NOW · Q3 2025 Earnings

Bullish

ServiceNow

Reported October 29, 2025

30-second summary

Subscription revenue of $3.30B grew 21.5% YoY (20.5% cc), beating the prior cc guide by ~100bps (one full point above the high end per McDermott), and cRPO of $11.35B grew 20.5% cc — a 250bps cc beat that prompted a $55M raise to the FY25 subscription revenue midpoint and a 200bps raise to FY FCF margin to 34%. The numbers are clean, but the more important read is that Now Assist is now on pace to exceed $500M in ACV this year — the first hard run-rate disclosure underwriting management's $1B 2026 target. The only blemish: government shutdown timing risk flagged as a Q4 federal headwind.

Headline numbers

EPS

Q3 FY2025

$4.82

Revenue

Q3 FY2025

$3.41B

+22.0% YoY

Gross margin

Q3 FY2025

81.0%

Free cash flow

Q3 FY2025

$0.59B

Operating margin

Q3 FY2025

33.5%

Key financials

Q3 FY2025

Metric	Q3 FY2025	YoY	Q2 FY2025	QoQ
Revenue	$3.41B	+22.0%	$3.21B	+6.0%
EPS	$4.82	—	$4.09	+17.8%
Gross margin	81.0%	—	81.0%	+0bps
Operating margin	33.5%	—	29.5%	+400bps
Free cash flow	$0.59B	—	$0.54B	+10.7%

Guidance

ServiceNow raised full-year 2025 subscription revenue, operating margin, and free cash flow guidance following strong Q3 beat across topline and profitability metrics; Q4 guidance signaled continued momentum with 19.5% YoY subscription growth and 23% cRPO growth, though government shutdown flagged as potential federal business headwind.

Guidance is issued for both next quarter and the full year. Both may appear below.

Actuals vs prior guidance

Metric	Period	Prior guide	Actual	Δ	Result
Subscription Revenue	Q3 FY2025	$3.260B–$3.265B	$3.299B	+$0.034B–$0.039B above guide	Beat
Operating Margin	Q3 FY2025	30.5%	33.5%	+300bps above guide	Beat
cRPO YoY Growth	Q3 FY2025	18.5% (18% constant currency)	21% (20.5% constant currency)	+2.5ppts above guide (reported); +2.5ppts above guide (constant currency)	Beat

New guidance

Metric	Period	Guide	YoY
Subscription Revenue	Q4 FY2025	$3.42B–$3.43B	19.5% (reported); 17.5%–18% (constant currency)
cRPO YoY Growth	Q4 FY2025	23% (reported); 19% (constant currency)	—
Operating Margin	Q4 FY2025	30%	—

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Subscription Revenue	FY2025	$12.775B–$12.795B	$12.835B–$12.845B	+$0.060B at midpoint (+47bps)	Raised
Operating Margin	FY2025	30.5%	31.0%	+50bps	Raised
Free Cash Flow Margin	FY2025	32%	34%	+200bps	Raised
Subscription Revenue YoY Growth	FY2025	20% (19.5%–20% constant currency)	20.5% (reported); 20% constant currency	+0.5ppts YoY (reported); unchanged constant currency	Raised

Reaffirmed unchanged this quarter: Subscription Gross Margin (83.5%)

Segment performance

Q3 FY2025

Segment	Q3 FY2025	YoY
Subscription revenues	$3.299B	+21.5%
Professional services and other revenues	$0.108B	+31.0%

Platform metrics

Q3 FY2025

Segment	Q3 FY2025
Current Remaining Performance Obligations (cRPO)	$11.35 billion
cRPO YoY Growth	21% (20.5% constant currency)
Remaining Performance Obligations (RPO)	$24.3 billion
RPO YoY Growth	24% (23% constant currency)
Customers with $5M+ ACV	553
Customers with $5M+ ACV YoY Growth	18%
$1M+ ACV Transactions in Q3	103

Profitability

Q3 FY2025

Segment	Q3 FY2025
Subscription Gross Margin	83%

Management tone

Q1 still-SaaS framing → Q2 "AI operating system" pivot → Q3 "Super 8" / "AI defining enterprise software company of the 21st century." Management's positional ambition has escalated each quarter, and Q3 is the most aggressive yet.

The clearest shift is identity. Two quarters ago the company described itself as a workflow platform with AI capabilities; last quarter it became "the extensible AI operating system for the agentic enterprise"; this quarter McDermott went further: "It used to be the Mag7. Now there's a new category. I'm calling this the Super 8. That's the Mag7 plus ServiceNow." The claim is no longer about category creation — it's about peer-group reclassification alongside hyperscalers and foundation-model leaders. The financial print (300bps operating margin beat, FCF margin guide +200bps) is being deployed to support the claim rather than the other way around.

A second shift is the hardening of CRM as an offensive vector. Last quarter, "agentic AI could render traditional CRM obsolete" was framing; this quarter, Gina described AI-powered CPQ as driving "displacement wins around the globe including multiple million dollar deals" and McDermott called CRM "the doorstep of substantial legacy disruption." Two consecutive quarters of escalating language plus disclosed displacement deals means CRM is now a stated strategic priority, not a side bet.

A third shift is U.S. Federal moving from risk to growth pillar. In Q2, federal was framed defensively (agencies "navigating tightening budgets"). In Q3, McDermott called out federal as having "beat NNACV expectations handily" and highlighted the GSA OneGov agreement projected to save the federal government "billions over the next five years." The shutdown headwind is acknowledged but bounded to Q4 timing, not structural.

A fourth shift, more subtle: the consumption flywheel is now being articulated as a mechanic, not an aspiration. Amit Zavery disclosed that agentic workflows drive 5–12X higher system-call volume than prior AI use cases, and management framed the token-reload cycle as creating a "built-in hockey stick" — the first time the company has framed AI economics as having inherent compounding, not just attach.

Recurring themes management leaned on this quarter:

AI control tower and governance as mission-critical enterprise value propAgentic AI workflows as the next paradigm shift beyond chatbots and point solutionsCross-enterprise orchestration ('east to west, north to south') as differentiation vs. siloed competitorsNow Assist adoption acceleration (55X consumption growth since May, $500M+ ACV run rate, $1B target for 2026)Platform 'Better Together' model strength evidenced in top 20 deals (all with 6+ products)AI-driven operational efficiencies unlocking margin expansion and organizational capacity

Risks management surfaced:

Government shutdown timing impact on U.S. federal deal closure in Q4Legacy system integration complexity and failed enterprise technology deployments as historical risk contextAI hallucination and governance risks requiring ServiceNow's control towerCustomer conformity risk if forcing adoption vs. meeting customers where they are

Q&A highlights

Cash Rangan · Goldman Sachs

With agentic technology, how will ServiceNow leverage integration and implementation expertise from partners like Accenture and forward-deployed engineers to drive adoption of agentic technology in the ecosystem?

ServiceNow has 100+ pre-packaged workflows with agentic built-in, reducing implementation complexity. The company is investing in forward-deployed engineers as AI black belts to work closely with customers. The platform abstracts complexity and enables faster implementations and faster time-to-value compared to competitors.

100+ pre-packaged workflows with agentic built-inForward-deployed engineers model with AI black beltsCustomers getting autonomous implementations in a few weeks, not years75 billion workflows and over 1 trillion transactions on platform

Samad Samana · Jefferies

With $500M+ ACV for AI and broadening deal volumes, is the sales organization and partner base getting better at selling AI solutions, making it less top-down driven? How should this impact be thought about going forward?

AI selling has progressed and is now a standard way of selling across the company, demonstrated in ProPlus upgrades and new business. 1,700 customers are live on Now Assist with growing daily additions. Company has seen 55X growth in assists since May. Culture of AI credentialing and learning journeys permeates the organization, with 90% of IT, customer service, and HR processes now automated by agents internally.

55X growth in assists since May1,700 customers live on Now Assist, growing dailyEvery employee has AI learning journey and credentialing90% of IT, customer service, and HR processes automated by agents internally

Alex Vukin · Wolf Research

How are demand trends progressing through the quarter, what is the linearity of bookings, and how are consumption and utilization of AI credits trending relative to expectations?

Demand is better than ever seen, with World Forums substantially oversubscribed globally (6,500 vs. 6,000 capacity in Japan). Linearity is historically consistent and expected to improve. The token reload cycle creates a built-in 'hockey stick' as customers use tokens and reload. The 55X growth in assists since May indicates strong customer value derivation and indicates consumption will accelerate further.

Demand better than ever seenJapan World Forum oversubscribed by 500 people due to fire regulationsLinearity historically consistent and expected to improveToken reload model creates hockey stick consumption pattern

Tyler · Citi

What is driving the 55X consumption increase? Is it broad-based or outsized in particular verticals/use cases? How does the $500M Now Assist ACV track to original expectations and what is the upside to the $1B target next year?

Agentic workflows drive 5-12X higher volume of system calls compared to prior use cases like summarization. Pre-packaged agentic workflows enable faster go-live and accelerate usage. Examples: Lenovo 35% faster case resolution with 100% CSAT; Bell deflecting 3M+ calls annually and automating 90% of dispatch tasks; Griffith University achieved 87% increase in self-service. $500M ACV by year-end is tracking ahead of plan. Management expects to continue tracking ahead of plan towards $1B target but not updating guidance.

Agentic workflows require 5-12X higher system call volumes than prior AI use casesLenovo: 35% faster case resolution, 100% CSATBell: 3M+ annual call deflections, 90% dispatch automationGriffith University: 87% increase in self-service rate

Peter Reed · Allspring

On AI Control Tower, is demand front-loaded from customers beginning their AI journey, or does adoption occur after reaching a certain maturity level? How does this affect commercialization ramp and materiality of the opportunity?

AI Control Tower resonates immediately upon introduction to customers as they worry about control, security, trust, and regulatory requirements when adopting AI. The business customer base grew 4X this quarter alone. Control Tower integrates different AI systems to provide visibility and management. AstraZeneca example shows use at scale to govern all AI initiatives while driving employee productivity. Control Tower is unique end-to-end capability in industry and will continue driving security, risk, compliance conversations.

Control Tower customer base grew 4X in Q3Immediate customer resonance addressing control/security/compliance concernsAstraZeneca using Control Tower to manage and govern all AI initiatives at scaleEthical, compliant, secure attributes resonating particularly in Europe and Asia

Answers to last quarter's watch list

Now Assist ACV trajectory toward the $1B 2026 target — Resolved positively. First hard run-rate disclosure: on pace to exceed $500M in ACV in 2025. Management said they are tracking ahead of the $1B 2026 target. 55X consumption growth since May and 1,700 live customers are the supporting evidence. The 2026 target is now substantially more underwritable. Status: Resolved positively.

cRPO growth deceleration vs. acceleration on a cc basis — Resolved positively. Q3 cRPO came in at +20.5% cc vs. +18% cc guide — a 250bps beat. Q4 guided to +19% cc (reported +23%). The back-half ramp implied by the Q2 FY raise has materialized. Status: Resolved positively.

MoveWorks close timing and dilution disclosure — Not resolved. MoveWorks was not addressed in the press release excerpts or the disclosed Q&A; FY operating margin was raised 50bps to 31% without explicit attribution to MoveWorks integration economics. Status: Continue monitoring.

CRM/CPQ momentum post-Logic.ai — Resolved positively but disclosure remains qualitative. Management cited "displacement wins around the globe including multiple million dollar deals" and called CRM "the doorstep of substantial legacy disruption." Still no breakout of CRM Workflows as a line item. Status: Continue monitoring.

U.S. Federal subscription contribution — Resolved positively, with a Q4 caveat. Federal "beat NNACV expectations handily" in Q3 and the GSA OneGov agreement opens broader federal adoption. Government shutdown flagged as a Q4 deal-timing risk, but characterized as timing rather than structural. Status: Resolved positively.

What to watch into next quarter

Now Assist ACV print at year-end vs. the $500M run-rate signal — management said "on pace to exceed"; watch whether the Q4 disclosure crosses $500M cleanly and whether 2026 guidance is set above $1B.

U.S. Federal NNACV in Q4 amid shutdown — management said shutdown impact is "prudently factored" into the Q4 guide; watch whether federal beats again or whether deal slippage forces a Q4 subscription miss within the $3.42B–$3.43B range.

Q4 cRPO cc growth vs. the +19% cc guide — the reported +23% / cc +19% spread is the widest in recent quarters; watch whether the cc number can hold or exceed the guide as it did in Q2 and Q3.

MoveWorks close and reaffirmation of FY26 operating margin trajectory — close has been pushed toward late 2H25 / early 2026; watch for closing date, dilution disclosure, and whether the FY26 margin framework is set above the now-31% FY25 base.

CRM Workflows / CPQ as a disclosed line item or ACV breakout — two quarters of "displacement wins" without a number; watch whether ServiceNow finally quantifies the CRM attack.

Sources

ServiceNow Q3 FY2025 earnings press release — https://www.sec.gov/Archives/edgar/data/1373715/000137371525000305/erq3fy25.htm
ServiceNow Q3 FY2025 earnings call — prepared remarks and Q&A (McDermott, Mastantuono, Zavery).

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