ServiceNow, Inc. Q3 FY2025 earnings call

• Bill McDermott highlighted strong Q3 results: subscription revenue growth 20.5% year-over-year, cRPO 20.5% year-over-year, operating margin 33.5%, and free cash flow margin 17.5%. There were 103 deals greater than $1 million in net new ACV, with 6 over $10 million. AI products are on pace to exceed $0.5 billion in ACV in 2025 and aim for $1 billion in 2026. Now Assist had 12 deals over $1 million, AI Control Tower deal volume quadrupled quarter-over-quarter in Q3, and AI Agent Assist consumption increased over 55x since May. U.S. federal had a strong Q3, and the GSA OneGov agreement boosts adoption. Partnerships with Figma and Genesys were mentioned.
• Gina Mastantuono noted Q3 subscription revenues $3.299 billion, 20.5% year-over-year growth. RPO $24.3 billion, 23% year-over-year growth. Raised 2025 guidance: subscription revenues midpoint by $55 million to $12.835B-$12.845B (20.5% year-over-year growth), operating margin target to 31%, and free cash flow margin to 34%. Q4 guidance: subscription revenues $3.42B-$3.43B, cRPO growth 23% year-over-year, operating margin 30%.

Subscription revenues in Q3 were $3.299 billion, growing 20.5% year-over-year at constant currency, driven by broad-based demand. RPO ended the quarter at approximately $24.3 billion, a 23% year-over-year constant currency growth. Current RPO was $11.35 billion, 20.5% year-over-year constant currency growth. Transportation and logistics led net new ACV growth over 90% year-over-year, followed by retail/hospitality, education (over 50% each), energy/utilities with healthy demand, and U.S. federal growing net new ACV over 30% year-over-year. Renewal rate was 97%, 98% excluding a large federal agency closure. There were 553 customers generating over $5 million in ACV, and the number of customers with over $50 million in ACV increased by over 20% year-over-year. The company closed 103 deals greater than $1 million in net new ACV in the quarter, including 3 deals over $20 million.

• Raised 2025 subscription revenues midpoint by $55 million to $12.835B-$12.845B, representing 20.5% year-over-year growth. Operating margin target raised to 31% from 30.5%, and free cash flow margin target raised to 34% from 32%.
• Q4 guidance: subscription revenues between $3.42 billion and $3.43 billion, cRPO year-over-year growth 23%, operating margin 30%.

Risks include actual results differing materially from forward-looking statements, government impact on deal timing in U.S. federal business, and general uncertainties in AI adoption and market dynamics.

Q: Kash Rangan asked about Agentic technology integration and implementation.

A: Bill McDermott and Amit Zavery discussed prepackaged workflows, forward-deployed engineers, and 100+ prepackaged Agentic workflows.

Q: Samad Samana asked about AI solution sales breadth.

A: Bill McDermott and Amit Zavery talked about standard selling, 1,700 live customers, and internal AI learning journeys.

Q: Alex Zukin asked about demand trends and AI credit consumption.

A: Bill McDermott and Gina Mastantuono discussed strong demand, linearity, and proactive renewal cohort management.

Q: Tyler Radke asked about AI consumption drivers and $1B target.

A: Amit Zavery and Bill McDermott gave examples like Lenovo, Bell, Griffith University, and Gina Mastantuono on ACV tracking.

Q: Michael Turrin asked about Q4 subscription revenue guide.

A: Gina Mastantuono mentioned public sector impact and on-prem factors.

Q: Kirk Materne asked about industry-specific AI solutions.

A: Bill McDermott and Amit Zavery discussed industry data models, joint solutions with partners.

Q: Ryan Lance (for Keith Weiss) asked about MoveWorks.

A: Gina Mastantuono and Amit Zavery talked about MoveWorks closing in Q4 and current Now Assist momentum.

Q: Peter Weed asked about AI control tower demand.

A: Amit Zavery and Bill McDermott discussed AI control tower's importance for governance and security.

Q: Brad Sills asked about Now Assist pricing and lighthouses.

A: Amit Zavery and Bill McDermott talked about hybrid pricing and lighthouse accounts.

Q: Arjun Bhatia asked about workflow adoption and Now Assist monetization.

A: Bill McDermott, Amit Zavery, and Gina Mastantuono discussed CRM and HR workflows, and subscription vs. consumption in Now Assist.

Q: Keith Bachman asked about security and margin guidance.

A: Amit Zavery and Gina Mastantuono discussed security acceleration with AI, and margin guidance for 2026.