ServiceNow Inc ((NOW)) has held its Q2 earnings call. Read on for the main highlights of the call.
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ServiceNow’s recent earnings call painted a picture of robust performance and strategic growth, with the company surpassing expectations across key metrics. Despite minor uncertainties in the U.S. federal market and the timing of the Moveworks acquisition, the overall sentiment was overwhelmingly positive, driven by significant advancements and successes, particularly in AI products.
Subscription Revenue Growth
ServiceNow reported a remarkable 21.5% growth in subscription revenue in constant currency, exceeding guidance by two points. This impressive performance underscores the company’s strong market position and ability to drive consistent revenue growth.
CRPO Growth
The company also achieved a 21.5% growth in current remaining performance obligations (CRPO) in constant currency, again surpassing guidance by two points. This growth reflects the company’s robust pipeline and sustained demand for its offerings.
Operating Margin and Free Cash Flow
ServiceNow’s operating margin reached 29.5%, over 2.5 points above guidance, while free cash flow margin improved to 16.5%, marking a 3% year-on-year increase. These metrics highlight the company’s operational efficiency and strong cash generation capabilities.
Significant Deal Activity
The company closed 89 deals greater than $1 million in net new annual contract value (ACV), with 11 deals exceeding $5 million. This significant deal activity demonstrates ServiceNow’s ability to secure large-scale engagements and expand its customer base.
AI Product Success
ServiceNow’s AI products, particularly Now Assist, exceeded expectations, with key AI Pro Plus deal counts increasing by over 50% quarter-on-quarter. This success underscores the company’s leadership in AI-driven solutions.
New Product Announcements
The company announced the launch of Agentic Workforce Management and the acquisition of data.world, enhancing its data governance capabilities. These strategic moves are expected to bolster ServiceNow’s product portfolio and market competitiveness.
Strong Industry Performance
ServiceNow reported exceptional performance in the transportation and logistics sector, with net new ACV growing over 100% year-over-year. The technology, media, and telecom sectors also saw substantial growth, exceeding 70% year-over-year.
Record New Customer Engagement
The company achieved record new customer engagement, landing 11 deals over $1 million in net new ACV, including two deals over $5 million. This growth in average new logo ACV by over 100% year-over-year highlights ServiceNow’s expanding market reach.
Federal Market Uncertainty
Despite overall positive performance, ServiceNow acknowledged some uncertainty in the U.S. federal market due to tightening budgets and evolving mission demands. This remains a minor concern amid the company’s broader success.
Potential Moveworks Acquisition Timing
The anticipated Moveworks acquisition, expected to close in late 2025 or early 2026, adds some uncertainty to the company’s strategic timeline. However, this is not expected to significantly impact ServiceNow’s growth trajectory.
Forward-Looking Guidance
ServiceNow provided robust guidance for future quarters, reflecting strong performance metrics and growth prospects. The company raised its subscription revenue guidance for the full year 2025 to a range of $12.775 billion to $12.795 billion, anticipating 20% growth year-over-year. The guidance underscores ServiceNow’s confidence in sustained demand, particularly driven by its AI capabilities and platform differentiation.
In conclusion, ServiceNow’s earnings call highlighted a quarter of outstanding performance and strategic advancements. The company’s ability to exceed expectations across key metrics, coupled with its strong forward-looking guidance, positions it well for continued growth. Despite minor uncertainties, the overall sentiment remains positive, with significant achievements in AI products and new customer engagements leading the way.