ServiceNow, Inc. Q4 FY2025 earnings call

Q4 results beat expectations handily. Subscription revenue growth was 21% QoQ and YoY in Q4 (19.5% in constant currency). CRPO growth was 25% (21% in constant currency). Operating margin was 31%. Full year '25 free cash flow margin was 35%. There were 244 deals >$1M NNACV and 7 deals >$10M NNACV. Now Assist NNACV surpassed $600M, with Q4 YoY doubling. AI is driving innovation, with ServiceNow as the AI control tower for business reinvention. Strategic acquisitions like VESA and ARMS to expand security capabilities. Customer examples include a leading US consumer services company with 400% ROI from assist pack, and a leading European telecom provider using ServiceNow for AI-driven CRM.

Q4 subscription revenues were $3,466,000,000, growing 19.5% year over year in constant currency. RPO ended the quarter at approximately $28,200,000,000, representing 22.5% year over year constant currency growth. Operating margin was 31%. Full year '25 free cash flow margin was 35%. There were 244 deals greater than $1,000,000 in NNACV and seven deals greater than $10,000,000 in NNACV. Now Assist NNACV surpassed $600,000,000 in ACV, with more than doubled year over year in Q4 and 35 deals over $1,000,000. Workflows and transactions each grew over 33%.

For 2026, expect subscription revenues between $15,530,000,000 and $15,570,000,000 (19.5%-20% growth constant currency). Subscription gross margin 82%, operating margin 32%, free cash flow margin 36%. For Q1 2026, expect subscription revenues between $3,650,000,000 and $3,655,000,000 (18.5%-19% growth constant currency), CRPO growth 20% constant currency, operating margin 31.5%.

Q: Hey, guys. Thanks for a really inspired and inspiring message. And congrats on a very strong end to the year. Maybe, Bill, first one for you. Just give us a flavor a little bit of the tailwinds and headwinds that you're seeing both in the demand environment, from a budgetary perspective, and also kind of how you're thinking about the monetization of AI in the product set, particularly the consumption component to play out as we get through the year.

A: Well, thank you very much, Alex, for your very nice remarks. And, also, giving me a chance to explain how it's going out there in the marketplace. You know, we have excellent hyperscalers in the marketplace...

Q: Hi. This is Sanchez speaking for Keith Weiss, and congrats on proving out the durability of growth in the business throughout the year. I wanted to follow-up on some of the themes in Q3, particularly the federal business. So give me some color on how federal performed via your expressed relative to expectations?

A: Thank you. Yeah. Well, it was really great. About the Fed business is even with the shutdown and less days to do business...

Q: Hi, good afternoon. Thank you. My question is for Gina on the gross margin outlook. Tell us a little bit about how you think about the puts and takes to gross margin, particularly around some of the temporary headwinds you have before monetization on the consumption revenue part of the business.

A: Thanks, Gabriela, for the question. So listen, I'm really excited about the overall guide from a margin perspective...

Q: The execution scale continues to be very impressive, so congrats on that. Bill, maybe a question for you. I appreciate you digging into the M&A given that it's been such a big focus. You made a point about there may not be more to expand the TAM at least on the security side via M&A. So should we take that as maybe we won't see Armis-sized deals going forward?

A: Yeah. Thank you very much, Samad, for the question. First of all, I wanted to underscore what both Gina and I both said. We're an organic growth company...

Q: Good afternoon. Thank you. And let me add my congratulations and my appreciation of the hitting the three bear cases upfront. So, Bill, I was talking to a senior executive at a Fortune 500 company. And they really want to transform the enterprise using AI, but there's some sort of specific concerns holding them back.

A: No, Pat. I'll address those. I mean, think this I mean, no doubt, every customer we speak to in enterprise are wondering how to adopt the AI, how to make it easy to manage, and really have controls...

Q: Great. Thanks for taking my question, guys. And congrats from me as well, really strong results here. I guess for Bill or Amit, in an agentic world, it really does seem like now with assist packs, are resonating with customers, and it's great to see the $600,000,000 ACV number already. I guess, while we're entering this period of hybrid pricing and paid seats are still growing strong, do you envision a time in the future when ServiceNow pivots completely away from seats due to maybe consumption or some form of value-based pricing, for instance?

A: Matt, maybe I'll give you my perspective. Of course, Bill and Gina can add that. You know, we keep on thinking about what's the best way to give value and show them what they can get out of the products...

Q: Yes. Hi. Thanks for taking my question this afternoon, squeezing me in. I'm not sure if this is for Bill or Amit. It's on the topic of the mega LLM provider partnerships. Bill, in your introductory comments, you're clearly making it clear you view these anthropics open AI as more complementary to ServiceNow's product set than as competitors. Guess the question I wanted to ask you or Amit, if we think about the percentage of AI inferencing and training workloads that are gonna run on the platform in 2026?

A: Yeah. Brian, I think, as I said, we definitely want to make sure customers have choice, and they can use any of those foundational models as well as now LLM...