NOW Q4 Deep Dive: AI Platform Momentum and Strategic Acquisitions Shape Outlook

Enterprise workflow automation company ServiceNow (NYSE:NOW) announced better-than-expected revenue in Q4 CY2025, with sales up 20.7% year on year to $3.57 billion. Its non-GAAP profit of $0.92 per share was 3.9% above analysts’ consensus estimates.

Is now the time to buy NOW? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

ServiceNow’s fourth quarter results surpassed Wall Street’s revenue and non-GAAP profit expectations, but the market reaction was notably negative. Management focused on the acceleration in AI-driven product uptake and major enterprise wins, citing strong adoption of Now Assist and workflow automation across industries. CEO Bill McDermott described the period as ServiceNow's “largest quarter in history” for CRM net new annual contract value, emphasizing customer demand for end-to-end AI and workflow solutions. Despite these achievements, management acknowledged that recent M&A activity and questions about future growth drivers contributed to investor uncertainty.

Looking forward, ServiceNow’s guidance is anchored by expectations of continued AI adoption, product integration, and operational efficiencies. Management highlighted the company’s evolving hybrid pricing model and the rapid expansion of its AI control tower and security capabilities as central to sustaining growth. CFO Gina Mastantuono noted that investments in cloud infrastructure and integration of recent acquisitions may pressure gross margins in the short term, but stated, “We expect margin accretion at the bottom line, both from an operating margin and free cash flow perspective.” The company is betting on its platform strategy and expanding ecosystem partnerships to drive durable growth.

Key Insights from Management’s Remarks

Management attributed quarterly growth to rapid uptake of AI-native products, strategic acquisitions in security, and strong momentum in large enterprise deals across key sectors.

• AI-native product adoption: Now Assist and workflow data fabric saw growing enterprise demand, with Now Assist annual contract value more than doubling year over year as customers expanded usage across multiple departments.
• Strategic security acquisitions: The announced acquisitions of ARMS and VESA are designed to enhance ServiceNow’s AI control tower, providing advanced asset visibility and identity governance for enterprise customers, especially as autonomous AI deployments scale.
• Sector diversification: Management cited especially strong net new annual contract value growth in transportation and logistics, business and consumer services, and financial services, with global government business up 80% year over year.
• Large deal momentum: The company closed 244 deals greater than $1 million in net new annual contract value, including nine with new customers and growth in customers spending over $20 million annually.
• AI and cloud partnerships: ServiceNow expanded partnerships with Microsoft, OpenAI, and Anthropic, enabling integration of advanced language models and cloud services into its platform, which management believes differentiates its offerings and accelerates enterprise adoption.

Drivers of Future Performance

ServiceNow expects ongoing AI integration, expanded security capabilities, and operational leverage to shape its growth and margin trajectory for the upcoming year.

• AI monetization and pricing evolution: Management is emphasizing a hybrid pricing model that balances predictable seat-based subscriptions with increasing consumption-based revenue from AI-powered assist packs. While customers favor predictability, rapid adoption of agentic AI workflows and assist packs is accelerating expansion opportunities within existing accounts.
• Security platform expansion: The integration of ARMS and VESA is expected to enhance visibility and identity governance across IT, operational technology, and IoT assets. Management believes these capabilities are critical for enabling large-scale, secure AI deployments and could open significant new market opportunities.
• Margin management and cloud transition: While transitioning more workloads to hyperscaler cloud partners may temporarily pressure gross margins, CFO Gina Mastantuono stated these investments are necessary for scalability and will be offset by operating efficiencies and AI-enabled cost reductions over time. Management aims for continued operating margin and free cash flow expansion despite these headwinds.

Catalysts in Upcoming Quarters

In the coming quarters, StockStory analysts will be tracking (1) the pace of AI-native product adoption and upsell expansion within ServiceNow’s customer base, (2) integration progress and early contributions from ARMS and VESA in strengthening the security platform, and (3) signs of margin stabilization as cloud infrastructure investments scale. The impact of major partnerships and the evolution of hybrid pricing will also be important milestones for monitoring the company’s strategic execution.

ServiceNow currently trades at $122.78, down from $130.02 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free).

High Quality Stocks for All Market Conditions

If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.

Don’t wait for the next volatility shock. Check out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).

Stocks that have made our list include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.