ServiceNow’s Q2 results were met with a strongly positive market reaction, reflecting the company’s ability to surpass Wall Street expectations on both revenue and non-GAAP profit. Management credited the performance to widespread customer adoption of its AI-powered Now Assist products, a surge in large enterprise deals, and robust demand across all workflow segments. CEO Bill McDermott noted, “AI is what changed. And agentic AI is transforming the business model every company in the world.” The quarter also saw notable strength in technology workflows and increased renewal activity, supported by early on-premises contract renewals.
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ServiceNow (NOW) Q2 CY2025 Highlights:
- Revenue: $3.22 billion vs analyst estimates of $3.12 billion (22.4% year-on-year growth, 2.9% beat)
- Adjusted EPS: $4.09 vs analyst estimates of $3.57 (14.6% beat)
- Adjusted Operating Income: $955 million vs analyst estimates of $846.5 million (29.7% margin, 12.8% beat)
- The company provided subscription revenue guidance for the full year of $12.79 billion at the midpoint
- Operating Margin: 11.1%, up from 9.1% in the same quarter last year
- Annual Recurring Revenue: $12.45 billion at quarter end, up 22.5% year on year
- Billings: $3.17 billion at quarter end, up 24.9% year on year
- Market Capitalization: $206.1 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions ServiceNow’s Q2 Earnings Call
- Aleksandr Zukin (Wolfe Research) asked about the drivers behind ServiceNow’s execution amid a challenging environment. CEO Bill McDermott attributed the difference to rapid AI adoption and cross-functional value, emphasizing, “AI is what changed. And agentic AI is transforming the business model every company in the world.”
- Mark Murphy (JPMorgan) questioned whether customers would use AI Control Tower to manage both ServiceNow and third-party AI agents. McDermott responded that the platform is designed to orchestrate agents from any provider, with Amit Zavery adding that customers can select different large language models as needed.
- Brad Zelnick (Deutsche Bank) asked about immediate opportunities in front office workflows after the Logik.ai acquisition. McDermott cited strong traction in sales and order management, while Zavery detailed success in complex workflows like CPQ (Configuration, Price, Quote).
- Keith Weiss (Morgan Stanley) pressed on why operating margin guidance remained steady despite efficiency gains. CFO Gina Mastantuono explained that some upside was due to timing of marketing spend and that ongoing investments in technical talent would support future AI ramp-up.
- James Wood (Cowen) sought clarity on what drove the revenue beat, including contributions from on-prem renewals and technology workflow strength. Mastantuono noted a combination of new business wins and early renewals, but cautioned against reading too much into quarter-to-quarter mix shifts.
Catalysts in Upcoming Quarters
In coming quarters, the StockStory team will be watching (1) the pace of customer expansion into new AI-powered workflows and the degree of adoption of Control Tower and Now Assist, (2) the impact of front office and industry-specific product launches on deal volume and average contract value, and (3) the integration of recent acquisitions such as Logik.ai and data.world into ServiceNow’s workflow platform. Progress in onboarding technical talent and navigating public sector budget dynamics will also be important to track.
ServiceNow currently trades at $992.50, up from $955.51 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free).
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