NOW Q3 Earnings Beat Estimates, Revenues Rise Y/Y, Shares Rise

ServiceNow NOW reported third-quarter 2025 adjusted earnings of $4.82 per share, which beat the Zacks Consensus Estimate by 14.49% and increased 29.6% year over year. Shares were up 4.5% at the time of writing this article.

Revenues of $3.41 billion beat the consensus mark by 1.66% and increased 21.7% year over year. At constant currency (cc), revenues increased 20.5% year over year to $3.37 billion.

NOW’s Q3 Top-Line Details

Subscription revenues improved 21.5% year over year, on a reported basis, to $3.3 billion. On a cc basis, revenues increased 20.5% to $3.27 billion. Professional services and other revenues increased 31% year over year on a reported basis to $108 million and 29.5% on a cc basis to $107 million.

At the end of the third quarter, the current remaining performance obligations (cRPO) were $11.35 billion, up 21% year over year on a reported basis and 20.5% on a cc basis. Remaining performance obligations, on a cc basis, rose 23% year over year to $24.3 billion.

Expanding Clientele Aids NOW’s Top-Line Growth

ServiceNow had 103 transactions over $1 million in net new annual contract value (ACV) in the third quarter, 6 of which were greater than $10 million in net new ACV. The company expanded its customer relationships, reaching 553 customers with more than $5 million in ACV at the end of the reported quarter. The number of customers contributing $50 million or more increased by more than 20% year over year.

Technology workflows had 50 deals over $1 million, including six over $5 million. ITSM, ITOM and ITAM were all in 15 of NOW’s top 20 deals with double-digit deals over $1 million. Security and risk combined for 12 of the top 20 deals, with three deals over $1 million. CRM and industry workflows were in 14 of the top 20, with 15 deals over $1 million, and core business workflows were in 13 of the top 20, with 14 deals over $1 million. NOW saw 12 Now Assist deals over $1 million, including one over $10 million in the reported quarter. AI Control Tower deal volume more than quadrupled sequentially in the third quarter of 2025. 

Net new ACV in transportation and logistics industries grew more than 90% year over year, while more than 50% growth was seen in retail and hospitality and education. Net new ACV at U.S. federal business grew more than 30% on a year-over-year basis.

NOW’s Operating Details

In the third quarter of 2025, non-GAAP gross margin was 80.9%, down 160 basis points (bps) on a year-over-year basis. Subscription gross margin was 83.2%, contracted 170 bps year over year. Professional services and other gross margins were 11.1% compared with 5.9% reported in the year-ago quarter.

As a percentage of revenues, operating expenses decreased 360 bps on a year-over-year basis to 60.5%.

ServiceNow’s non-GAAP operating margin expanded 230 bps on a year-over-year basis to 33.5%.

NOW’s Balance Sheet & Cash Flow

As of Sept. 30, 2025, NOW had cash and cash equivalents and marketable securities of $5.41 billion compared with $6.13 billion as of June 30, 2025. Long-term marketable securities were $4.27 billion.

During the reported quarter, cash from operations was $813 million compared with $716 million in the previous quarter.

ServiceNow generated a free cash flow of $592 million in the reported quarter, up from $535 million reported in the prior quarter. Free cash flow margin was 17.5%, up 50 bps year over year.

NOW repurchased roughly 644,000 shares. The company has approximately $2 billion remaining available for future share repurchases. NOW’s board approved a 5-for-1 stock split.

NOW Offers Positive 2025 Guidance

ServiceNow expects AI products’ ACV to exceed $0.5 billion this year.

For 2025, NOW expects subscription revenues to be $12.835-$12.845 billion, which suggests a rise of 20.5% from 2024 on a GAAP basis and 20% on a cc basis.

ServiceNow expects the non-GAAP subscription gross margin to be 83.5% and the non-GAAP operating margin to be 31%. Moreover, the free cash flow margin is expected to be 34%.

For the fourth quarter of 2025, subscription revenues are projected between $3.42 billion and $3.43 billion, suggesting year-over-year growth of 19.5% on a GAAP basis and in the 17.5% to 18% on a cc basis.

ServiceNow expects the non-GAAP operating margin to be 30% in the current quarter, with cRPO growth projected at 23% on a GAAP basis and 19% on a cc basis.

Zacks Rank & Stocks to Consider

ServiceNow currently has a Zacks Rank #3 (Hold).

Cirrus Logic CRUS, Fair Isaac FICO, and CoreWeave CRWV are some better-ranked stocks that investors can consider in the broader Zacks Computer and Technology sector.

Cirrus Logic shares have returned 31.9% year to date. CRUS is scheduled to release second-quarter fiscal 2026 results on Nov. 4. Cirrus Logic sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
 
Fair Isaac shares have dropped 21.3% year to date. This Zacks Rank #1 company is scheduled to release fourth-quarter fiscal 2025 results on Nov. 5. 
 
CoreWeave shares have surged 249.9% since its initial public offering. CRWV is set to report its third-quarter 2025 results on Nov. 10. CoreWeave currently has a Zacks Rank #2 (Buy). 

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