ServiceNow(US:NOW)2025-10-29 22:00Financial 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]