ServiceNow, Inc. (NOW)

ServiceNow operates in a dynamic and rapidly evolving technology landscape characterized by the accelerating adoption of artificial intelligence and machine learning capabilities across enterprise software. The industry is highly competitive, with competition based on brand recognition, product quality, price, and innovation, and is characterized by fragmentation, low barriers to entry, shifting customer needs, and frequent introductions of new products and services. The company addresses evolving organizational needs by providing solutions that help organizations govern, secure, and manage artificial intelligence while optimizing their workflows, and believes its established market position, deep customer relationships, and platform capabilities position it favorably to capitalize on emerging needs.

The company competes with a broad range of solutions including enterprise application software vendors such as Microsoft, Oracle, SAP, Salesforce, and Workday; new technologies and entrants including point-solutions and platform solutions particularly related to AI; custom-developed and in-house solutions; technology consulting firms; systems integrators; and software resellers. Competitive advantages include two decades of partnering with enterprise customers providing deep understanding of how work flows across organizations, a platform architecture developed over years of iteration that allows deployment of AI-enhanced workflows without replacing existing technology infrastructure, and operational expertise in maintaining reliability, security, and performance standards at scale. As of December 31, 2025, the company had approximately 8,700 customers across a wide variety of industries, with 603 customers with annual contract value greater than $5 million ¹ as of December 31, 2025, compared to 502 ² as of December 31, 2024 and 420 ³ as of December 31, 2023.

The company generates revenue primarily through subscription agreements facilitated by a global direct sales organization, with subscription revenues comprising 97% of total revenues for the years ended December 31, 2025 and 2024. Certain AI and data solutions include a consumption-based pricing component that governs when customer usage exceeds the fixed number of service credits available under the customer's subscription agreement. The company also sells through managed service providers and resale partners, and generates revenues from professional services and training of customers and partner personnel. The core of the solutions is the ServiceNow AI Platform, a cloud-based platform that facilitates delivery of seamless workflows and drives digital transformation across all departments and personas within an organization, with a one platform architecture providing the foundation for organizations to integrate AI, data, and workflows.

The company's products are grouped into four areas: Technology, Customer Relationship Management (CRM) and Industry, Core Business, and Creator and Other. Technology products help companies unite technology, risk management, and security operations on a single platform, including IT Operations Management (ITOM), IT Service Management (ITSM), Risk Management (RM), Security Operations, Strategic Portfolio Management (SPM), Asset Management, and Operational Technology (OT) Management. CRM and Industry products orchestrate end-to-end workflows across front, middle, and back-office functions, including Customer Service Management (CSM), Field Service Management (FSM), Sales and Order Management (SOM), and industry-specific solutions for financial services, healthcare and life sciences, manufacturing, public sector, retail, technology, and telecommunications. Core Business products support processes across HR, legal, finance, supply chain, and facilities, including HR Service Delivery (HRSD), Legal and Contract Operations (LCO), Source-to-Pay Operations (SPO), and Workplace Service Delivery (WSD). Creator and Other products include App Engine for low-code and no-code development, Platform Privacy and Security products, RaptorDB, and Workflow Data Fabric (WDF). The company also provides customer success offerings including Customer Support, Professional Services, and ServiceNow Impact.

The company's Platform integrated AI offering, Now Assist, empowers organizations to boost productivity by providing a range of AI tools that operate autonomously with human oversight and adhere to predefined guardrails. Organizations can choose to leverage ServiceNow's language models or integrate third-party or proprietary models, and can deploy thousands of out-of-the-box ServiceNow AI agents, integrate AI agents built into third-party applications, or create custom AI agents using natural language. The Platform's single data fabric and integrated data layer, enabled by Workflow Data Fabric and RaptorDB products, supports organizations' operationalization of their AI strategy with speed, scale, and security. The company releases two major Platform upgrades each year, adding new products and functionality that simplify work and enhance productivity.

On December 15, 2025, the company acquired all outstanding shares of Moveworks, Inc. for total purchase consideration of $2.4 billion ⁴, comprised of $1.467 billion ⁵ in fair value of common stock issued, $905 million ⁶ in cash, $31 million ⁷ in settlement of a pre-existing loan, and $4 million ⁸ in stock-based compensation awards attributable to pre-combination services. On May 30, 2025, the company acquired Logik.io Inc. for total purchase consideration of $506 million ⁹, consisting primarily of approximately 2.1 million ¹⁰ shares of ServiceNow common stock with a value of approximately $434 million ¹¹ and $62 million ¹² in cash. In December 2025, the company signed definitive agreements to acquire Veza Technologies, Inc. for approximately $1.25 billion ¹³ cash consideration and Armis Security Ltd. for approximately $7.75 billion ¹⁴ cash consideration. During the year ended December 31, 2025, the company repurchased 10.3 million ¹⁵ shares of its common stock for $1.8 billion ¹⁶. On December 5, 2025, the board of directors approved and declared a 5-for-1 split of the common stock ¹⁷.

Total revenues for the year ended December 31, 2025 were $13.278 billion ¹⁸, compared to $10.984 billion ¹⁹ for the year ended December 31, 2024, representing 21% growth. Subscription revenues were $12.883 billion ²⁰ for 2025 versus $10.646 billion ²¹ for 2024, also growing 21%. Net income was $1.748 billion ²² for 2025 compared to $1.425 billion ²³ for 2024. Diluted net income per share was $1.67 ²⁴ for 2025 versus $1.37 ²⁵ for 2024. Gross profit was $10.295 billion ²⁶ for 2025 compared to $8.697 billion ²⁷ for 2024, with total gross profit percentage of 78% ²⁸ in 2025 versus 79% ²⁹ in 2024. Net cash provided by operating activities was $5.444 billion ³⁰ for 2025 compared to $4.267 billion ³¹ for 2024.

Management expects subscription revenues for the year ending December 31, 2026 to increase in absolute dollars and remain relatively flat as a percentage of revenue compared to the year ended December 31, 2025. Professional services and other revenues are expected to increase in absolute dollars and remain relatively flat as a percentage of revenue. The company expects subscription gross profit percentage to decrease slightly for the year ending December 31, 2026 compared to the year ended December 31, 2025, primarily due to the ongoing growth of third-party cloud services usage and incremental amortization expense of intangible assets acquired through acquisitions completed during the year ended December 31, 2025. Professional services and other gross loss percentage is expected to increase for the year ending December 31, 2026 compared to the year ended December 31, 2025.

The company's strategy focuses on continuing to understand and meet customer needs as they adopt AI technologies, applying its ability to deliver integrated solutions that address the practical complexities of converting AI-generated insights into controlled, governed business outcomes. The acquisition of Moveworks, Inc. is intended to drive use of the Platform to accelerate enterprise adoption and innovation across key growth areas, including CRM. The acquisition of Logik.io Inc. is intended to expand the company's growing CRM footprint and accelerate sales and order management capabilities with acquired Configure, Price, Quote (CPQ) solutions technology. The acquisition of data.world, Inc. is intended to strengthen the company's AI platform by allowing customers to enrich data with meaning, context, and relationships while enabling AI agents and workflows to operate. The pending acquisition of Veza Technologies, Inc., a provider of a unified access platform, is expected to close during the first half of 2026. The pending acquisition of Armis Security Ltd., a cyber-exposure management and cyber-physical security solutions provider, is expected to close during the second half of 2026.

The company expects sales and marketing expenses for the year ending December 31, 2026 to increase in absolute dollars and to decrease slightly as a percentage of revenue compared to the year ended December 31, 2025, as the company continues to see leverage from increased sales productivity and marketing efficiencies. Research and development expenses are expected to increase in absolute dollars but remain relatively flat as a percentage of revenue compared to the year ended December 31, 2025, as the company continues to improve the existing functionality of its services, develop new applications to fill market needs, and enhance its core platform. General and administrative expenses are expected to decrease in absolute dollars and to decrease slightly as a percentage of revenue compared to the year ended December 31, 2025, as the company continues to see leverage from continued G&A productivity. Stock-based compensation is expected to continue to increase in absolute dollars for the year ending December 31, 2026 but remain relatively flat as a percentage of revenue compared to the year ended December 31, 2025, and is expected to decline as a percentage of revenue over time as the company continues to grow.

The company expects to grow its business and generate positive cash flows from operations during 2026. The company anticipates cash flows generated from operations, together with cash, cash equivalents, marketable securities, and long-term marketable securities totaling $10.1 billion ³² as of December 31, 2025, will be sufficient to meet liquidity needs for at least the next 12 months, although the company does expect to seek additional debt financing to fund its acquisition of Armis Security Ltd. The company's expectations for revenues, cost of revenues, and operating expenses for the year ending December 31, 2026 are based on the 31-day average of foreign exchange rates for December 31, 2025.

The company has made and expects to continue to make significant investments in research and development to expand Platform capabilities, strengthen existing applications, increase the number of applications on the platform, and advance mobile, automation, AI, and machine intelligence technologies. The company continues to invest in sales and marketing to increase market penetration and expand into new geographies, including growth in both direct and indirect sales channels, investments in professional services and customer support, and development of strategic partnerships. The company has expanded relationships with technology providers including AWS, Google, Microsoft, and NVIDIA to strengthen AI capabilities and improve cloud interoperability, and maintains relationships with global system integrators such as Accenture, Cognizant, Deloitte, EY, Infosys, and KPMG.

In May 2023, the board of directors authorized a program to repurchase up to $1.5 billion ³³ of common stock. In January 2025, the board authorized an additional $3.0 billion ³⁴ in repurchases under the share repurchase program. During the year ended December 31, 2025, the company repurchased 10.3 million shares for $1.8 billion . As of December 31, 2025, approximately $1.4 billion ³⁵ of the authorized amount remained available for future repurchases. In January 2026, the board authorized an additional $5.0 billion ³⁶ in repurchases under the Share Repurchase Program. The company's board of directors currently intends to retain any future earnings to support operations and to finance the growth and development of the business, and therefore does not intend to pay cash dividends on common stock for the foreseeable future.

Sales outside of North America represented 37% of total revenues for each of the years ended December 31, 2025 and 2024. The growth of the business depends on the company's ability to increase sales outside of the U.S. as a percentage of total revenues. Operating in international markets requires significant investment and management attention and subjects the company to varying regulatory, political, and economic risks. The company has made and will continue to make substantial investments in data centers, geographic-specific service delivery models, advisory councils, cloud computing infrastructure, sales, marketing, partnership arrangements, personnel, and facilities in new geographic markets. The rate of acquisition of new large enterprise customers has been generally lower in territories where the company is less established and where there may be heightened or evolving regulations and operational and intellectual property risks.

The company faces risks from global economic and political conditions, including inflation, interest rates, tax rates, foreign exchange rates, economic downturns, recession, economic uncertainty, political instability, warfare, changes in laws, trade barriers, supply chain disruptions, and economic and trade sanctions. The U.S. capital markets experienced and continue to experience extreme volatility and disruption, which could adversely affect the company's business, financial condition, results of operations, and cash flows. Geopolitical destabilization and warfare have impacted and may continue to impact global currency exchange rates, commodity prices, energy markets, trade, and movement of resources, which may adversely affect the buying power of customers and the company's access to and cost of resources from suppliers. The company is closely monitoring ongoing global conflicts but does not believe they will have a material impact on business and results of operations, though if conflicts persist or worsen, leading to greater global economic disruptions and uncertainty, the business and results of operations could be materially impacted.

Management's message emphasizes the company's ambition to become the defining AI enterprise software company of the 21st century, driven by values centered on customers, teamwork, learning, and empathy. The company believes its established market position, deep customer relationships, and platform capabilities position it favorably to capitalize on emerging needs from the accelerating adoption of AI and machine learning across enterprise software. Management highlights that a critical insight from the technological shift is that AI excels at analyzing data and generating information, but transforming that information into business outcomes requires infrastructure that can orchestrate action across systems, enforce governance policies, and manage complex workflows, and the company's platform addresses this fundamental gap. The strategy focuses on continuing to understand and meet customer needs as they adopt AI technologies, applying the company's ability to deliver integrated solutions that address the practical complexities of converting AI-generated insights into controlled, governed business outcomes. Management expects subscription revenues for the year ending December 31, 2026 to increase in absolute dollars and remain relatively flat as a percentage of revenue, and expects to grow the business and generate positive cash flows from operations during 2026.

Total revenues for the year ended December 31, 2025 were $13.278 billion compared to $10.984 billion for 2024. Subscription revenues were $12.883 billion versus $10.646 billion in the prior year. Net income was $1.748 billion for 2025 compared to $1.425 billion for 2024. Diluted net income per share was $1.67 for 2025 versus $1.37 for 2024. Income from operations was $1.824 billion ³⁷ for 2025 compared to $1.364 billion ³⁸ for 2024. Total gross profit percentage was 78% in 2025 versus 79% in 2024, with subscription gross profit percentage of 80% ³⁹ in 2025 compared to 82% ⁴⁰ in 2024. Non-GAAP free cash flow was $4.636 billion ⁴¹ for 2025 compared to $3.455 billion ⁴² for 2024. As of December 31, 2025, the company had cash, cash equivalents, marketable securities, and long-term marketable securities totaling $10.1 billion , and total assets of $26.038 billion ⁴³ compared to $20.383 billion ⁴⁴ as of December 31, 2024. Long-term debt, net was $1.491 billion ⁴⁵ as of December 31, 2025, compared to $1.489 billion ⁴⁶ as of December 31, 2024. The company's remaining performance obligations (RPO) were $28.2 billion ⁴⁷ as of December 31, 2025, of which 46% ⁴⁸ represented current RPO, with RPO and cRPO increasing by 27% ⁴⁹ and 25% ⁵⁰, respectively, compared to December 31, 2024. The renewal rate was 98% ⁵¹ for each of the years ended December 31, 2025, 2024, and 2023.

The company operates in a highly competitive and rapidly evolving market, and a failure to innovate and adapt in response to rapidly evolving technological changes, particularly in AI, may harm competitive position and business prospects. Incorporating AI technology into offerings may result in operational, legal, regulatory, ethical, and other challenges, including potential copyright infringement claims, unreliable or biased outcomes that could affect customer trust, and compliance with laws such as the EU AI Act. The company faces risks related to cybersecurity events experienced by the company or its third-party service providers, which could create the perception that the platform is not secure and result in loss of customers or significant liabilities; the company has identified vulnerabilities in its products and services in the past and expects to continue to do so. Doing business with the public sector subjects the company to risks related to government procurement processes, regulations, and contracting requirements, and the company has informed certain U.S. government agencies of an internal investigation and is cooperating with the Department of Justice, which has commenced its own investigation into matters concerning the hiring of the Chief Information Officer of the U.S. Army. The company's customer deals are becoming more complex, involving longer, more expensive sales cycles, increased pricing pressure, and implementation and configuration challenges, and as the business grows, the revenue growth rate is expected to decline over the long term.