ServiceNow (NOW) Q4 2025 earnings review
The AI Control Tower Flexes its Muscle
ServiceNow capped FY25 with a definitive beat-and-raise quarter, dispelling any fears of software spending fatigue. cRPO growth accelerated to 25% YoY (21% constant currency), significantly beating the 19% guidance. The company is successfully pivoting from 'AI hype' to 'AI revenue,' with Now Assist net new ACV doubling YoY. Management unleashed a massive capital return program ($2B immediate ASR, $5B authorization) while forecasting FY26 subscription revenue to grow nearly 20%—a remarkable feat for a company at $13B+ scale.
🐂 Bull Case
Now Assist net new ACV more than doubled YoY in Q4. This validates the 'Pro Plus' strategy—customers are paying a premium for AI agents. The accelerating cRPO (21% CC actual vs 19% guided) proves this is leading to larger, stickier contract commitments.
Despite aggressive M&A (Armis, Veza, Moveworks), FY26 guidance calls for 32% Operating Margin, up from 31% in FY25. The company continues to demonstrate the 'Rule of 50' elite status (20% growth + 30%+ margin).
🐻 Bear Case
26Q1 and FY26 guidance includes ~100bps contribution from the Moveworks acquisition. Without this, organic subscription revenue growth guidance for Q1 (18.5-19% CC) would dip into the high teens (17.5-18%), signaling a natural slowing of the core business.
Management flagged a 150bps headwind in Q1 26 subscription revenue growth due to a mix shift away from self-hosted revenue. While this shifts customers to the cloud (good long term), it creates optical drag on growth rates in the near term.
⚖️ Verdict: 🟢🟢
Strong Buy. Acceleration in cRPO (the leading indicator) combined with tangible AI monetization and a shareholder-friendly buyback program outweighs the slight optical deceleration in organic revenue. ServiceNow is executing perfectly as the 'AI Control Tower.'
Key Themes
Agentic AI Adoption Accelerating
Now Assist (GenAI) net new ACV more than doubled YoY. The narrative has shifted from 'pilots' to 'deployment,' with specific call-outs to 'Agentic AI' driving deals. This drove a 40% YoY increase in transactions over $1M net new ACV (244 deals).
Large Customer Expansion
ServiceNow is successfully upsizing its base. The count of customers with >$5M ACV grew 20% YoY to 603. This metric correlates with the 'platform consolidation' thesis—enterprises are ripping out point solutions to standardize on NOW.
Aggressive Security & Identity Expansion
Management announced intents to acquire Armis (Asset Intelligence/Security) and Veza (Identity Security) for 2026 close. Combined with the closed Moveworks deal, NOW is aggressively buying its way into the 'Security Exposure' market, aiming to triple its TAM in that vertical.
Self-Hosted Revenue Drag
A specific 150bps headwind to Q1 26 subscription growth was cited due to 'mix shift of self-hosted revenue to hosted revenue.' This indicates a faster-than-expected decline in legacy on-prem/hybrid arrangements, which dampens reported growth optically despite strong underlying cloud demand.
Capital Return Pivot
ServiceNow is flexing its cash flow muscle. A new $5B repurchase authorization plus an immediate $2B accelerated share repurchase (ASR) signals a shift from pure 'growth at all costs' to managing dilution. This is necessary as SBC (Stock Based Comp) remains high ($494M in Q4 alone).
Other KPIs
Accelerating. Up 25% YoY reported and 21% Constant Currency. This significantly beat the prior Q3 guidance which called for ~19% growth. This is the most critical leading indicator for FY26 revenue.
Stable/Expanding. Up from 29.5% in 24Q4. The company continues to show operating leverage even while digesting acquisitions and ramping AI capex.
Surging. 57% FCF margin in the quarter. FY25 FCF finished at $4.64B (35% margin). This massive cash generation supports the aggressive M&A and buyback strategy.
Guidance
Decelerating. Implies 18.5-19% CC growth vs 19.5% in 25Q4. Includes ~100bps contribution from Moveworks but offset by 150bps headwind from self-hosted mix shift.
Stable. Implies 19.5-20% CC growth. This is effectively flat vs FY25's 20.5% growth, showing remarkable resilience at scale. Includes ~100bps from Moveworks.
Accelerating. Up from 31% in FY25. Management continues to squeeze efficiency out of the model despite M&A integration costs.
Key Questions
Organic vs. Inorganic Growth Bridge
With Moveworks contributing ~100bps to FY26 growth, organic growth appears to be guiding to the high teens. Can you break down the assumptions for organic acceleration/deceleration throughout the year, particularly regarding the self-hosted headwinds?
Security & Risk TAM Expansion
You announced intentions to acquire Armis and Veza. How much overlap exists between their customer bases and your existing ITOM/SecOps customers, and do you anticipate regulatory hurdles closing two significant security deals in the same year?
AI Pricing Durability
You noted Now Assist net new ACV doubled. Are you seeing any pressure on the 'Pro Plus' pricing uplift (30%+) as competitors launch their own agentic capabilities, or is the pricing power holding firm?
Self-Hosted Revenue Headwind
The 150bps headwind from self-hosted revenue in Q1 is significant. Is this a one-quarter step-down due to a specific large customer conversion, or should we model this drag persisting through H1 2026?