ServiceNow, Inc.

ServiceNow, Inc. operates as a pivotal enterprise software provider, delivering solutions that empower public and private organizations to govern, secure, and manage artificial intelligence while digitalizing and streamlining workflows to enhance collaboration, productivity, and overall enterprise experiences. At the core of its offerings is the ServiceNow AI Platform, a robust, cloud-based architecture designed to facilitate seamless workflows and drive digital transformation across various departments. The company's competitive positioning is underpinned by its two decades of experience with enterprise customers, providing deep insights into organizational workflow dynamics, and its platform's ability to orchestrate actions across disparate systems, enforce governance policies, and manage complex workflows, effectively bridging the gap between AI-generated insights and operational execution.

The company's product portfolio is strategically grouped into four key areas: Technology, Customer Relationship Management ("CRM") and Industry, Core Business, and Creator and Other. Technology products, including IT Operations Management (ITOM), IT Service Management (ITSM), and Risk Management (RM), help organizations unite technology, risk, and security operations on a single platform, delivering resilient digital services. CRM and Industry products integrate front-end customer service with operations, field service, sales, and order management, offering tailored workflows for sectors like financial services, healthcare, manufacturing, public sector, retail, technology, and telecommunications. Core Business products support functions such as HR, legal, finance, and facilities, improving efficiency and user experience through automation. Lastly, Creator and Other products, including App Engine, Workflow Data Fabric, and RaptorDB, enable organizations to rapidly develop and customize AI-powered, low-code workflows and manage data privacy and security.

For the fiscal year ended December 31, 2025, ServiceNow reported total revenues of $13,278 million ¹, marking a 21% increase from $10,984 million in the prior year. Subscription revenues, which constitute 97% of total revenues, grew by 21% year-over-year to $12,883 million, driven primarily by increased purchases from both new and existing customers. Professional services and other revenues also saw an increase of 17% to $395 million. The company achieved a gross profit of $10,295 million, up 18% from $8,697 million in 2024, though the total gross profit percentage slightly contracted to 78% ² from 79% in the previous year. Operating income for 2025 reached $1,824 million ³, a substantial increase from $1,364 million in 2024, reflecting an operating margin of approximately 13.7%. Net income for the period was $1,748 million, resulting in a diluted EPS of $1.67 ⁴, compared to $1.37 in the prior year.

Operational cash flow generation remained robust, with non-GAAP free cash flow reaching $4,636 million ⁵ for 2025, up from $3,455 million in 2024. The company's liquidity position strengthened, with cash and cash equivalents totaling $3,726 million ⁶ as of December 31, 2025, an increase from $2,304 million at the end of 2024. Total long-term debt, net, remained relatively stable at $1,491 million ⁷. Remaining performance obligations (RPO), a key indicator of future revenue, stood at $28.2 billion ⁸ as of December 31, 2025, with 46% representing current RPO expected to be recognized within the next 12 months. ServiceNow expanded its customer base, with 603 customers ⁹ having an annual contract value (ACV) greater than $5 million in 2025, up from 502 in 2024. The company maintained a consistent renewal rate of 98% for each of the years ended December 31, 2025, 2024, and 2023. Significant operational developments in 2025 included the acquisition of Moveworks, Inc. for $2.4 billion, enhancing enterprise search and virtual agent technology, and Logik.io Inc. for $506 million, expanding CRM capabilities. Additionally, ServiceNow entered into definitive agreements to acquire Veza Technologies, Inc. for approximately $1.25 billion and Armis Security Ltd. for approximately $7.75 billion ¹¹, both expected to close in 2026, further solidifying its AI and security offerings.

Management anticipates continued growth, projecting subscription revenues for the year ending December 31, 2026, to increase in absolute dollars while remaining relatively flat as a percentage of total revenue compared to 2025. Similarly, professional services and other revenues are expected to increase in absolute dollars and remain relatively flat as a percentage of revenue. However, the cost of subscription revenues for 2026 is projected to increase in absolute dollars and slightly as a percentage of revenue, primarily due to the ongoing growth of third-party cloud services usage and incremental amortization expense from intangible assets acquired in 2025. Consequently, the subscription gross profit percentage is expected to decrease slightly for 2026, and the professional services and other gross loss percentage is expected to increase.

Strategic growth initiatives are centered on expanding the ServiceNow AI Platform's capabilities, strengthening existing applications, and developing new ones, with a particular focus on advancing mobile, automation, AI, and machine intelligence technologies. The company is actively co-building agentic AI solutions with strategic customers through its Now Next AI program to solve critical challenges and expand AI product use cases. Capital allocation plans include an additional $5.0 billion ¹⁰ authorized for share repurchases in January 2026, building on the approximately $1.4 billion remaining from previous authorizations as of December 31, 2025. The company also expects to seek additional debt financing to fund the acquisition of Armis Security Ltd.

Key structural headwinds and execution risks flagged by management include the ongoing global conflicts and broader macroeconomic events such as interest rates, global inflation, and tariffs, which could impact customer buying power and resource costs. The company also anticipates increased costs associated with attracting customers in regulated markets and providing enhanced support for those impacted by new and evolving data residency requirements. Despite these challenges, management expects sales and marketing expenses for 2026 to increase in absolute dollars but decrease slightly as a percentage of revenue due to increased sales productivity and marketing efficiencies. Research and development expenses are also expected to increase in absolute dollars but remain relatively flat as a percentage of revenue, while general and administrative expenses are projected to decrease in absolute dollars and slightly as a percentage of revenue, reflecting continued productivity gains. Stock-based compensation is expected to increase in absolute dollars for 2026 but remain relatively flat as a percentage of revenue, with a long-term expectation for it to decline as a percentage of revenue.

ServiceNow operates in a dynamic environment fraught with material risks spanning macroeconomic, competitive, regulatory, geopolitical, and operational dimensions. Macroeconomic and geopolitical instability, including global conflicts, inflation, interest rates, and trade barriers, can adversely affect customer purchasing decisions and increase operating costs. Competitively, the company faces challenges from rapidly evolving technologies, new AI-focused entrants, and larger enterprise software vendors, alongside the risk of "systems of record" operators hindering integration with the ServiceNow platform. Regulatory risks are intensifying, with evolving laws on data use, storage, and movement, such as the EU Data Act and the EU AI Act, potentially restricting platform optimization and increasing compliance costs. Operational risks include actual or perceived cybersecurity events, which are becoming more sophisticated with AI, potentially leading to data breaches, service disruptions, and significant liabilities, particularly given the reliance on third-party service providers and the potential for customer misconfigurations. The company also faces risks related to attracting and retaining key talent, delays or defects in product releases, and the successful integration of acquired companies. A notable customer concentration risk exists, as one U.S. federal channel partner and systems integrator represented 11% of accounts receivable and 11% of total revenues for the year ended December 31, 2025.

Management's message to shareholders conveys a clear and ambitious vision, emphasizing the company's aspiration to become the defining AI enterprise software company of the 21st century, guided by its core values. The tone is confident in ServiceNow's established market position and its ability to capitalize on the accelerating adoption of artificial intelligence and machine learning. Specific forward-looking guidance includes the expectation that subscription revenues for the year ending December 31, 2026, will increase in absolute dollars and remain relatively flat as a percentage of revenue, while professional services and other revenues are also projected to increase in absolute dollars and remain relatively flat as a percentage of revenue. Management further stated that the cost of subscription revenues for 2026 is expected to increase in absolute dollars and slightly as a percentage of revenue, leading to a slight decrease in subscription gross profit percentage. Professional services and other gross loss percentage is anticipated to increase for 2026. Sales and marketing expenses for 2026 are expected to increase in absolute dollars but decrease slightly as a percentage of revenue, and research and development expenses are projected to increase in absolute dollars but remain relatively flat as a percentage of revenue. General and administrative expenses for 2026 are expected to decrease in absolute dollars and slightly as a percentage of revenue. 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, with an expectation for it to decline over time as a percentage of revenue. The three strategic priorities emphasized for the period ahead are to continue helping organizations govern, secure, and manage artificial intelligence, digitalize and streamline workflows, and drive collaboration, productivity, and better experiences across the enterprise.