TLDR: ServiceNow reported stellar second-quarter 2025 financial results, surpassing revenue and earnings forecasts, largely attributed to the strong performance and adoption of its Artificial Intelligence (AI) platform and related solutions. The company raised its full-year revenue guidance and is on track to achieve significant milestones in AI-driven annual contract value.
ServiceNow (NYSE: NOW) announced exceptional financial results for its second quarter, which concluded on June 30, 2025, significantly exceeding market expectations. The company reported adjusted earnings per share of $4.09, comfortably beating analysts’ target of $3.57. Total revenue for the period surged by 23% year-over-year to $3.22 billion, surpassing the consensus estimate of $3.12 billion. Subscription revenue, which constitutes the majority of its sales, reached $3.11 billion, a 22.5% increase from the previous year, outperforming the Street’s forecast of $3.03 billion.
The strong financial performance underscores ServiceNow’s expanding profitability, with net income rising by 47% year-over-year to $385 million. The company’s current remaining performance obligations (cRPO), representing revenue expected to be recognized in the next 12 months, grew by 24.5% year-over-year to $10.92 billion.
Chairman and CEO Bill McDermott emphasized the pivotal role of AI in the company’s success, stating, “Our beat‑and‑raise quarter showcases the mission‑critical nature of the ServiceNow AI Platform. Every business process in every industry is being refactored for agentic AI.” He further highlighted that ServiceNow has invested billions in AI to position itself at the forefront of ‘AI agents’ that automate business processes with minimal human intervention. These AI tools are designed to provide intelligent recommendations, automate tasks, and offer proactive support, ultimately boosting productivity and efficiency.
President and CFO Gina Mastantuono added, “Q2 was a spectacular quarter across the board, as we significantly beat the high end of our guidance across all topline and profitability metrics.” She specifically noted the strong performance of ‘Now Assist’ products, which continued to exceed net new annual contract value (ACV) expectations, driven by an increase in both deal volume and size. ServiceNow remains firmly on track to achieve its ambitious target of $1 billion in Now Assist ACV by 2026.
ServiceNow’s commitment to AI innovation was further demonstrated by its recent acquisition of data.world, aimed at enhancing AI agent understanding and deepening enterprise data intelligence and governance. The company also reported a significant increase in AI-driven deals, with its ‘AI Pro Plus’ deal count, including ITSM, CSM, and HR, up over 50% quarter-on-quarter. The company secured 89 transactions over $1 million in net new ACV in Q2 and now serves 528 customers with more than $5 million in ACV, representing approximately 19.5% year-over-year growth.
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Looking ahead, ServiceNow provided an optimistic outlook, raising its 2025 subscription revenue guidance by $125 million at the midpoint to a range of $12.775 billion to $12.795 billion, targeting 20% year-over-year growth. For the current quarter (Q3 2025), the company projects subscription revenue between $3.26 billion and $3.27 billion, exceeding the Street’s target of $3.21 billion. The company also aims for an operating margin of 30.5% and a free cash flow margin of 32% for the full year, with a long-term target of over $15 billion in subscription revenue by 2026. Despite some headwinds in the U.S. federal market, management expressed confidence in their guidance, attributing continued growth to the strength of AI in the enterprise sector and the company’s differentiated cross-domain system-of-action platform.
