NOW · Q2 2025 Earnings

Bullish

ServiceNow

Reported July 23, 2025

30-second summary

Subscription revenue of $3.11B grew 22.5% YoY (21.5% cc) and cRPO of $10.92B grew 24.5% reported / 21.5% cc — a 200bps beat vs. the cc guide, which is the basis management uses for the guidance comparison. Both metrics prompted a $125M raise to the FY25 subscription revenue midpoint to $12.785B. The print itself is clean — operating margin 29.5%, FCF $535M, 89 deals over $1M net new ACV, customers over $5M ACV up 19.5% — but the more important signal is positioning: management has explicitly moved off the "SaaS" framing onto "enterprise AI operating system," with Now Assist ACV tracking toward $1B in 2026 and AI Control Tower already beating its full-year plan in 60 days. This is a confidence quarter, not a beat-and-raise-by-a-hair quarter.

Headline numbers

EPS

Q2 FY2025

$4.09

Revenue

Q2 FY2025

$3.21B

+22.5% YoY

Gross margin

Q2 FY2025

81.0%

Free cash flow

Q2 FY2025

$0.54B

Operating margin

Q2 FY2025

29.5%

Key financials

Q2 FY2025

Metric	Q2 FY2025	YoY
Revenue	$3.21B	+22.5%
EPS	$4.09	—
Gross margin	81.0%	—
Operating margin	29.5%	—
Free cash flow	$0.54B	—

Guidance

Prior quarter data unavailable — comparison not possible.

Segment performance

Q2 FY2025

Segment	Q2 FY2025	YoY
Subscription revenues	$3.113B	+22.5%
Professional services and other revenues	$0.102B	+19.5%

Platform metrics

Q2 FY2025

Segment	Q2 FY2025
Current Remaining Performance Obligations (cRPO)	$10.92B
Remaining Performance Obligations (RPO)	$23.9B
cRPO YoY Growth	24.5%
Customers with >$5M ACV	528
Customers with >$5M ACV YoY Growth	19.5%
Customers with >$20M ACV YoY Growth	>30%
Transactions >$1M net new ACV	89

Profitability

Q2 FY2025

Segment	Q2 FY2025
Non-GAAP subscription gross margin	83%

Management tone

The most important shift this quarter is positional, not financial. Management is no longer describing ServiceNow as a SaaS workflow vendor with AI features bolted on — they are describing it as the only enterprise-grade agentic AI operating system, and they are saying so explicitly. McDermott's prepared remarks framed the company as "the extensible AI operating system for the agentic enterprise" and asserted that "the software industrial complex of the 21st century is converging into ServiceNow." The claim is monopolistic in tone, and the financial backdrop (FY raise, cRPO beat on a cc basis, AI Control Tower beating its annual plan in two months) is being used to justify it rather than the other way around.

The second shift is offensive positioning against CRM. Management was unusually direct in prepared remarks: "agentic AI represents a seismic shift that could render traditional CRM obsolete… The future isn't a CRM screen. It's omnipresent AI agents embedded in everyday tools." Combined with the Logic.ai acquisition contributing 9 CPQ deals in June, this signals ServiceNow is now willing to attack Salesforce's core franchise rhetorically, not just adjacent to it.

Hedging language across the prepared remarks was sparse. Confidence is high. This is the tone of an inflection-point quarter, not a steady-state quarter.

Recurring themes management leaned on this quarter:

Agentic AI as fundamental enterprise transformation driver, not incremental featureServiceNow as extensible AI operating system/control tower managing heterogeneous AI environmentsCustomer consolidation from fragmented legacy stacks onto unified platformCross-functional, CEO-level strategic positioning vs. departmental/siloed salesNowAssist product adoption and revenue exceeding expectations with 50%+ QoQ growth in key AI ProPlus deal countCRM reimagined through AI agents; Logic.ai acquisition driving CPQ momentum (9 deals in June alone)

Risks management surfaced:

U.S. federal agencies navigating tightening budgets and evolving mission demandsExecution risk on MoveWorks acquisition (closing late 2H25 or early 2026, not in guidance)Competitive threat from hyperscalers and GenAI-native companies innovating at paceCustomer implementation complexity and required co-innovation/engineering resources for AI adoptionPotential margin headwinds from MoveWorks integration if closing in back half

What to watch into next quarter

Now Assist ACV trajectory toward the stated $1B 2026 target — disclosure has been qualitative ("50%+ QoQ AI Pro Plus deal growth"); investors need a hard ACV number or run-rate before the 2026 target becomes underwritable.

cRPO growth deceleration vs. acceleration — on a constant-currency basis (the basis management guides on), the step-down is from +21.5% in Q2 to +18% guided for Q3, with the disclosed ~200bps Q4 renewal cohort timing headwind explaining most of the move. Mastantuono also noted Q2 reported growth benefited from some early on-prem renewals, so the underlying decel is narrower than the headline reported numbers (24.5% → 18.5%) suggest. Watch whether the back-half ramp materializes as implied by the FY raise.

MoveWorks close timing and dilution disclosure — guided to late 2H25 or early 2026, excluded from current FY guide. Watch for closing date, deal economics on update, and whether operating margin guide is reaffirmed at 30.5% once it's in.

CRM/CPQ momentum post-Logic.ai — 9 deals in June is a starting print, not a trend. Watch whether the CRM Workflows line breaks out separately and how many of those deals are competitive displacements vs. greenfield.

U.S. federal subscription contribution — press release notes federal agencies are navigating tightening budgets and evolving mission demands; watch whether federal grows in-line with overall subscription or remains a drag, and whether any agency-level deal disclosures appear.

Sources

ServiceNow Q2 FY2025 earnings press release — https://www.sec.gov/Archives/edgar/data/1373715/000137371525000274/erq2fy25.htm
ServiceNow Q2 FY2025 earnings call — prepared remarks (McDermott, Mastantuono).

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