ServiceNow Q1 2025 Earnings Analysis
Dive into $NOW ServiceNow’s Q1 2025 earnings with review of financial performance, key metrics, operating expenses, dilution, customer growth, future outlook
Financial Results
↗️$3,088M rev (+18.6% YoY, +21.3% LQ) beat est by 0.1%
↘️Gross Margin* (82.1%, -1.4 PPs YoY)🟡
↗️Operating Margin* (30.9%, +0.5 PPs YoY)
↗️FCF Margin (47.8%, +0.8 PPs YoY)
↗️Net Margin (14.9%, +1.6 PPs YoY)
↗️EPS* $4.04 beat est by 4.9%🟢
*non-GAAP
Subscription Revenue
↗️$3,005.0M Subscription rev (+19.1% YoY)
↘️Subscription GM* (82.0%, -1.0 PPs YoY)
Key Metrics
↗️сRPO $10.31B (+22.0% YoY)🟢
↗️RPO $22.10B (+24.9% YoY)🟢
➡️Renewal Rate 98% (98% LQ)
↗️Average ACV of $5M+ ACV Customers $14.20M (+7.6% YoY)
Customers
➡️508customers $5M+ ACV (+19.5% YoY, +10)
Revenue by Geography
↗️North America $1,963M (+19.9% YoY, 63.6% of Rev)
➡️EMEA $782M (+15.7% YoY, 25.3% of Rev)
➡️APAC & Other $343M (+18.3% YoY, 11.1% of Rev)
Operating expenses
↘️S&M*/Revenue 29.3% (-1.0 PPs YoY)
↘️R&D*/Revenue 16.8% (-0.4 PPs YoY)
↘️G&A*/Revenue 5.5% (-0.7 PPs YoY)
Quarterly Performance Highlights
↘️Net New ARR $556M (-12.0% YoY)
↗️CAC* Payback Period 23.2 Months (+6.6 YoY)🟡
↘️R&D* Index (RDI) 1.08 (-0.32 YoY)🟡
Dilution
↘️SBC/rev 15%, -0.1 PPs QoQ
↗️Basic shares up 0.9% YoY, +0.2 PPs QoQ🟢
↘️Diluted shares up 0.6% YoY, -0.7 PPs QoQ🟢
Guidance
↗️Q2'25 $3,030.0 - $3,035.0M guide (+19.3% YoY) beat est by 0.2%
➡️$12,640.0 - $12,680.0M FY guide (+18.9% YoY) raised by 0.1% in line with est
Key points from ServiceNow’s First Quarter 2025 Earnings Call:
Financial Performance
ServiceNow reported strong Q1’25 results. Subscription revenue reached $3.005B, up +20% YoY in constant currency, exceeding the high end of guidance. CRPO grew +25.5% YoY to $22.1B, while current RPO increased +22% YoY, beating guidance by 150 bps. Non-GAAP operating margin reached 31%, up 100 bps YoY. Free cash flow margin improved to 48%, also up +100 bps YoY. The company secured 72 $1M+ deals, including 9 over $5M.
Technology Workflows
Technology workflows generated 36 $1M+ deals, with 2 over $5M. ITSM, ITOM, ITAM, Security, and Risk were present in over half of the top 20 deals. ITSM Plus featured in 15 of the top 20. ICON Plus ACV grew +70% QoQ, and SecOps Plus recorded a 4x QoQ increase. Despite CRM gaining share, demand for IT transformation remains resilient. The key success has been multi-product expansion. The main challenge is preserving differentiation as competition intensifies.
RaptorDB
RaptorDB secured 5 $1M+ deals in Q1. Quarterly ACV growth accelerated due to strong demand in complex enterprise data environments. Internally, it supports real-time analytics and automation. The Yokohama release introduced enhanced multilevel drill-down capabilities. Wells Fargo uses RaptorDB to automate AI-powered workflows. Adoption is growing, though scaling across legacy infrastructure remains a challenge.
Workflow Data Fabric
Workflow data fabric integrates structured and unstructured data from ERP, CRM, and HCM systems. It enables real-time orchestration and cross-domain workflow automation. Coupled with RaptorDB, it enhances data visibility and insight generation. A key advantage is its ability to unify data into a single model for AI execution. Complexity in legacy environments continues to pose integration challenges.
Customer and Industry Workflows
Customer and Industry workflows accounted for 34% of net new ACV, surpassing Technology workflows. Present in 16 of the top 20 deals, the segment saw +50% YoY ACV growth in EMEA and Japan. The Logic.ai acquisition expanded CPQ capabilities. Finance & Supply Chain workflows grew +60% YoY, and HR Service Delivery rose +40% YoY. Customers are consolidating operations into one unified AI-first platform. The challenge is overcoming deeply entrenched CRM incumbents.
Autonomous AI Agents
AI agents from the Yokohama release are now deployable within weeks. Internally, they reduced lead-to-sale time by 16x and deflected 86% of low-value tasks. Enterprise customers like Adobe are implementing orchestration layers with ServiceNow’s agent framework. Productivity gains are consistent, but successful scaling requires managing hybrid integration, governance, and coordination complexity.
Employee Workflows
HR workflows grew +40% YoY, driven by Now Assist and GenAI integrations. Orca improved IT support deflection from 18% to 94%, reducing average resolution time by 1.5 days. AI-led efficiencies are enabling reallocation toward higher-value tasks. The challenge is extending automation across siloed functions.
Now Assist
Now Assist featured in 15 of the top 20 deals. 39 deals included three or more Now Assist products. System admin tasks dropped from 20 minutes to seconds. Creator Plus deal sizes tripled QoQ. Pro Plus deals quadrupled YoY. AI capabilities are embedded platform-wide, with consistent value delivery across customer implementations. Competition from other AI-native platforms remains a pricing and innovation pressure point.
Creator Workflows
Creator Workflows were present in all top 20 Q1 deals. Average Creator Plus deal size tripled QoQ. The low-code framework supports scalable, AI-driven workflow automation. Customers are building bespoke solutions using ServiceNow’s composable architecture. Differentiation remains a focus as competition in the low-code space accelerates.
Product Innovation
The Now Assist portfolio led Q1’s AI adoption momentum. Pro Plus deals quadrupled YoY, helping raise average deal size by 33% QoQ. GenAI-powered agents, agent orchestration studio, and case summarization tools were launched in the Yokohama release. These tools have driven efficiency gains both internally and across customer environments.
Strategic Partnerships
Aptiv expanded its platform usage for cost efficiency. It also partnered with Wind River to co-develop AI solutions in industrial sectors. Vodafone signed a 5-year deal for AI-driven CRM transformation across Europe and the Middle East. Other large accounts expanding usage include Adobe, NEC, Hitachi Energy, Accenture, NHL, Yokohama City, and Pure Storage.
International Growth
CRM net new ACV in EMEA and Japan grew +50% YoY. International customers are rapidly adopting Now Assist and Pro Plus products, especially in markets with complex legacy infrastructure. Global momentum continues to build, particularly in regulated industries.
Customers
ServiceNow ended the quarter with 508 customers generating >$5M in ACV, up from 425 YoY. The number of $20M+ ACV customers grew 40% YoY. 19 of the top 20 deals included five or more products, indicating broader adoption. 72 deals surpassed $1M, with 9 exceeding $5M, signaling large enterprise trust in the full platform.
Customer Success
Aptiv expanded usage to drive productivity and partnered for industrial AI development. Vodafone committed to platform-wide CRM transformation. Adobe adopted agentic AI for lead management workflows. Wells Fargo deployed RaptorDB for real-time data workflows. Orca improved IT efficiency through Now Assist, reducing task volume and resolution time significantly.
Public Sector
Public sector ACV grew +30% YoY. The quarter included 11 $1M+ federal deals, with 2 above $5M, and 6 new federal customers. The Government Transformation Suite drove modernization across agencies. One agency is using ServiceNow AI agents to automate contract reviews and reduce operational costs.
Stock Buyback
ServiceNow repurchased 316,000 shares in Q1. $3B remains authorized under the current buyback program, primarily to manage dilution.
Future Outlook
FY25 subscription revenue guidance was raised to $12.64B–$12.68B, up +18.5% to +19% YoY, or +19.5% in constant currency. Q2 guidance includes $3.03B–$3.035B in subscription revenue and +19.5% CRPO growth. Full-year operating margin is expected at 30.5%, with FCF margin at 32%. Guidance reflects cautious optimism amid macro uncertainty, backed by consistent AI-driven momentum.
Management comments on the earnings call.
Product Innovations
Bill McDermott, Chairman and Chief Executive Officer
“We are leading the AI race because we ourselves are running it. The ServiceNow team is raising the bar by innovating on our own platform, taking an end-to-end, agentic AI-first approach to running our business.”
Amit Zavery, President, Chief Product Officer and Chief Operating Officer
“We are the only vendor with a full-blown orchestration engine, packaged AI agents, tools to build new agents, and integration with third-party products. We're not doing piecemeal AI—we're delivering end-to-end transformation.”
RaptorDB
Gina Mastantuono, President and Chief Financial Officer
“RaptorDB Pro continues to gain traction, with net new ACV accelerating quarter over quarter, including five deals over a million. The new multilevel performance analytics in the Yokohama release is driving even more customer enthusiasm.”
Bill McDermott, Chairman and Chief Executive Officer
“Wells Fargo launched ServiceNow AI with RaptorDB to automate complex workflows and process datasets in real time. This is just one example of the kind of breakthrough productivity our platform is enabling.”
Autonomous AI Agents
Amit Zavery, President, Chief Product Officer and Chief Operating Officer
“Our Yokohama release introduced AI agents that can be deployed in weeks. Internally, we’ve built agents across every department—customer service, finance, legal, IT, HR—and they’re already delivering high-value outcomes.”
Bill McDermott, Chairman and Chief Executive Officer
“The lead-to-sale conversion process has improved by 16x. We're seeing 86% deflection of the repetitive work people used to do themselves. These results speak for themselves.”
Now Assist
Gina Mastantuono, President and Chief Financial Officer
“The number of Pro Plus deals more than quadrupled year over year. Now Assist is a key growth lever, beating expectations again and again. In Q1, 39 deals included three or more Now Assist products.”
Amit Zavery, President, Chief Product Officer and Chief Operating Officer
“System admin use cases that took 20 minutes are now resolved in seconds. That’s the kind of performance our customers demand, and we’re delivering it.”
Competitors
Bill McDermott, Chairman and Chief Executive Officer
“No one says they’ll use ERP to cut across all systems and drive productivity. They say that about us. That’s why we’re the AI operating system for the enterprise.”
“We’re hearing it directly from customers: they want someone else to lose so they can invest more in us. We’ve gone from 'no one has to lose' to 'we need consolidation—and fast.'”
Customers
Gina Mastantuono, President and Chief Financial Officer
“We now have 508 customers generating over $5 million in ACV, up from 425 a year ago. Customers contributing $20 million or more increased by nearly 40% year over year.”
Bill McDermott, Chairman and Chief Executive Officer
“Aptiv made a bold move to expand their use of ServiceNow to drive cost takeout and improve productivity. They’re not just transforming how they work—they’re growing with us.”
“Our CRM and industry workflows were in 16 of our top 20 deals. One customer said, 'If we don’t adapt our supplier network, our cost per vehicle could rise by $10,000.' We help them avoid that through real-time AI workflow reconfiguration.”
Strategic Partnerships
Bill McDermott, Chairman and Chief Executive Officer
“We announced the intent to acquire Moveworks. Their employee-facing AI and our fulfiller-oriented automation will come together at scale to reduce costs and boost productivity.”
“The acquisition of Logic.ai strengthens our front-office strategy. It brings AI-native CPQ capabilities that will accelerate performance in sales and commerce across industries.”
Amit Zavery, President, Chief Product Officer and Chief Operating Officer
“Moveworks brings 500 AI engineers into our team and a proven user experience model. Over 70% of their customers already integrate with us—we’re going to accelerate roadmap execution together.”
International Growth
Bill McDermott, Chairman and Chief Executive Officer
“CRM workflows are seeing over 50% net new ACV growth in EMEA and Japan. That’s a signal of rising global demand for AI-first customer engagement and operations platforms.”
Challenges
Gina Mastantuono, President and Chief Financial Officer
“We’ve built our full-year guidance with a healthy degree of conservatism. We’re factoring in risks tied to federal budgets and geopolitical complexity, while still reflecting strong demand signals.”
Future Outlook
Gina Mastantuono, President and Chief Financial Officer
“For 2025, we’ve raised our subscription revenue guidance to $12.64 billion to $12.68 billion. That represents 18.5% to 19% growth, or 19.5% in constant currency.”
“Our guide reflects the real-world complexity of today’s macro backdrop, but our execution strength, customer pipeline, and platform relevance give us high confidence looking ahead.”
Bill McDermott, Chairman and Chief Executive Officer
“You don’t build a defining company by surrendering to uncertainty. You do it by seeing challenges as opportunities. ServiceNow is built for this moment.”
Thoughts on ServiceNow Earnings Report $NOW:
🟢 Positive
Revenue reached $3.088B, up +18.6% YoY, beating estimates by 0.1%
Subscription revenue grew +19.1% YoY to $3.005B
cRPO rose +22.0% YoY to $10.31B, RPO up +24.9% YoY to $22.10B
Operating margin increased to 30.9%, up +0.5 PPs YoY
FCF margin improved to 47.8%, up +0.8 PPs YoY
EPS of $4.04, beat estimates by 4.9%
508 customers with $5M+ ACV, up +19.5% YoY
S&M, R&D, G&A expenses as % of revenue decreased YoY
Pro Plus deals quadrupled YoY, included in 15 of top 20 deals
Creator Plus deal sizes tripled QoQ
Wells Fargo, Adobe, Vodafone among major enterprise AI adopters
Public sector ACV up +30% YoY with 11 $1M+ deals and 6 new federal logos
FY25 revenue guidance raised to $12.64B–$12.68B, +18.9% YoY
🟡 Neutral
Gross margin at 82.1%, down -1.4 PPs YoY
Subscription GM at 82.0%, down -1.0 PPs YoY
Renewal rate remained flat at 98%
Basic shares increased +0.9% YoY, diluted shares up +0.6% YoY
CAC payback lengthened to 23.2 months, up +6.6 months YoY
Stock-based comp/revenue declined slightly to 15%
🔴 Negative
Net new ARR declined -12.0% YoY to $556M
R&D Index (RDI) fell to 1.08, down -0.32 YoY
CRM incumbents present continued competitive pressure
Scaling RaptorDB across legacy systems remains a challenge
AI competition poses ongoing pricing and innovation risk
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Disclaimer: This earnings review is for informational purposes only and does not constitute financial, investment, or trading advice.