01—Abstract
Summary
Summary of the 10-Q filed April 23, 2025. Cited figures are marked; the original filing is the authoritative source.
ServiceNow, Inc. (NOW) reported strong financial results for the first quarter of 2025, demonstrating robust revenue growth and improved profitability.
Total revenues surged by 19% year-over-year to $3.09 billiona, driven primarily by a 19% increase in subscription revenues, which now constitute 97% of total revenue. The company also saw a significant increase in operating income, up 36% to $451 million, with a non-GAAP operating income of $953 million, up 20%. This growth was supported by healthy increases in net income, rising to $460 million from $347 million in the prior year period, translating to diluted EPS of $2.20.
Key operational metrics highlight continued customer expansion, with the number of customers with Annual Contract Value (ACV) greater than $5 millionb increasing by 15% to 508. Remaining Performance Obligations (RPO) grew by 25% to $22.1 billion, indicating a strong future revenue pipeline.
The company also reported substantial free cash flow generation, increasing by 21% to $1.48 billionc, underscoring its operational efficiency and financial strength. Management anticipates continued revenue growth and profitability for the full year, with strategic investments in R&D and sales and marketing to support long-term expansion.
02—Key points
Key Highlights
- Total revenues grew 19% year-over-year to $3.09 billion, with subscription revenues comprising 97% of this total.
- Net income increased significantly to $460 million, resulting in diluted EPS of $2.20.
- Operating income saw a strong increase of 36% to $451 million, and non-GAAP operating income rose 20% to $953 million.
- The number of customers with Annual Contract Value (ACV) greater than $5 million increased by 15% to 508.
- Remaining Performance Obligations (RPO) grew by 25% to $22.1 billion, signaling robust future revenue.
- Free cash flow increased by 21% to $1.48 billion, demonstrating strong operational cash generation.
- Announced a definitive agreement to acquire Moveworks for approximately $2.9 billion, expected to close in the second half of 2025.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2025, ServiceNow kept $0.15.
- Revenue$3.09B100.0%
- Cost of revenue−$651.0M21.1%
- Gross profit$2.44B78.9%
- Operating costs−$1.99B64.3%
- Operating income$451.0M14.6%
- Interest, other & tax$9.0M0.3%
- Net income$460.0M14.9%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2025filed April 23, 2025Financial Statements
Q1 FY2025 against Q1 FY2024
| Line item | Q1 FY2025Q1 FY2024 | Change |
|---|---|---|
| Revenue | $3.09B$2.60B | +18.6% |
| Cost of Revenue | $651.00M$520.00M | +25.2% |
| Gross Profit | $2.44B$2.08B | +17.0% |
| R&D Expenses | $703.00M$606.00M | +16.0% |
| Operating Expenses | $1.99B$1.75B | +13.4% |
| Operating Income | $451.00M$332.00M | +35.8% |
| Net Income | $460.00M$347.00M | +32.6% |
| EPS (Basic) | $0.44$0.34 | +30.2% |
| EPS (Diluted) | $0.44$0.33 | +31.7% |
| Shares Outstanding (Basic) | 1.03B1.03B | +0.8% |
| Shares Outstanding (Diluted) | 1.05B1.04B | +0.8% |
05—Questions
Frequently Asked Questions
What are the key drivers of ServiceNow's revenue growth in the first quarter of 2025?
ServiceNow's revenue growth in Q1 2025 was primarily driven by a 19% increase in subscription revenues, which benefited from new customer acquisitions and expanded usage by existing customers. The company's strategy of digital transformation and workflow automation continues to resonate with enterprises, fueling demand for its platform and applications.
How is ServiceNow managing its expenses and profitability?
ServiceNow demonstrated improved profitability through disciplined expense management. While sales and marketing and R&D expenses increased in absolute dollars to support growth, they remained relatively flat as a percentage of revenue, indicating increased operating leverage. The company also saw a slight improvement in its gross profit percentage for subscription revenues, contributing to a 36% increase in GAAP income from operations.
What is the significance of the pending acquisition of Moveworks?
The pending acquisition of Moveworks for approximately $2.9 billion is a strategic move to enhance ServiceNow's AI capabilities, particularly in agentic AI assistants for enterprise systems. This acquisition is expected to strengthen the Now Platform's ability to automate business processes and improve employee experiences, aligning with ServiceNow's focus on AI for digital transformation. The deal is anticipated to close in the second half of 2025.
What is the company's outlook for liquidity and cash flow?
ServiceNow maintains a strong liquidity position with $10.9 billion in cash, cash equivalents, and investments as of March 31, 2025. The company generated $1.68 billion in cash from operating activities and $1.48 billion in free cash flow, representing a 21% increase year-over-year. Management expects these cash flows, along with existing liquidity, to be sufficient to meet its needs for at least the next 12 months.
06—Continue