ServiceNow Reports Third Quarter 2025 Financial Results; Board of Directors Authorizes Five-for-One Stock Split
-
ServiceNow -
ServiceNow raises 2025 subscription revenue, operating margin, and free cash flow guidance; expects 250bps of free cash flow margin expansion year-over-year -
Subscription revenues of
$3,299 million in Q3 2025, representing 21.5% year-over-year growth, 20.5% in constant currency -
Total revenues of
$3,407 million in Q3 2025, representing 22% year-over-year growth, 20.5% in constant currency -
Current remaining performance obligations of
$11.35 billion as of Q3 2025, representing 21% year-over-year growth, 20.5% in constant currency -
Remaining performance obligations of
$24.3 billion as of Q3 2025, representing 24% year-over-year growth, 23% in constant currency - ServiceNow’s Board of Directors authorizes a five-for-one split of the company’s common stock
“This outstanding Q3 performance is the clearest demonstration yet that
As of
“Q3 was an exceptional quarter, with standout performances across the board,” said
Recent Business Highlights
Innovation
-
In Q3,
ServiceNow unveiled AI Experience, the new user interface (UI) for enterprise AI. The context-aware, multimodal environment unites people, data, and workflows with built-in governance and security. Redefining the traditional UI, AI Experience serves as the intelligent entry point for employees to access information, delegate tasks, and collaborate with AI. -
With the
Zurich platform release, announced in September,ServiceNow delivered breakthrough innovations that accelerate multi-agentic development and bring secure, scalable AI systems into production. The company introduced new developer tools enabling secure vibe coding with natural language to lower the barrier to application creation; built-in capabilities such as ServiceNow Vault Console and Machine Identity Console to secure sensitive data and govern integrations; and autonomous workflows powered by agentic playbooks that blend AI and human input where and when it's needed for greater control and efficiency.
Global and Industry Expansion
-
ServiceNow announced a new regional innovation hub andAI Institute inWest Palm Beach, Florida , to drive AI innovation, talent development, and economic growth. This initiative is projected to create more than 850 new jobs and deliver$1.8 billion in economic impact over the next five years. -
ServiceNow and SENAI-SP, Latin America’s largest professional education institution, launched a statewide AI skills program to equip Brazilians with technical skills in AI, workflow automation, and low-code development. Included withinServiceNow University , the program offers trainings and certification pathways to build an AI-ready workforce. -
ServiceNow was named the Official Workflow Partner of the DFL Deutsche Fußball Liga (Bundesliga). Powered by the ServiceNow AI Platform, the league is modernizing its operations to improve employee satisfaction, collaboration with clubs and partners, and fan engagement across the league ecosystem.
Partnerships
-
ServiceNow and theU.S. General Services Administration (GSA) announced a landmark OneGov agreement to power AI-first modernization for a new era of government. The partnership offers a simplified licensing model to reduce complexity, drive cost savings, and enable easier adoption of the ServiceNow AI Platform, helping agencies accelerate workflow efficiencies and agentic AI transformation. -
In Q4,
ServiceNow and NVIDIA deepened their longstanding partnership, introducing Apriel 2.0, a next-generation AI model with advanced reasoning and multimodal capabilities in a faster, smaller, more efficient footprint. Additionally,ServiceNow will integrate withNVIDIA AI Factory reference architectures to deliver out-of-the box AI agents and workflow solutions, helping organizations enhance security and customer experiences in sectors such as retail, government, and data center management. -
Today,
ServiceNow and FedEx Dataworks announced their collaboration to build AI-powered supply chain workflows that combine FedEx Dataworks’ global logistics intelligence with the ServiceNow AI Platform’s automation and workflow capabilities. To start, FedEx Dataworks will integrate withServiceNow procurement solutions, using actionable data to deliver real-time visibility into supply chain health and performance.
Investment
-
Today,
ServiceNow announced an investment in Zaelab to accelerate CRM and AI-driven modernization for manufacturing and technology customers. The collaboration will deliver joint solutions for enhanced CPQ and digital commerce capabilities, while simultaneously allowing Zaelab to expand its CRM practice by adding 350 certified professionals to deliverServiceNow offerings that solve customers’ CRM needs. -
In September,
ServiceNow closed on its$750 million investment in Genesys, a global leader in AI-Powered Experience Orchestration, building on the companies’ global partnership to elevate customer and employee experiences. -
In Q3,
ServiceNow repurchased approximately 644,000 shares of its common stock for$584 million as part of its share repurchase program(1), with the primary objective of managing the impact of dilution. Approximately$2 billion remains available for share repurchases under the program.
Recognition
-
Over the last few months,
ServiceNow was recognized as a Leader across multiple Gartner® Magic Quadrant™ reports, including in the inaugural 2025 Gartner Magic Quadrant for Business Orchestration and Automation Technologies(2), the 2025 Gartner Magic Quadrant for AI Applications in IT Service Management(3), the 2025 Gartner Magic Quadrant for the CRM Customer Engagement Center(4), and a six-time Leader in the 2025 Gartner Magic Quadrant for Enterprise Low-Code Application platforms(5). -
Throughout the quarter, ServiceNow’s purpose-driven, unified culture was recognized with placements on Forbes America’s Best Employers for Company Culture and Fortune Best Workplaces in Technology(6) lists. The company was also honored on Glassdoor’s
Best-Led Company list and Ethisphere’s World’s Most Ethical Companies list.
|
___________________ |
|
(1) |
|
The program does not have a fixed expiration date, may be suspended, or discontinued at any time, and does not obligate |
|
(2) |
|
Gartner, Inc. Magic Quadrant for Business Orchestration and Automation Technologies, by |
|
(3) |
|
Gartner, Inc., Magic Quadrant for AI Applications in IT Service Management, by |
|
(4) |
|
Gartner, Inc., Magic Quadrant for the CRM Customer Engagement Center, by |
|
(5) |
|
Gartner, Inc., Magic Quadrant for Enterprise Low-Code Application Platforms, by Oleksandr Matvitskyy, |
|
(6) |
|
From |
|
Gartner Disclaimer |
|
|
|
The Gartner content described herein, (the "Gartner Content") represents research opinion or viewpoints published, as part of a syndicated subscription service, by Gartner, Inc. ("Gartner"), and is not representation of fact. Gartner Content speaks as of its original publication date (and not as of the date of this earnings press release) and the opinions expressed in the Gartner Content are subject to change without notice. |
|
|
|
Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner's research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose. |
|
|
|
GARTNER is a registered trademark and service mark of Gartner, Inc. and/or its affiliates in the |
Third Quarter 2025 GAAP and Non-GAAP Results:
The following table summarizes our financial results for the third quarter 2025:
|
|
|
|
|
|
|
|
|
Third Quarter 2025 GAAP Results |
|
Third Quarter 2025 Non-GAAP Results(1) |
||
|
|
Amount ($ millions) |
Year/Year Growth (%) |
|
Amount ($ millions)(3) |
Year/Year Growth (%) |
|
Subscription revenues |
|
21.5% |
|
|
20.5% |
|
Professional services and other revenues |
|
31% |
|
|
29.5% |
|
Total revenues |
|
22% |
|
|
20.5% |
|
|
|
|
|
|
|
|
|
Amount ($ billions) |
Year/Year Growth (%) |
|
Amount
|
Year/Year Growth (%) |
|
cRPO |
|
21% |
|
|
20.5% |
|
RPO |
|
24% |
|
|
23% |
|
|
|
|
|
|
|
|
|
Amount ($ millions) |
Margin (%) |
|
Amount ($ millions)(2) |
Margin (%)(2) |
|
Subscription gross profit |
|
80% |
|
|
83% |
|
Professional services and other gross profit |
$— |
0.5% |
|
|
11% |
|
Total gross profit |
|
77.5% |
|
|
81% |
|
Income from operations |
|
17% |
|
|
33.5% |
|
Net cash provided by operating activities |
|
24% |
|
|
|
|
Free cash flow |
|
|
|
|
17.5% |
|
|
|
|
|
|
|
|
|
Amount ($ millions) |
Earnings per
|
|
Amount ($ millions)(2) |
Earnings per Basic/Diluted Share ($)(2) |
|
Net income |
|
|
|
|
|
|
(1) |
We report non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures. |
|
|
(2) |
Refer to the table entitled “GAAP to Non-GAAP Reconciliation” for a reconciliation of GAAP to non-GAAP measures. |
|
|
(3) |
Non-GAAP subscription revenues and total revenues are adjusted for constant currency by excluding effects of foreign currency rate fluctuations and any gains or losses from foreign currency hedge contracts. Professional services and other revenues, cRPO, and RPO are adjusted only for constant currency. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures. |
|
Note: Numbers rounded for presentation purposes and may not foot. |
Financial Outlook
Our guidance includes GAAP and non‑GAAP financial measures. The non‑GAAP growth rates for subscription revenues are adjusted for constant currency by excluding the effects of foreign currency rate fluctuations and any gains or losses from foreign currency hedge contracts, and the non-GAAP growth rates for cRPO are adjusted only for constant currency to provide better visibility into the underlying business trends.
The following table summarizes our guidance for the fourth quarter 2025:
|
|
Fourth Quarter 2025 GAAP Guidance |
|
Fourth Quarter 2025 Non-GAAP Guidance(1) |
||
|
|
Amount
|
Year/Year Growth (%)(3) |
|
Constant Currency Year/Year Growth (%) |
|
|
Subscription revenues |
|
19.5% |
|
17.5% - 18% |
|
|
|
|
|
|
|
|
|
cRPO |
|
23% |
|
19% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Margin (%)(2) |
|
|
Income from operations |
|
|
|
30% |
|
|
|
|
|
|
|
|
|
|
|
Amount (millions) |
|
|
|
|
Weighted-average shares used to compute diluted net income per share |
|
210 |
|
|
|
|
(1) |
We report non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures. |
|
|
(2) |
Refer to the table entitled “Reconciliation of Non-GAAP Financial Guidance” for a reconciliation of GAAP to non-GAAP measures. |
|
|
(3) |
Guidance for GAAP subscription revenues and GAAP subscription revenues and cRPO growth rates are based on the 30-day average of foreign exchange rates for |
The following table summarizes our guidance for the full-year 2025:
|
|
Full-Year 2025 GAAP Guidance |
|
Full-Year 2025 Non-GAAP Guidance(1) |
|
|
|
Amount
|
Year/Year Growth (%)(3) |
|
Constant Currency Year/Year Growth (%) |
|
Subscription revenues |
|
20.5% |
|
20% |
|
|
|
|
|
|
|
|
|
|
|
Margin (%)(2) |
|
Subscription gross profit |
|
|
|
83.5% |
|
Income from operations |
|
|
|
31% |
|
Free cash flow |
|
|
|
34% |
|
|
|
|
|
|
|
|
|
Amount (millions) |
|
|
|
Weighted-average shares used to compute diluted net income per share |
|
210 |
|
|
|
(1) |
We report non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures. |
|
|
(2) |
Refer to the table entitled “Reconciliation of Non-GAAP Financial Guidance” for a reconciliation of GAAP to non-GAAP measures. |
|
|
(3) |
GAAP subscription revenues and related growth rate for the future quarter included in our full-year 2025 guidance are based on the 30-day average of foreign exchange rates for |
|
Note: Numbers are rounded for presentation purposes and may not foot. |
Conference Call Details
The conference call will begin at
https://events.q4inc.com/attendee/414259171
An audio replay of the conference call and webcast will be available two hours after its completion and will be accessible for 30 days. To hear the replay, interested parties may go to the investor relations section of the
Investor Presentation Details
An investor presentation providing additional information, including forward-looking guidance, and analysis can be found at https://investors.servicenow.com.
Upcoming Investor Conferences
These include:
-
ServiceNow Senior Vice President and General Manager, Core Business WorkflowsJosh Kahn will participate in a fireside chat at the RBCGlobalTIMT Conference onTuesday, November 18, 2025 , at5:40 a.m. PT . -
ServiceNow President, Chief Product Officer, and Chief Operating OfficerAmit Zavery will participate in a fireside chat at theUBS Global Technology and AI Conference onWednesday, December 3, 2025 , at9:15 a.m. PT . -
ServiceNow President and Chief Financial OfficerGina Mastantuono will participate in a keynote at theBarclays Global Technology Conference onWednesday, December 10, 2025 , at12:45 p.m. PT .
The live webcasts will be accessible on the investor relations section of the
Statement Regarding Use of Non-GAAP Financial Measures
We use the following non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.
-
Revenues. We adjust revenues and related growth rates for constant currency to provide a framework for assessing how our business performed excluding the effect of foreign currency rate fluctuations and any gains or losses from foreign currency hedge contracts that are reported in the current and comparative period. To exclude the effect of foreign currency rate fluctuations, current period results for entities reporting in currencies other than
U.S. Dollars (“USD”) are converted into USD at the average exchange rates in effect during the comparison period (for Q3 2024, the average exchange rates in effect for our major currencies were1 USD to0.91 Euros and1 USD to0.77 British Pound Sterling (“GBP”)), rather than the actual average exchange rates in effect during the current period (for Q3 2025, the average exchange rates in effect for our major currencies were1 USD to0.86 Euros and1 USD to0.74 GBP ). Guidance for related growth rates is derived by applying the average exchange rates in effect during the comparison period, rather than the exchange rates for the guidance period, adjusted for any foreign currency hedging effects. We believe the presentation of revenues and related growth rates adjusted for constant currency facilitates the comparison of revenues year-over-year.
-
Remaining performance obligations and current remaining performance obligations. We adjust cRPO and remaining performance obligations (“RPO”) and related growth rates for constant currency to provide a framework for assessing how our business performed. To present this information, current period results for entities reporting in currencies other than USD are converted into USD at the exchange rates in effect at the end of the comparison period (for Q3 2024, the end of the period exchange rates in effect for our major currencies were
1 USD to0.90 Euros and1 USD to0.75 GBP ), rather than the actual end of the period exchange rates in effect during the current period (for Q3 2025, the end of the period exchange rates in effect for our major currencies were1 USD to0.85 Euros and1 USD to0.74 GBP ). Guidance for the related growth rate is derived by applying the end of period exchange rates in effect during the comparison period rather than the exchange rates in effect during the guidance period. We believe the presentation of cRPO and RPO and related growth rates adjusted for constant currency facilitates the comparison of cRPO and RPO year-over-year, respectively.
- Gross profit, Income from operations, Net income and Net income per share - diluted. Our non-GAAP presentation of gross profit, income from operations, and net income measures exclude certain non-cash or non-recurring items, including stock-based compensation expense, amortization of purchased intangibles, legal settlements, business combination and other related costs including compensation expense, impairment of assets, severance costs, and income tax effects and adjustments. We believe these adjustments provide useful supplemental information to investors and facilitates the analysis of our operating results and comparison of operating results across reporting periods.
- Free cash flow. Free cash flow is defined as net cash provided by operating activities plus cash outflows for legal settlements and business combination and other related costs including compensation expense, reduced by purchases of property and equipment. Free cash flow margin is calculated as free cash flow as a percentage of total revenues. We believe information regarding free cash flow and free cash flow margin provides useful information to investors because it is an indicator of the strength and performance of our business operations.
Our presentation of non-GAAP financial measures may not be comparable to similar measures used by other companies. We encourage investors to carefully consider our results under GAAP, as well as our supplemental non-GAAP information and the reconciliation between these presentations, to more fully understand our business. Please see the tables included at the end of this release for the reconciliation of GAAP and non-GAAP results for gross profit, income from operations, net income, net income per share, and free cash flow.
Use of Forward-Looking Statements
This release contains “forward-looking statements” regarding our performance, including but not limited to statements in the section entitled “Financial Outlook” and statements regarding the expected benefits of our announced partnerships. Forward-looking statements are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, our results could differ materially from the results expressed or implied by the forward-looking statements we make.
Factors that may cause actual results to differ materially from those in any forward-looking statements include, among others, experiencing an actual or perceived cyber-security event or weakness; our ability to comply with evolving privacy laws, data transfer restrictions, and other foreign and domestic standards related to data and the Internet; errors, interruptions, delays or security breaches in or of our service or data centers; our ability to maintain and attract key employees and manage workplace culture; alleged violations of laws and regulations, including those relating to anti-bribery and anti-corruption and those relating to public sector contracting requirements; our ability to compete successfully against existing and new competitors; our ability to predict, prepare for and respond promptly to rapidly evolving technological, market and customer developments; our ability to grow our business, including converting remaining performance obligations into revenue, adding and retaining customers, selling additional subscriptions to existing customers, selling to larger enterprises, government and regulated organizations with complex sales cycles and certification processes, and entering new geographies and markets; our ability to develop and gain customer demand for and acceptance of existing, new and improved products and services, including products that incorporate AI technology; our ability to expand and maintain our partnerships and partner programs, including expected market opportunity from such relationships, and realize the anticipated benefits thereof; global macroeconomic and political conditions including tariffs, inflation and armed conflicts; changes in government spending and operating status; fluctuations in the value of foreign currencies relative to the
Further information on these and other factors that could affect our financial results are included in our Form 10-K for the year ended
We undertake no obligation, and do not intend, to update these forward-looking statements, to review or confirm analysts’ expectations, or to provide interim reports or updates on the progress of the current financial quarter.
About
© 2025
|
Condensed Consolidated Statements of Operations (in millions, except per share data) (unaudited) |
||||||||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
|||||||||||
|
|
|
|
|
|
|
|
|
|||||||
|
Revenues: |
|
|
|
|
|
|
|
|||||||
|
Subscription |
$ |
3,299 |
|
$ |
2,715 |
|
|
$ |
9,417 |
|
|
$ |
7,780 |
|
|
Professional services and other |
|
108 |
|
|
82 |
|
|
|
293 |
|
|
|
247 |
|
|
Total revenues |
|
3,407 |
|
|
2,797 |
|
|
|
9,710 |
|
|
|
8,027 |
|
|
Cost of revenues (1): |
|
|
|
|
|
|
|
|||||||
|
Subscription |
|
666 |
|
|
496 |
|
|
|
1,852 |
|
|
|
1,406 |
|
|
Professional services and other |
|
108 |
|
|
88 |
|
|
|
297 |
|
|
|
250 |
|
|
Total cost of revenues |
|
774 |
|
|
584 |
|
|
|
2,149 |
|
|
|
1,656 |
|
|
Gross profit |
|
2,633 |
|
|
2,213 |
|
|
|
7,561 |
|
|
|
6,371 |
|
|
Operating expenses (1): |
|
|
|
|
|
|
|
|||||||
|
Sales and marketing |
|
1,056 |
|
|
944 |
|
|
|
3,238 |
|
|
|
2,827 |
|
|
Research and development |
|
750 |
|
|
626 |
|
|
|
2,187 |
|
|
|
1,875 |
|
|
General and administrative |
|
255 |
|
|
225 |
|
|
|
755 |
|
|
|
679 |
|
|
Total operating expenses |
|
2,061 |
|
|
1,795 |
|
|
|
6,180 |
|
|
|
5,381 |
|
|
Income from operations |
|
572 |
|
|
418 |
|
|
|
1,381 |
|
|
|
990 |
|
|
Interest income |
|
115 |
|
|
108 |
|
|
|
346 |
|
|
|
313 |
|
|
Other income (expense), net |
|
7 |
|
|
(10 |
) |
|
|
(7 |
) |
|
|
(28 |
) |
|
Income before income taxes |
|
694 |
|
|
516 |
|
|
|
1,720 |
|
|
|
1,275 |
|
|
Provision for income taxes |
|
192 |
|
|
84 |
|
|
|
373 |
|
|
|
234 |
|
|
Net income |
$ |
502 |
|
$ |
432 |
|
|
$ |
1,347 |
|
|
$ |
1,041 |
|
|
Net income per share - basic |
$ |
2.42 |
|
$ |
2.09 |
|
|
$ |
6.50 |
|
|
$ |
5.06 |
|
|
Net income per share - diluted |
$ |
2.40 |
|
$ |
2.07 |
|
|
$ |
6.43 |
|
|
$ |
5.00 |
|
|
Weighted-average shares used to compute net income per share - basic |
|
208 |
|
|
206 |
|
|
|
207 |
|
|
|
206 |
|
|
Weighted-average shares used to compute net income per share - diluted |
|
210 |
|
|
209 |
|
|
|
209 |
|
|
|
208 |
|
|
(1) |
Includes stock-based compensation as follows: |
|
|
Three Months Ended |
|
Nine Months Ended |
|||||||||||
|
|
|
|
|
|
|
|
|
|||||||
|
Cost of revenues: |
|
|
|
|
|
|
|
|||||||
|
Subscription |
$ |
78 |
|
$ |
64 |
|
$ |
222 |
|
$ |
184 |
|||
|
Professional services and other |
|
11 |
|
|
11 |
|
|
33 |
|
|
35 |
|||
|
Operating expenses: |
|
|
|
|
|
|
|
|||||||
|
Sales and marketing |
|
141 |
|
|
144 |
|
|
444 |
|
|
419 |
|||
|
Research and development |
|
203 |
|
|
150 |
|
|
584 |
|
|
479 |
|||
|
General and administrative |
|
59 |
|
|
57 |
|
|
178 |
|
|
175 |
|||
|
Condensed Consolidated Balance Sheets (in millions) |
|||||
|
|
|
|
|
||
|
|
(unaudited) |
|
|
||
|
Assets |
|
|
|
||
|
Current assets: |
|
|
|
||
|
Cash and cash equivalents |
$ |
2,725 |
|
$ |
2,304 |
|
Marketable securities |
|
2,686 |
|
|
3,458 |
|
Accounts receivable, net |
|
1,548 |
|
|
2,240 |
|
Current portion of deferred commissions |
|
559 |
|
|
517 |
|
Prepaid expenses and other current assets |
|
846 |
|
|
668 |
|
Total current assets |
|
8,364 |
|
|
9,187 |
|
Deferred commissions, less current portion |
|
1,017 |
|
|
999 |
|
Long-term marketable securities |
|
4,266 |
|
|
4,111 |
|
Strategic investments |
|
1,508 |
|
|
472 |
|
Property and equipment, net |
|
2,127 |
|
|
1,763 |
|
Operating lease right-of-use assets |
|
807 |
|
|
693 |
|
Intangible assets, net |
|
391 |
|
|
209 |
|
|
|
1,820 |
|
|
1,273 |
|
Deferred tax assets |
|
1,217 |
|
|
1,385 |
|
Other assets |
|
272 |
|
|
291 |
|
Total assets |
$ |
21,789 |
|
$ |
20,383 |
|
Liabilities and Stockholders’ Equity |
|
|
|
||
|
Current liabilities: |
|
|
|
||
|
Accounts payable |
$ |
146 |
|
$ |
68 |
|
Accrued expenses and other current liabilities |
|
1,267 |
|
|
1,369 |
|
Current portion of deferred revenue |
|
6,347 |
|
|
6,819 |
|
Current portion of operating lease liabilities |
|
107 |
|
|
102 |
|
Total current liabilities |
|
7,867 |
|
|
8,358 |
|
Deferred revenue, less current portion |
|
115 |
|
|
95 |
|
Operating lease liabilities, less current portion |
|
804 |
|
|
687 |
|
Long-term debt, net |
|
1,491 |
|
|
1,489 |
|
Other long-term liabilities |
|
211 |
|
|
145 |
|
Stockholders’ equity |
|
11,301 |
|
|
9,609 |
|
Total liabilities and stockholders’ equity |
$ |
21,789 |
|
$ |
20,383 |
|
Note: Certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications did not result in a restatement of prior period condensed consolidated financial statements. |
|
Condensed Consolidated Statements of Cash Flows (in millions) (unaudited) |
|||||||||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
||||||||
|
Net income |
$ |
502 |
|
|
$ |
432 |
|
|
$ |
1,347 |
|
|
$ |
1,041 |
|
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
||||||||
|
Depreciation and amortization |
|
194 |
|
|
|
144 |
|
|
|
526 |
|
|
|
410 |
|
|
Amortization of deferred commissions |
|
161 |
|
|
|
140 |
|
|
|
454 |
|
|
|
403 |
|
|
Stock-based compensation |
|
492 |
|
|
|
426 |
|
|
|
1,461 |
|
|
|
1,292 |
|
|
Deferred income taxes |
|
124 |
|
|
|
(5 |
) |
|
|
172 |
|
|
|
47 |
|
|
Other |
|
(19 |
) |
|
|
(6 |
) |
|
|
43 |
|
|
|
(31 |
) |
|
Changes in operating assets and liabilities, net of effect of business combinations: |
|
|
|
|
|
|
|
||||||||
|
Accounts receivable |
|
141 |
|
|
|
228 |
|
|
|
740 |
|
|
|
727 |
|
|
Deferred commissions |
|
(171 |
) |
|
|
(155 |
) |
|
|
(462 |
) |
|
|
(461 |
) |
|
Prepaid expenses and other assets |
|
23 |
|
|
|
(15 |
) |
|
|
(199 |
) |
|
|
(267 |
) |
|
Accounts payable |
|
(85 |
) |
|
|
(130 |
) |
|
|
48 |
|
|
|
42 |
|
|
Deferred revenue |
|
(449 |
) |
|
|
(263 |
) |
|
|
(713 |
) |
|
|
(355 |
) |
|
Accrued expenses and other liabilities |
|
(100 |
) |
|
|
(125 |
) |
|
|
(211 |
) |
|
|
(216 |
) |
|
Net cash provided by operating activities |
$ |
813 |
|
|
$ |
671 |
|
|
$ |
3,206 |
|
|
$ |
2,632 |
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
||||||||
|
Purchases of property and equipment |
|
(235 |
) |
|
|
(202 |
) |
|
|
(630 |
) |
|
|
(599 |
) |
|
Business combinations, net of cash acquired |
|
(139 |
) |
|
|
(41 |
) |
|
|
(215 |
) |
|
|
(82 |
) |
|
Purchases of other intangibles |
|
(9 |
) |
|
|
— |
|
|
|
(43 |
) |
|
|
(30 |
) |
|
Purchases of marketable securities |
|
(397 |
) |
|
|
(1,292 |
) |
|
|
(2,719 |
) |
|
|
(3,952 |
) |
|
Purchases of strategic investments |
|
(882 |
) |
|
|
(61 |
) |
|
|
(1,020 |
) |
|
|
(149 |
) |
|
Sales and maturities of marketable securities |
|
1,129 |
|
|
|
911 |
|
|
|
3,410 |
|
|
|
3,024 |
|
|
Other |
|
(18 |
) |
|
|
27 |
|
|
|
26 |
|
|
|
25 |
|
|
Net cash used in investing activities |
$ |
(551 |
) |
|
$ |
(658 |
) |
|
$ |
(1,191 |
) |
|
$ |
(1,763 |
) |
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
||||||||
|
Proceeds from employee stock plans |
|
117 |
|
|
|
106 |
|
|
|
270 |
|
|
|
237 |
|
|
Repurchases of common stock |
|
(584 |
) |
|
|
(225 |
) |
|
|
(1,243 |
) |
|
|
(400 |
) |
|
Taxes paid related to net share settlement of equity awards |
|
(190 |
) |
|
|
(173 |
) |
|
|
(628 |
) |
|
|
(525 |
) |
|
Business combination |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(184 |
) |
|
Net cash used in financing activities |
$ |
(657 |
) |
|
$ |
(292 |
) |
|
$ |
(1,601 |
) |
|
$ |
(872 |
) |
|
Foreign currency effect on cash, cash equivalents and restricted cash |
|
(4 |
) |
|
|
5 |
|
|
|
10 |
|
|
|
(8 |
) |
|
Net change in cash, cash equivalents and restricted cash |
|
(399 |
) |
|
|
(274 |
) |
|
|
424 |
|
|
|
(11 |
) |
|
Cash, cash equivalents and restricted cash at beginning of period |
|
3,133 |
|
|
|
2,167 |
|
|
|
2,310 |
|
|
|
1,904 |
|
|
Cash, cash equivalents and restricted cash at end of period |
$ |
2,734 |
|
|
$ |
1,893 |
|
|
$ |
2,734 |
|
|
$ |
1,893 |
|
|
GAAP to Non-GAAP Reconciliation (in millions, except per share data) (unaudited) |
|||||||||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Gross profit: |
|
|
|
|
|
|
|
||||||||
|
GAAP subscription gross profit |
$ |
2,633 |
|
|
$ |
2,219 |
|
|
$ |
7,565 |
|
|
$ |
6,374 |
|
|
Stock-based compensation |
|
78 |
|
|
|
64 |
|
|
|
222 |
|
|
|
184 |
|
|
Amortization of purchased intangibles |
|
32 |
|
|
|
22 |
|
|
|
75 |
|
|
|
64 |
|
|
Severance costs |
|
1 |
|
|
|
— |
|
|
|
4 |
|
|
|
— |
|
|
Non-GAAP subscription gross profit |
$ |
2,744 |
|
|
$ |
2,305 |
|
|
$ |
7,866 |
|
|
$ |
6,622 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
GAAP professional services and other gross profit (loss) |
$ |
— |
|
|
$ |
(6 |
) |
|
$ |
(4 |
) |
|
$ |
(3 |
) |
|
Stock-based compensation |
|
11 |
|
|
|
11 |
|
|
|
33 |
|
|
|
35 |
|
|
Severance costs |
|
1 |
|
|
|
— |
|
|
|
1 |
|
|
|
— |
|
|
Non-GAAP professional services and other gross profit |
$ |
12 |
|
|
$ |
5 |
|
|
$ |
30 |
|
|
$ |
32 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
GAAP gross profit |
$ |
2,633 |
|
|
$ |
2,213 |
|
|
$ |
7,561 |
|
|
$ |
6,371 |
|
|
Stock-based compensation |
|
89 |
|
|
|
75 |
|
|
|
255 |
|
|
|
219 |
|
|
Amortization of purchased intangibles |
|
32 |
|
|
|
22 |
|
|
|
75 |
|
|
|
64 |
|
|
Severance costs |
|
2 |
|
|
|
— |
|
|
|
5 |
|
|
|
— |
|
|
Non-GAAP gross profit |
$ |
2,756 |
|
|
$ |
2,310 |
|
|
$ |
7,896 |
|
|
$ |
6,654 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Gross margin: |
|
|
|
|
|
|
|
||||||||
|
GAAP subscription gross margin |
|
80 |
% |
|
|
81.5 |
% |
|
|
80.5 |
% |
|
|
82 |
% |
|
Stock-based compensation as % of subscription revenues |
|
2.5 |
% |
|
|
2.5 |
% |
|
|
2.5 |
% |
|
|
2.5 |
% |
|
Amortization of purchased intangibles as % of subscription revenues |
|
1 |
% |
|
|
1 |
% |
|
|
1 |
% |
|
|
1 |
% |
|
Severance costs as % of subscription revenues |
|
— |
% |
|
|
— |
% |
|
|
— |
% |
|
|
— |
% |
|
Non-GAAP subscription gross margin |
|
83 |
% |
|
|
85 |
% |
|
|
83.5 |
% |
|
|
85 |
% |
|
|
|
|
|
|
|
|
|
||||||||
|
GAAP professional services and other gross margin |
|
0.5 |
% |
|
|
(6.5 |
%) |
|
|
(1.5 |
%) |
|
|
(1 |
%) |
|
Stock-based compensation as % of professional services and other revenues |
|
10.5 |
% |
|
|
14 |
% |
|
|
11.5 |
% |
|
|
14 |
% |
|
Severance costs as % of professional services and other revenues |
|
0.5 |
% |
|
|
— |
% |
|
|
0.5 |
% |
|
|
— |
% |
|
Non-GAAP professional services and other gross margin |
|
11 |
% |
|
|
7.5 |
% |
|
|
10 |
% |
|
|
13 |
% |
|
|
|
|
|
|
|
||||||||||
|
GAAP gross margin |
|
77.5 |
% |
|
|
79 |
% |
|
|
78 |
% |
|
|
79.5 |
% |
|
Stock-based compensation as % of total revenues |
|
2.5 |
% |
|
|
2.5 |
% |
|
|
2.5 |
% |
|
|
2.5 |
% |
|
Amortization of purchased intangibles as % of total revenues |
|
1 |
% |
|
|
1 |
% |
|
|
1 |
% |
|
|
1 |
% |
|
Severance costs as % of total revenues |
|
— |
% |
|
|
— |
% |
|
|
— |
% |
|
|
— |
% |
|
Non-GAAP gross margin |
|
81 |
% |
|
|
82.5 |
% |
|
|
81.5 |
% |
|
|
83 |
% |
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Income from operations: |
|
|
|
|
|
|
|
||||||||
|
GAAP income from operations |
$ |
572 |
|
|
$ |
418 |
|
|
$ |
1,381 |
|
|
$ |
990 |
|
|
Stock-based compensation |
|
492 |
|
|
|
426 |
|
|
|
1,461 |
|
|
|
1,292 |
|
|
Amortization of purchased intangibles |
|
33 |
|
|
|
23 |
|
|
|
79 |
|
|
|
71 |
|
|
Business combination and other related costs |
|
19 |
|
|
|
4 |
|
|
|
44 |
|
|
|
29 |
|
|
Impairment of assets |
|
— |
|
|
|
— |
|
|
|
30 |
|
|
|
— |
|
|
Severance costs |
|
24 |
|
|
|
— |
|
|
|
53 |
|
|
|
— |
|
|
Non-GAAP income from operations |
$ |
1,140 |
|
|
$ |
872 |
|
|
$ |
3,048 |
|
|
$ |
2,383 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Operating margin: |
|
|
|
|
|
|
|
||||||||
|
GAAP operating margin |
|
17 |
% |
|
|
15 |
% |
|
|
14 |
% |
|
|
12.5 |
% |
|
Stock-based compensation as % of total revenues |
|
14.5 |
% |
|
|
15 |
% |
|
|
15 |
% |
|
|
16 |
% |
|
Amortization of purchased intangibles as % of total revenues |
|
1 |
% |
|
|
1 |
% |
|
|
1 |
% |
|
|
1 |
% |
|
Business combination and other related costs as % of total revenues |
|
0.5 |
% |
|
|
— |
% |
|
|
0.5 |
% |
|
|
0.5 |
% |
|
Impairment of assets as % of total revenues |
|
— |
% |
|
|
— |
% |
|
|
0.5 |
% |
|
|
— |
% |
|
Severance costs as % of total revenues |
|
0.5 |
% |
|
|
— |
% |
|
|
0.5 |
% |
|
|
— |
% |
|
Non-GAAP operating margin |
|
33.5 |
% |
|
|
31 |
% |
|
|
31.5 |
% |
|
|
29.5 |
% |
|
|
|
|
|
|
|
|
|
||||||||
|
Net income: |
|
|
|
|
|
|
|
||||||||
|
GAAP net income |
$ |
502 |
|
|
$ |
432 |
|
|
$ |
1,347 |
|
|
$ |
1,041 |
|
|
Stock-based compensation |
|
492 |
|
|
|
426 |
|
|
|
1,461 |
|
|
|
1,292 |
|
|
Amortization of purchased intangibles |
|
33 |
|
|
|
23 |
|
|
|
79 |
|
|
|
71 |
|
|
Business combination and other related costs |
|
19 |
|
|
|
4 |
|
|
|
44 |
|
|
|
29 |
|
|
Impairment of assets |
|
— |
|
|
|
— |
|
|
|
30 |
|
|
|
— |
|
|
Severance costs |
|
24 |
|
|
|
— |
|
|
|
53 |
|
|
|
— |
|
|
Income tax effects and adjustments(1) |
|
(60 |
) |
|
|
(110 |
) |
|
|
(304 |
) |
|
|
(300 |
) |
|
Non-GAAP net income |
$ |
1,010 |
|
|
$ |
775 |
|
|
$ |
2,710 |
|
|
$ |
2,133 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Net income per share - basic and diluted: |
|
|
|
|
|
|
|
||||||||
|
GAAP net income per share - basic |
$ |
2.42 |
|
|
$ |
2.09 |
|
|
$ |
6.50 |
|
|
$ |
5.06 |
|
|
GAAP net income per share - diluted |
$ |
2.40 |
|
|
$ |
2.07 |
|
|
$ |
6.43 |
|
|
$ |
5.00 |
|
|
Non-GAAP net income per share - basic |
$ |
4.86 |
|
|
$ |
3.76 |
|
|
$ |
13.08 |
|
|
$ |
10.37 |
|
|
Non-GAAP net income per share - diluted |
$ |
4.82 |
|
|
$ |
3.72 |
|
|
$ |
12.94 |
|
|
$ |
10.26 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Weighted-average shares used to compute net income per share - basic |
|
208 |
|
|
|
206 |
|
|
|
207 |
|
|
|
206 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Weighted-average shares used to compute net income per share - diluted |
|
210 |
|
|
|
209 |
|
|
|
209 |
|
|
|
208 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Free cash flow: |
|
|
|
|
|
|
|
||||||||
|
GAAP net cash provided by operating activities |
$ |
813 |
|
|
$ |
671 |
|
|
$ |
3,206 |
|
|
$ |
2,632 |
|
|
Purchases of property and equipment |
|
(235 |
) |
|
|
(202 |
) |
|
|
(630 |
) |
|
|
(599 |
) |
|
Business combination and other related costs |
|
14 |
|
|
|
2 |
|
|
|
28 |
|
|
|
22 |
|
|
Non-GAAP free cash flow |
$ |
592 |
|
|
$ |
471 |
|
|
$ |
2,604 |
|
|
$ |
2,055 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Free cash flow margin: |
|
|
|
|
|
|
|
||||||||
|
GAAP net cash provided by operating activities as % of total revenues |
|
24 |
% |
|
|
24 |
% |
|
|
33 |
% |
|
|
33 |
% |
|
Purchases of property and equipment as % of total revenues |
|
(7 |
%) |
|
|
(7 |
%) |
|
|
(6.5 |
%) |
|
|
(7.5 |
%) |
|
Business combination and other related costs as % of total revenues |
|
0.5 |
% |
|
|
— |
% |
|
|
0.5 |
% |
|
|
— |
% |
|
Non-GAAP free cash flow margin |
|
17.5 |
% |
|
|
17 |
% |
|
|
27 |
% |
|
|
25.5 |
% |
|
(1) |
We use a non-GAAP effective tax rate for evaluating our operating results to provide consistency across reporting periods. Based on our long-term projections, we are using a non-GAAP tax rate of 20% for each of the three and nine months ended |
|
Note: Numbers are rounded for presentation purposes and may not foot. |
|
Reconciliation of Non-GAAP Financial Guidance |
|||
|
|
Three Months Ending |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP operating margin |
14 |
% |
|
|
|
|
|
|
|
Stock-based compensation expense as % of total revenues |
14 |
% |
|
|
|
|
|
|
|
Amortization of purchased intangibles as % of total revenues |
1 |
% |
|
|
|
|
|
|
|
Business combination and other related costs as % of total revenues |
— |
% |
|
|
|
|
|
|
|
Severance costs as % of total revenues |
1 |
% |
|
|
|
|
|
|
|
Non-GAAP operating margin |
30 |
% |
|
|
|
Twelve Months Ending |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP subscription gross margin |
80 |
% |
|
|
|
|
|
|
|
Stock-based compensation expense as % of subscription revenues |
2 |
% |
|
|
|
|
|
|
|
Amortization of purchased intangibles as % of subscription revenues |
1 |
% |
|
|
|
|
|
|
|
Severance costs as % of subscription revenues |
— |
% |
|
|
|
|
|
|
|
Non-GAAP subscription margin |
83.5 |
% |
|
|
|
|
|
|
|
GAAP operating margin |
14 |
% |
|
|
|
|
|
|
|
Stock-based compensation expense as % of total revenues |
15 |
% |
|
|
|
|
|
|
|
Amortization of purchased intangibles as % of total revenues |
1 |
% |
|
|
|
|
|
|
|
Business combination and other related costs as % of total revenues |
— |
% |
|
|
|
|
|
|
|
Impairment of assets as % of total revenues |
— |
% |
|
|
|
|
|
|
|
Severance costs as % of total revenues |
1 |
% |
|
|
|
|
|
|
|
Non-GAAP operating margin |
31 |
% |
|
|
|
|
|
|
|
GAAP net cash provided by operating activities as % of total revenues |
41 |
% |
|
|
|
|
|
|
|
Purchases of property and equipment as % of total revenues |
(7 |
%) |
|
|
|
|
|
|
|
Business combination and other related costs as % of total revenues |
— |
% |
|
|
|
|
|
|
|
Non-GAAP free cash flow margin |
34 |
% |
|
|
|
|
|
|
|
Note: Numbers are rounded for presentation purposes and may not foot. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20251029871385/en/
Media Contact:
(408) 250-8644
press@servicenow.com
Investor Contact:
(925) 388-7205
ir@servicenow.com
Source:
