Core Viewpoint - ServiceNow (NOW) stock presents an attractive investment opportunity due to its high margins, indicative of pricing power and cash generation ability, available at a discounted price [2][10]. Company Overview - ServiceNow is a leading enterprise software company that provides digital workflow solutions aimed at automating operations and enhancing efficiency, supported by a widely adopted platform and strong recurring revenue [3]. Recent Performance - Despite a 23% decrease in stock value this year, NOW has become 35% less expensive based on its Price-to-Sales (P/S) ratio compared to one year ago [4]. - In Q3 2025, ServiceNow recorded 103 deals exceeding $1 million in net new annual contract value, expanding its high-value customer base to 553 accounts with over $5 million in Annual Contract Value (ACV) [5]. Financial Metrics - Remaining Performance Obligations reached $24.3 billion, indicating strong revenue visibility, and management has raised its full-year cash flow margin guidance [5]. - The company boasts a 97% customer renewal rate, underscoring the durability of its solutions [5]. - ServiceNow has demonstrated a 21.1% revenue growth over the last twelve months and a 22.3% growth over the last three-year average [10]. Valuation - NOW stock is currently offered at a P/S multiple of 13.4, representing a 35% markdown compared to one year ago [10].

Core Insights - ServiceNow's subscription revenues have increased by 21% over the trailing nine-month period in 2025 compared to the previous year, driven by growing demand for its workflows [1] - The company raised its subscription revenue guidance for 2025 to between $12.835 billion and $12.845 billion, indicating a growth of approximately 20% year-over-year [2] - ServiceNow shares have underperformed, dropping 17.9% over the past year, while competitors like Oracle and SAP have seen positive returns [3] Subscription Revenue Performance - Subscription revenues account for roughly 97% of ServiceNow's total revenues, reflecting strong demand [1] - The growth rate for subscription revenues in 2025 is expected to be slower than the 23% growth rate seen in 2024 [2] Market Position and Competition - ServiceNow's stock has been affected by challenging macroeconomic conditions and increased competition, particularly from companies like Workday, Oracle, and SAP [3][7] - The stock is currently trading at a premium with a forward 12-month price/sales ratio of 11.7X, compared to the broader sector's 6.91X [8] Customer Growth and Transactions - In Q3 2025, ServiceNow had 103 transactions exceeding $1 million in net new annual contract value (ACV), with six transactions over $10 million [13] - The number of customers contributing over $5 million in ACV reached 553, with a more than 20% year-over-year increase in customers contributing $50 million or more [13] Industry Trends and Partnerships - Net new ACV in transportation and logistics grew over 90% year-over-year, with significant growth also seen in retail, hospitality, and education sectors [17] - ServiceNow's partnerships, particularly with NVIDIA, are enhancing its AI workflow capabilities, which may help mitigate some macroeconomic challenges [18] Earnings Estimates - The Zacks Consensus Estimate for Q4 2025 earnings is $4.35 per share, reflecting an 18.53% growth year-over-year, although it has seen a slight downward revision [19] - Positive trends are noted for 2025 and 2026 earnings estimates, with expected growth rates of 24.21% and 16.66%, respectively [20] Conclusion - ServiceNow's expanding portfolio and growing workflow adoption are expected to enhance top-line growth, despite concerns regarding macroeconomic conditions and valuation [21]

Core Insights - Salesforce, Inc. is enhancing its AI capabilities through the Agentforce platform, which has contributed to a 10% increase in revenues and a 13.7% rise in non-GAAP EPS year-over-year for Q2 of fiscal 2026 [1][10] Group 1: Agentforce Platform Performance - Agentforce has secured over 6,000 paid deals since its launch three quarters ago, indicating strong demand for AI tools that enhance enterprise workflows [2] - 40% of new Agentforce bookings in Q2 came from existing Salesforce customers expanding their usage, showcasing strong early adoption and confidence in the platform [2][3] - There was a 60% increase in customers scaling Agentforce use quarter over quarter, reflecting rapid movement from pilot programs to full production [3] Group 2: Revenue Growth and Business Model - The consumption-based model, supported by flexible payment options like Flex Credits, is driving demand for Agentforce and has the potential to enhance recurring revenue growth over time [4] - AI and Data Cloud annualized recurring revenues have reached $1.2 billion, positioning Salesforce for meaningful growth [5] - The Zacks Consensus Estimate indicates a year-over-year revenue increase of 10.8% for fiscal 2026 and 8.8% for fiscal 2027 [5] Group 3: Competitive Landscape - Microsoft and ServiceNow are also advancing AI automation in the enterprise market, with Microsoft integrating AI features into Dynamics 365 and ServiceNow rolling out industry-specific AI tools [6][7] Group 4: Valuation and Earnings Estimates - Salesforce shares have declined 27.7% year to date, contrasting with the Zacks Computer – Software industry's growth of 12.8% [8] - The company trades at a forward price-to-earnings ratio of 19.57, significantly below the industry average of 30.3 [11] - The Zacks Consensus Estimate for fiscal 2026 and 2027 earnings implies year-over-year increases of approximately 11.4% and 11.3%, respectively [14]

Core Insights - ServiceNow (NYSE: NOW) has announced a five-for-one stock split following strong business performance driven by AI, indicating positive momentum in AI-assisted workflows [1][7] - The company reported a 22% year-over-year increase in total revenue to $3.4 billion, with subscription revenue rising by 21.5% to $3.3 billion, highlighting robust demand [4] - ServiceNow signed over one hundred new transactions exceeding $1 million in annual contract value, contributing to a 24% year-over-year increase in remaining performance obligations (RPOs) to $24.3 billion [5] Financial Performance - The third quarter performance exceeded the company's own guidance, showcasing the effectiveness of its AI platform for business transformation [6] - AI-related products are growing significantly faster than the overall business, with predictions that annual contract value (ACV) for AI products will exceed $1 billion next year, up from over $0.5 billion this year [10] - The AI Control Tower deal volume quadrupled sequentially in Q3, and AI Agent Assist consumption increased 55 times since the end of May, indicating strong growth potential [10] Market Outlook - Despite a recent stock price pullback, shares are considered expensive, suggesting cautious investor sentiment [9] - The company noted potential near-term uncertainties related to U.S. federal budgets amid a government shutdown, although federal business remains a strong area for AI-powered automation [6]

Core Insights - ServiceNow reported a significant increase in usage of its Now Assist platform, with a 55-fold growth since May, indicating strong demand and potential for monetization in upcoming quarters [1][8][10] - The company is on track to exceed $500 million in Annual Contract Value (ACV) for Now Assist by year-end, ahead of previous expectations, and is aiming for a $1 billion target next year [1][12][23] - The revenue for Q3 2025 reached $3.407 billion, a year-over-year increase of 21.81%, with net profit at $502 million, up 16.20% [2][6] Financial Performance - Q3 2025 revenue was $3.407 billion, representing a 21.81% year-over-year growth [2] - Net profit for the same quarter was $502 million, reflecting a 16.20% increase year-over-year [2] - Basic EPS for Q3 was $2.42, up 15.79% year-over-year [2] Product Development and Market Strategy - The company has integrated AI capabilities into over 100 prepackaged workflows, allowing customers to quickly adopt and implement these solutions [4][5] - ServiceNow's AI Control Tower is becoming a core offering, addressing customer needs for governance and compliance in AI deployment [16][24] - The company is focusing on industry-specific solutions, tailoring offerings to sectors like healthcare, finance, and retail, enhancing customer engagement and satisfaction [14][15] Customer Engagement and Adoption - Currently, 1,700 customers are utilizing Now Assist, with daily increases in adoption [2][10] - The company has observed a shift in customer behavior, with clients moving away from pilot projects to fully integrated solutions, indicating a growing trust in ServiceNow's platform [10][12] - Notable customer success stories include Lenovo and Bell Canada, showcasing significant improvements in operational efficiency and customer satisfaction through the use of Now Assist [11][18] Future Outlook - The company anticipates continued strong demand in the federal sector, with a net new ACV growth of over 30% year-over-year [6][13] - ServiceNow is confident in its ability to maintain a robust growth trajectory, supported by its AI capabilities and industry-specific solutions [26][27] - The company is committed to investing in its AI initiatives, which are expected to drive further operational efficiencies and profit margin expansion [26][27]

Core Insights - ServiceNow (NOW) reported third-quarter 2025 adjusted earnings of $4.82 per share, exceeding the Zacks Consensus Estimate by 14.49% and reflecting a year-over-year increase of 29.6% [1][9] - Revenues reached $3.41 billion, surpassing the consensus mark by 1.66% and showing a year-over-year growth of 21.7% [1][9] Revenue Breakdown - Subscription revenues improved by 21.5% year over year to $3.3 billion, with a constant currency increase of 20.5% to $3.27 billion [2] - Professional services and other revenues rose by 31% year over year to $108 million, with a constant currency increase of 29.5% to $107 million [2] Performance Obligations - Current remaining performance obligations (cRPO) stood at $11.35 billion, up 21% year over year, and 20.5% on a constant currency basis [3] - Remaining performance obligations increased by 23% year over year to $24.3 billion on a constant currency basis [3] Client Expansion - ServiceNow secured 103 transactions over $1 million in net new annual contract value (ACV) during the third quarter, with 6 transactions exceeding $10 million [4] - The company expanded its customer base, reaching 553 customers with more than $5 million in ACV, and saw a greater than 20% increase in customers contributing $50 million or more year over year [4] Deal Highlights - Technology workflows accounted for 50 deals over $1 million, with significant contributions from ITSM, ITOM, ITAM, security, risk, CRM, and industry workflows [5] - Net new ACV in transportation and logistics industries grew over 90% year over year, with more than 50% growth in retail, hospitality, and education sectors [6] Operating Metrics - Non-GAAP gross margin was 80.9%, down 160 basis points year over year, while subscription gross margin was 83.2%, contracting 170 basis points [7] - Operating expenses as a percentage of revenues decreased by 360 basis points year over year to 60.5% [7] Profitability - Non-GAAP operating margin expanded by 230 basis points year over year to 33.5% [8] - Free cash flow rose to $592 million, with a free cash flow margin of 17.5%, up 50 basis points year over year [11] Balance Sheet - As of September 30, 2025, cash and cash equivalents and marketable securities totaled $5.41 billion, down from $6.13 billion as of June 30, 2025 [10] - Cash from operations was $813 million, compared to $716 million in the previous quarter [10] Future Guidance - For 2025, ServiceNow expects subscription revenues to be between $12.835 billion and $12.845 billion, indicating a 20.5% rise from 2024 [12] - The company anticipates non-GAAP subscription gross margin of 83.5% and non-GAAP operating margin of 31% for 2025 [12] - For Q4 2025, subscription revenues are projected between $3.42 billion and $3.43 billion, suggesting year-over-year growth of 19.5% [13]

Financial Data and Key Metrics Changes - Subscription revenue for Q3 2025 was $3.299 billion, growing 20.5% year over year in constant currency, exceeding guidance by 100 basis points [20] - Remaining performance obligations (RPO) ended at approximately $24.3 billion, representing 23% year over year constant currency growth [20] - Current RPO was $11.35 billion, reflecting 20.5% year over year constant currency growth, beating guidance by 250 basis points [20] - Non-GAAP operating margin was 33.5%, 300 basis points above guidance, driven by top-line outperformance and operational efficiencies [23] - Free cash flow margin was 17.5%, up 50 basis points year over year [23] Business Line Data and Key Metrics Changes - Now Assist had 12 deals over $1 million in net new ACV, including one over $10 million, indicating strong performance [22] - IT Service Management (ITSM) and HR Plus net new ACV doubled quarter over quarter, while IT Operations Management (ITOM) Plus net new ACV surged more than 5x quarter over quarter [22] - Customer Service Management (CSM) Plus deal volume tripled year over year [22] Market Data and Key Metrics Changes - The transportation and logistics sector led growth with over 90% year over year increase in net new ACV, followed by retail, hospitality, and education sectors, both growing over 50% [21] - The U.S. Federal business grew net new ACV over 30% year over year, showcasing strong demand in the government sector [21] Company Strategy and Development Direction - The company is focusing on AI business transformation, with a target of exceeding $1 billion in AI products ACV by 2026 [7][22] - ServiceNow is positioning itself as a leader in enterprise AI, integrating various technologies to provide comprehensive solutions [10][19] - The company is raising guidance for Q4 and full-year 2025, reflecting confidence in its growth trajectory and market opportunities [7][24] Management's Comments on Operating Environment and Future Outlook - Management expressed strong confidence in the future, highlighting the significant market opportunity for the platform and the ongoing demand for AI solutions [6][7] - The company acknowledged potential impacts from the ongoing government shutdown on deal timing in the U.S. Federal business for Q4 [26] Other Important Information - The Board of Directors approved a five-for-one stock split to make shares more accessible to a broader base of investors [24] - The company ended Q3 with $9.7 billion in cash and investments, indicating a robust balance sheet [23] Q&A Session Summary Question: Integration and Implementation of Agentic Technology - Bill McDermott discussed the importance of integration expertise and the role of external partners in successfully implementing agentic technology [30][31] Question: Broader Sales Organization and AI Solutions - Amit Zavery confirmed that the sales organization is becoming more adept at selling AI solutions, with a growing number of customers live on the platform [41] Question: Federal Government Shutdown Impact - Gina Mastantuono explained that while demand remains strong, the government shutdown has led to a more prudent approach in guidance [45][46] Question: Demand Trends and AI Consumption - Bill McDermott highlighted strong demand trends and the significant growth in AI consumption, particularly in the context of customer engagement [50][51] Question: MoveWorks Acquisition Update - Gina Mastantuono provided an update on the expected closing of the MoveWorks deal, emphasizing that current successes are independent of this acquisition [75] Question: AI Control Tower Demand - Amit Zavery noted that the AI Control Tower is gaining significant interest from customers concerned about managing AI security and compliance [80]

Financial Data and Key Metrics Changes - Subscription revenue for Q3 2025 was $3.299 billion, growing 20.5% year over year in constant currency, exceeding guidance by 100 basis points [20] - Remaining Performance Obligations (RPO) ended at approximately $24.3 billion, representing 23% year over year constant currency growth [20] - Current RPO was $11.35 billion, reflecting 20.5% year over year constant currency growth, beating guidance by 250 basis points [20] - Non-GAAP operating margin was 33.5%, 300 basis points above guidance, driven by top-line outperformance and operational efficiencies [23] - Free cash flow margin was 17.5%, up 50 basis points year over year [23] Business Line Data and Key Metrics Changes - Now Assist had 12 deals over $1 million in net new ACV, including one over $10 million, indicating strong performance [22] - IT Service Management (ITSM) and HR Plus net new ACV doubled quarter over quarter, while IT Operations Management (ITOM) Plus net new ACV surged more than 5x quarter over quarter [22] - Customer Service Management (CSM) Plus deal volume tripled year over year [22] Market Data and Key Metrics Changes - The transportation and logistics sector led growth with over 90% year over year increase in net new ACV, followed by retail, hospitality, and education sectors, both growing over 50% [21] - The U.S. Federal business grew net new ACV over 30% year over year, demonstrating strong demand [21] Company Strategy and Development Direction - The company is focused on AI business transformation, with a target of exceeding $1 billion in AI products ACV by 2026 [7][22] - ServiceNow aims to integrate AI into enterprise workflows, emphasizing the importance of governance and management of AI technologies [8][10] - The company is raising guidance for Q4 and full-year 2025, reflecting confidence in market opportunities and operational execution [7][24] Management's Comments on Operating Environment and Future Outlook - Management expressed strong confidence in the future, highlighting the significant market opportunity for the ServiceNow platform [6][7] - The ongoing government shutdown may impact deal timing in the U.S. federal business, but demand remains strong [26][45] - The company is optimistic about the trajectory of its business, with a robust pipeline heading into Q4 [53] Other Important Information - The Board of Directors approved a five-for-one stock split to make shares more accessible to a broader base of investors [24] - The company ended Q3 with $9.7 billion in cash and investments, indicating a strong balance sheet [23] Q&A Session Summary Question: Integration and Implementation of Agentic Technology - Bill McDermott discussed the importance of integration expertise and the role of external partners in implementing agentic technology [30][31] Question: Broader Sales Organization and AI Solutions - Amit Zavery confirmed that the sales organization is becoming more adept at selling AI solutions, with a growing number of customers live on the platform [41] Question: Federal Government Impact on Guidance - Gina Mastantuono explained that the company has factored in prudence regarding the federal government shutdown, affecting deal timing [45][46] Question: Demand Trends and AI Consumption - Bill McDermott noted that demand is stronger than ever, with significant growth in AI consumption and utilization [50][51] Question: MoveWorks Acquisition Update - Gina Mastantuono indicated that the MoveWorks deal is expected to close towards the end of Q4, enhancing ServiceNow's AI capabilities [75] Question: AI Control Tower Demand - Amit Zavery highlighted the strong interest in the AI Control Tower, which addresses customer concerns about managing AI technologies [80]

Financial Data and Key Metrics Changes - Subscription revenue for Q3 2025 was $3.299 billion, growing 20.5% year over year in constant currency, exceeding guidance by 100 basis points [19] - Remaining performance obligations (RPO) ended at approximately $24.3 billion, representing 23% year over year constant currency growth [19] - Current RPO was $11.35 billion, reflecting 20.5% year over year constant currency growth, beating guidance by 250 basis points [19] - Non-GAAP operating margin was 33.5%, 300 basis points above guidance, driven by top-line outperformance and operational efficiencies [22] - Free cash flow margin was 17.5%, up 50 basis points year over year [22] Business Line Data and Key Metrics Changes - Now Assist had 12 deals over $1 million in net new ACV, including one over $10 million, indicating strong performance in AI products [21] - IT Service Management and HR Plus net new ACV doubled quarter over quarter, while IT Operations Management Plus surged more than 5x quarter over quarter [21] - Customer Service Management Plus deal volume tripled year over year, showcasing significant growth in CRM solutions [21] Market Data and Key Metrics Changes - Transportation and logistics led the way with over 90% year over year growth in net new ACV, followed by retail, hospitality, and education, both growing over 50% [20] - U.S. Federal business grew net new ACV over 30% year over year, demonstrating strong demand in the government sector [20] Company Strategy and Development Direction - The company is focusing on AI business transformation, with a target of exceeding $1 billion in AI products ACV by 2026 [6][21] - The introduction of the AI Control Tower aims to provide governance and management for AI initiatives, addressing customer concerns about security and compliance [76][79] - The company is enhancing its platform with industry-specific solutions, leveraging partnerships to build tailored offerings for sectors like financial services and retail [67][68] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the future, raising guidance for Q4 and full-year 2025 based on strong Q3 performance [4][24] - The ongoing government shutdown may impact deal timing in the U.S. federal business, but demand remains strong [24][42] - The company is experiencing a cultural shift towards AI adoption internally, enhancing operational efficiencies and employee satisfaction [39] Other Important Information - The Board of Directors approved a five-for-one stock split to make shares more accessible to a broader base of investors [23] - The company ended Q3 with $9.7 billion in cash and investments, indicating a robust financial position [22] Q&A Session Summary Question: Integration and implementation of agentic technology - Management acknowledged the need for integration expertise and mentioned plans to invest in forward-deployed engineers to assist customers [28][33] Question: Broader sales organization and partner base for AI solutions - Management confirmed that the sales organization is becoming more adept at selling AI solutions, with a significant increase in customer assists [37][38] Question: Impact of government shutdown on guidance - Management noted that while demand remains strong, they have factored in prudence regarding the timing of federal deals due to the shutdown [41][42] Question: Consumption trends and AI credits - Management highlighted a 55x growth in assists since May, indicating strong customer engagement and usage of AI solutions [52][58] Question: Demand for AI Control Tower - Management reported a 4x growth in customer interest for the AI Control Tower, emphasizing its importance for managing AI initiatives [76][79]

Core Insights - AI is fundamentally reshaping the global economy, impacting both consumers and companies, as stated by Bill McDermott, CEO of ServiceNow [1][2] - The current AI spending boom is significant, with trillions being invested in AI infrastructure, although many digital transformation projects are failing to deliver returns [10] Company Developments - ServiceNow is experiencing a surge in demand for its AI-powered offerings, leading to a strong third-quarter performance with subscription revenue of $3.3 billion, a 22% year-over-year increase [15] - The company has raised its full-year guidance for subscription revenue, operating margin, and free cash flow, reflecting confidence in its AI capabilities [15][16] - ServiceNow is actively hiring in areas such as sales, technology architecture, and engineering to support its AI initiatives and is also focusing on re-skilling existing employees [4][5] Market Trends - The rise of generative AI poses a potential threat to the software industry, with concerns that companies may develop their own software instead of purchasing from vendors like ServiceNow [11] - Despite these concerns, McDermott asserts that ServiceNow's long-established platform cannot be easily replicated by customers [12][14] Product Innovations - ServiceNow's AI products, including Now Assist and Workflow Data Fabric, have shown strong uptake among both new and existing customers, with 103 deals exceeding $1 million in net new annual contract value [16] - The company is also investing in AI innovations and partnerships, enhancing its integration of AI into enterprise workflows [17]