ServiceNow (NOW) delivered a standout performance in Q2 2025, decisively surpassing guidance across all key financial and operational metrics, underscoring its position as a leading enterprise AI platform.

Total revenues rose to a record $3.22 billion, up 22.5% year-over-year, driven primarily by robust subscription revenue growth, which also climbed 22.5% to $3.11 billion. Professional services and other revenues contributed $102 million, marking a 19.5% increase. Gross profit came in at $2.49 billion, with GAAP and non-GAAP gross margins of 77.5% and 81%, respectively. Notably, subscription margins remained strong despite modest compression (GAAP 80%, non-GAAP 83%) due to expanded infrastructure and regulated market investments.

ServiceNow posted GAAP operating income of $358 million (an 11% margin) and non-GAAP operating income of $955 million (a 29.5% margin). Net income reached $385 million on a GAAP basis, while non-GAAP net income totaled $854 million. Diluted earnings per share were $1.84 (GAAP) and $4.09 (non-GAAP). Free cash flow surged to $535 million, representing a 16.5% margin, a three-point improvement year-over-year. The company ended the quarter with $10.8 billion in cash and investments.

Business momentum remained strong, with current remaining performance obligations (cRPO) up 24.5% YoY to $10.92 billion, and total RPO up 29% YoY to $23.9 billion. The company now counts 528 customers with over $5 million in ACV, up 19.5%, while the number of customers exceeding $20 million in ACV grew over 30%. Large deals also surged, with 89 transactions over $1 million in net new ACV, including 11 deals surpassing $5 million. Renewal rates remained best-in-class at 98%.

Across product lines, subscription revenue accounted for 97% of total revenues, fueled by expanding AI adoption and self-hosted offerings, which generated $109 million—up from $68 million a year ago. While subscription gross margins dipped slightly, overall margins remained healthy. All major workflow segments contributed to growth, with Technology Workflows securing 40 large deals, CRM & Industry Workflows appearing in 17 of the top 20 deals, and Creator Workflows included in all top 20.

AI-led innovation continues to drive differentiation. Now Assist exceeded expectations, contributing to 21 multi-product deals and landing the largest single AI deal to date—valued at over $20 million. Pro Plus deal volume rose 50% QoQ, while ITAM Now Assist net new ACV surged nearly 6x. AI adoption across SecOps, risk, ITSM, and CSM was particularly strong.

Industry-wise, ServiceNow saw net new ACV more than double in transportation and logistics, and grow over 70% in technology, media, and telecom, with retail, energy, and hospitality also achieving 50%+ YoY increases.

Strategically, ServiceNow bolstered its AI and data platform with the acquisitions of Logik.ai and data.world, enhancing its CPQ, CRM, and data governance capabilities. New product launches like AI Control Tower and Agent Fabric strengthen its value proposition as the "agentic AI operating system" for enterprises. Partnerships with AWS, NVIDIA, Cisco, and UKG further broaden its reach and capabilities.

Looking ahead, ServiceNow raised its full-year 2025 guidance, projecting subscription revenues of $12.775–$12.795 billion (up 20% YoY), a subscription gross margin of 83.5%, and free cash flow margin of 32%. Q3 2025 subscription revenues are guided to $3.26–$3.265 billion, up 20–20.5% YoY, with cRPO expected to grow 18.5% despite a two-point renewal headwind. The company reaffirmed its long-term goal of $15+ billion in subscription revenue and $1 billion in Now Assist ACV by 2026.

CEO Bill McDermott highlighted the company’s continued leadership in AI and enterprise transformation, calling ServiceNow the “CEO’s agentic AI story.” CFO Gina Mastantuono noted strong operational leverage driven by internal AI use and prudent cost management. Sales productivity gains and a 100%+ YoY increase in new logo ACV signal robust demand across sectors.

With $2.6 billion in remaining share repurchase authorization and $2.39 billion in H1 operating cash flow (up from $1.96 billion last year), ServiceNow enters the second half of 2025 with strong financial flexibility and strategic clarity. Its exceptional execution in Q2 positions the company well to capitalize on the accelerating enterprise demand for AI-driven transformation.