01—Abstract
Summary
Summary of the 10-Q filed July 23, 2026. Cited figures are marked; the original filing is the authoritative source.
ServiceNow, Inc. (NOW) reported its second-quarter 2026 financial results, showcasing strong revenue growth driven by its subscription services.
Total revenues increased by 24%a year-over-year for the quarter. While gross profit margins saw some pressure, particularly in subscription services, the company maintained a solid overall gross profit percentage. Significant investments were made in acquisitions, notably Armis Security Ltd. and Veza Technologies, Inc., which substantially increased goodwill and intangible assets.
The company also saw a notable increase in debt, including senior notes and commercial paper, to fund these strategic acquisitions. Despite the increased operating expenses, especially in sales and marketing and research and development, ServiceNow demonstrated robust operating income growth on a non-GAAP basis, indicating efficient operational management.
The company's cash flow from operations remained strong, although investing activities showed a significant outflow due to the aforementioned acquisitions. Management remains optimistic about continued revenue growth and operational leverage.
02—Key points
Key Highlights
- Total revenues grew 24% year-over-year to $3,987 million for the three months ended June 30, 2026.
- Subscription revenues, the primary revenue driver, increased by 25% year-over-year.
- The company completed significant acquisitions, including Armis Security Ltd. for approximately $7.6 billion and Veza Technologies, Inc. for approximately $1.2 billion, significantly increasing goodwill and intangible assets.
- Total debt increased substantially, with $4.0 billion in senior notes issued in May 2026 and $2.1 billion in commercial paper outstanding as of June 30, 2026.
- Non-GAAP income from operations increased by 23% year-over-year for the quarter, indicating strong operational performance.
- Remaining performance obligations (RPO) stood at $29.0 billion as of June 30, 2026, with approximately 46% expected to be recognized in the next 12 months.
- Cash flow from operating activities remained strong at $2,257 million for the six months ended June 30, 2026, though overall cash decreased due to investing activities.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2026, ServiceNow kept $0.07.
- Revenue$3.99B100.0%
- Cost of revenue−$1.17B29.3%
- Gross profit$2.82B70.7%
- Operating costs−$2.66B66.6%
- Operating income$162.0M4.1%
- Interest, other & tax$136.0M3.4%
- Net income$298.0M7.5%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2026filed July 23, 2026Financial Statements
Q2 FY2026 against Q2 FY2025
| Line item | Q2 FY2026Q2 FY2025 | Change |
|---|---|---|
| Revenue | $3.99B$3.21B | +24.0% |
| Cost of Revenue | $1.17B$724.00M | +61.5% |
| Gross Profit | $2.82B$2.49B | +13.1% |
| R&D Expenses | $915.00M$734.00M | +24.7% |
| Operating Expenses | $2.66B$2.13B | +24.5% |
| Operating Income | $162.00M$358.00M | −54.7% |
| Interest Expense | $66.00M$6.00M | +1000.0% |
| Net Income | $298.00M$385.00M | −22.6% |
| EPS (Basic) | $0.29$0.37 | −21.6% |
| EPS (Diluted) | $0.29$0.37 | −21.6% |
| Shares Outstanding (Basic) | 1.03B1.04B | −0.4% |
| Shares Outstanding (Diluted) | 1.03B1.05B | −1.2% |
05—Questions
Frequently Asked Questions
What is the impact of the recent acquisitions on ServiceNow's balance sheet?
The acquisitions of Armis Security Ltd. and Veza Technologies, Inc. have significantly impacted the balance sheet. Goodwill increased from $3,578 million at the end of 2025 to $9,837 million by June 30, 2026. Intangible assets, net, also saw a substantial increase from $1,121 million to $3,781 million over the same period, reflecting the recognized value of acquired technologies and customer relationships.
How has ServiceNow's debt situation changed?
ServiceNow's debt has increased significantly. In May 2026, the company issued $4.0 billion in senior unsecured notes and established a commercial paper program with $2.1 billion outstanding as of June 30, 2026. This increase is largely in response to funding the significant acquisition activities undertaken during the period.
What is the trend in ServiceNow's gross profit margins, particularly for subscription services?
Subscription gross profit percentage decreased to 73% for the three months ended June 30, 2026, down from 80% in the prior year's quarter. This decrease is attributed to increased headcount, higher cloud service costs, and amortization of acquired intangible assets. The company expects this trend to continue for the remainder of 2026, with gross profit percentage decreasing compared to 2025.
How is the company managing its cash flow given the significant investing activities?
Despite significant cash outflows for investing activities, primarily due to business combinations, ServiceNow generated strong operating cash flows of $2,257 million for the six months ended June 30, 2026. The company has $6.7 billion in cash, cash equivalents, and marketable securities, along with an undrawn revolving credit facility, providing sufficient liquidity for its operations and strategic initiatives.
06—Continue