ServiceNow, Inc.

Thank you for standing by. At this time, I would like to welcome everyone to the Q4 and full year 2025 ServiceNow earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press star one again. We do ask you limit yourself to one question for today's event. Thank you. I would now like to turn the call over to Darren Yip, Senior Vice President of Investor Relations and Market Insights. You may begin.

Good afternoon, and thank you for joining ServiceNow's fourth quarter 2025 earnings conference call. Joining me are Bill McDermott, our Chairman and Chief Executive Officer, Gina Mastantuno, our President and Chief Financial Officer, and Amit Zaveri, President, Chief Product Officer, and Chief Operating Officer. During today's call, we will review our fourth quarter 2025 results and discuss our guidance for the first quarter and full year 2026. Before we get started, we want to emphasize that the information discussed on this call, including our guidance, is based on information as of today and contains forward-looking statements that involve risks, uncertainties, and assumptions. We undertake no duty or obligation to update such statements as a result of new information or future events. Please refer to today's earnings press release and our SEC filings, including our most recent 10Q and 10K, for factors that may cause actual results to differ materially from our forward-looking statements. We'd also like to point out that we present non-GAAP measures in addition to and not as a substitute for financial measures calculated in accordance with GAAP. Unless otherwise noted, all financial measures and related growth rates we discuss today are non-GAAP except for revenues, remaining performance obligations, or RPOs, current RPO, and cash and investments. To see the reconciliation between these non-gap-on-gap measures, please refer to today's earnings press release and investor presentation, which are both posted on our website at investors.servicenow.com. A replay of today's call will also be posted on our website.

With that, I'll turn the call over to Bill. Thank you very much, Darren, and good afternoon to everyone joining today's call. As you might imagine, I've been waiting for this extraordinarily exciting moment since December 31st, 2025. There seems to be speculation everywhere these days, so let's take it all head on. Here are the facts. Our Q4 results beat expectations handily, just like we have consistently for years now. Overall, Q4 NNHCV growth accelerated both quarter over quarter and year over year in Q4. Our subscription revenue growth was 21%, 19.5% in constant currency, 1.5 points above the high end of our guidance. Contribution from MoveWorks was de minimis. Our CRPO growth was 25%, 21% in constant currency, 2 points above our guidance, including a 1% contribution from MoveWorks. operating margin was 31%, one point above our guidance. Full year 25, free cash flow margin was 35%, one point above our already raised guidance. We had 244 deals greater than a million in NNHCV. We had seven deals greater than 10 million in NNHCV. And CRM NNHCV growth accelerated quarter over quarter to close its largest quarter in history. Raptor DB Pro more than tripled NNACV year on year in Q4, including 13 1 million plus deals. Workflow Data Fabric was in 16 of our top 20 Q4 deals, and we've seen attach rates increase in every quarter of 2025. All of the workflow businesses were very strong in Q4. Gina will take you through the breakdown on all the metrics. The speculation of AI will eat software companies is out there. Let's clear it up with the facts. Enterprise AI will be the largest driver of return on the multi-trillion dollar super cycle of investment in AI infrastructure. The real payoff comes when trillions of tokens move beyond pilots to be embedded directly into the workflows where business decisions are made. ServiceNow is the gateway to this shift, serving as the semantic layer that makes AI ubiquitous in the enterprise. We are also the great consolidator. of hundreds of feature and function-specific software solutions into end-to-end business processes with our AI control tower for business reinvention. You need AI plus workflows because AI is probabilistic, which by definition means we can't be certain about the results. Workflow orchestration is deterministic. predictable, no randomness, which is required given the sophistication and governance of running global enterprises. AI doesn't replace enterprise orchestration. It depends on it. It depends on governance. It depends on scale. Many people ask why our valuation has not kept pace with our results. The short answer is that we have been viewed as a feature-oriented SaaS company. We are not living in a SaaS neighborhood. We are a platform company executing a long-term platform strategy where AI agents and workflows are harmonious and synonymous, creating sustained advantage, not short-term wins. This makes ServiceNow's AI platform more strategically relevant today than ever. By the way, our monthly active users grew 25%. Now Assist and NACV outperformed expectations in Q4 and surpassed 600 million in ACV. In Q4, Now Assist and NACV more than doubled year over year. We had 35 deals over a million in Q4 alone. Our AI control tower deal volume nearly tripled quarter over quarter in Q4. We saw great brands already purchasing assist packs in Q4 across a variety of industries, including financial services, manufacturing, healthcare, life sciences, public sector, and technology. Overall, The number of workflows and the number of transactions each grew over 33% from $60 billion to $80 billion and from $4.8 trillion to $6.4 trillion, respectively. And the growth continues. I continue to hear speculation about seat compression. If all we did was look at available seats in our target market, there would be an estimated 1.3 billion seats in that target market. So we barely scratched the surface. And of course, we're looking far beyond seats alone with our hybrid business model for billions of devices, agents, and assists. On the back of this momentum, we're guiding to 20% subscription revenue growth for 2026. And by now, everyone knows how ServiceNow rolls We don't set our sights on hitting the guide. We set our sights on beating it. The speculation out there is that M&A is the new playbook out of necessity. Here are the facts. ServiceNow has the fastest organic growth in the history of enterprise software. We're the fastest enterprise software company to have ever reached 1 billion, 5 billion, and 10 billion organically. and on our way to cross 15 billion plus this year. Since 2019, we've nearly quadrupled our revenue, all built on a foundation of continuous innovation and net new product delivery. ServiceNow is fully capable of achieving previously stated subscription revenue and now assist ACV targets without M&A. Our capital allocation strategy is about accelerating customer value and shareholder value. We have never acquired a single company for revenue alone. We use M&A to expand into an even larger TAM. And it is now beyond $600 billion, based entirely on where our customers need us to go, where we know we can build exciting growth businesses. Our announced plans to acquire VESA anormous happened in rapid succession, because this assembles three critical layers for enterprises to operate securely in an agentic AI world, visibility, identity, and orchestration. With our fast growing billion plus dollar CACV security and risk business, the timing to expand the opportunity could not be better. Post-ARMIS, we do not see any other large white spaces that are necessary to complete our platform vision for security. ServiceNow's organic growth strategy with opportunistic tuck-ins for tech and talent remains unchanged. AI, data, workflows, security. We are one of the few companies totally in control of our own destiny. We are playing offense on our tippy-toes. That's why we're announcing an incremental 5 billion US dollar share repurchase authorization with an immediate ASR of 2 billion. Here's another fact. ServiceNow has one unifying objective, which is simply to be the AI defining enterprise software company of the 21st century. IDC estimates there will be 2.2 billion AI agents in the world by 2030. Millions of those will be built on the ServiceNow platform. Whatever isn't built on our platform will be governed and secured by our AI control tower. ServiceNow is a build or buy winner. We'll win with the builders because they want ServiceNow for our data fabric, our agents, governance, and security. We'll win for buyers because they want best of breed AI native workflows and agents to reinvent their status quo in IT, HR, CRM, app development and beyond. We have a pristine rule of 55 plus financial profile, a comprehensive integrated platform architecture. We're open to any cloud, any language model, any data source, any system integration. We're one of the most trusted companies in the world, according to Forbes. We have an award-winning culture with millions of talented applicants. You may have noticed that I recently extended my own commitment here to ServiceNow until 2030 and beyond. There's one reason I did this, overwhelming belief in this company. This is a $1 trillion company in the making. I can't fathom a better entry point for what ServiceNow is building. To those on this journey with us, we are grateful for your enduring support. To those who are waiting, we've given you every reason to believe the time is now. This is a one of one company. That's not speculation. It's a fact. Let's bring the ServiceNow story to life with customer examples. We closed a 1 million plus assist pack deal with a leading US consumer services company after customer service agents generated a 400% ROI. After a year of deployment, the customer needed eight times more assists as they transition customer support operations to predominantly automated interactions. This is minimizing operating costs, shortening support resolution times, and enhancing the overall customer experience. They are flipping the support model from 80% human-led, 20% automated to 80% automated and 20% human-led. In Q4, we closed a landmark seven-figure deal with a complex high-tech manufacturer involving an end-to-end takeout of a legacy CRM competitor. they turned to ServiceNow CPQ to solve their complex deal evaluations, replacing manual spreadsheets, and unsuccessful legacy tools. In combination with CSM, Workflow Data Fabric, Now Assist, and other products too, our customer trusted ServiceNow as their AI control tower for business reinvention. A leading European telecom provider, is building an AI-driven CRM solution for the telecom industry with ServiceNow. They consolidated seven internal systems using ServiceNow CRM, and they're going to modernize even further to sell, serve, and support its own customers. This is reducing costs by 30%, reducing cycle time from order to fulfillment by 25%, and resolving 20% more work orders on the first request. a leading Canadian real estate company selected ServiceNow CRM platform to integrate all aspects of their resident support and field operations with a unified data model. The customer leveraged ServiceNow to gain real-time operational visibility, optimize dispatch, and automate work order management. This drove efficiency gains that delivered more than 100% ROI. A global business services company, deployed ServiceNow agents for incident classification and resolution, resulting in initial time savings of 13% for agents involved. The company is now processing hundreds of thousands of AI assists monthly on ServiceNow. An international leader in commercial real estate services deployed ServiceNow agents to automate email triage across their service desk, reducing mean time to resolution from two days to minutes, freeing agents for higher value work. A U.S. insurance company uses ServiceNow out-of-the-box agents to automate email-to-case conversion, achieving 91% accuracy and saving agents up to 12% of their time annually through an AI-first mindset. A diversified industrial multinational conglomerate deployed ServiceNow agents to automate help desk triage. These ServiceNow agents now handle over 90% of incoming requests. They've reduced triage time by 50% with 99% routing accuracy. This saves tens of thousands of hours annually. One of Europe's largest drugstore chains use ServiceNow to transform its customer service cutting the time it took customers to receive support from nine minutes to 30 seconds and resolving customer issues with 98% accuracy. ServiceNow was selected by a large US county in a seven figure deal to replace the legacy, highly customized IT platform. They are supporting election operations by consolidating manual fragmented processes into our AI platform, leveraging native ITSM asset management, custom app development, and offline mobile capabilities. A large U.S. agency is using ServiceNow as the foundation of its IT modernization strategy. They're consolidating all IT services on ServiceNow, replacing more than 40 disparate tools currently in use. And looking ahead, they plan to use ServiceNow agentic AI capabilities to expand self-service and reduce operational overhead. Everyone talks about AI. We deliver business outcomes with AI. Last quarter, we announced a collaboration with FedEx DataWorks. While supply chains are more critical than ever, many companies still lack the predictive intelligence needed to coordinate today's complex value chains. We're combining ServiceNow's orchestration with FedEx's unique data DNA to provide procurement leaders with trusted insights in our source-to-pay solution. FedEx is also expanding beyond just source-to-pay. Its partnership will leverage the capabilities of the ServiceNow AI platform. Other great brands like Adobe, Accenture, EY, Fiserv, Siemens, Panasonic Avionics, and VT have all saved millions and millions, and they're using ServiceNow to grow their business. And we could go on and on. So let's talk a little bit about our great partners. Our ecosystem includes all three hyperscalers. They're all great companies. The language model companies, they're excellent too. Systems integrators, PurePlay ServiceNow partners, and independent software vendors. They're all building their futures on our AI platform. Think about this, ServiceNow and Microsoft have announced a deep AI integration, connecting co-pilots, agents, and data across Microsoft 365 and the ServiceNow AI platform to deliver seamless orchestration, governance, and enterprise-wide automation. The collaboration introduces Microsoft's Agent 365 integration, and it's anchored by ServiceNow's AI control tower. And it sets a whole new standard for enterprise AI interoperability, moving organizations from isolated AI experiences to autonomous AI workflows that drive efficiency and return on investment. ServiceNow and Anthropic have announced an expanded partnership to integrate cloud models more deeply into the ServiceNow AI platform. Through the collaboration ServiceNow is also bringing leading cloud models into ServiceNow to support secure, compliant AI across numerous industries. ServiceNow also announced a new collaboration with OpenAI to enable direct customer access to frontier model capabilities, custom ServiceNow AI solutions, and increase speed with no bespoke development required. Under this agreement, Open AI models will be a preferred intelligence capability for several agentic use cases offered to ServiceNow Enterprise customers. ServiceNow and NTT Data have expanded our strategic partnership to accelerate AI-led transformation for global enterprises, designating NTT Data as a strategic AI delivery partner. This includes co-developing and co-selling AI-powered solutions. Also, scaling NTT data's use of ServiceNow's AI platform. And together, we will operationalize AI responsibly, advancing new deployment models and embedding AI engineering expertise into transformation projects. Again, these are just a few of the many strategic partnerships. Before I wrap up, let me give you a few more facts about our strategic expansion in AI security. As you know, we're growing through the regulatory clearance process, but we can say this. The combination of VESA and ARMIS with ServiceNow AI Platform will create something that is mission critical for enterprise AI. In the agentic era, if companies want to scale AI, trust in governance that span any cloud, Any asset, any AI system, and any device, these are all non-negotiable. So here's the problem enterprises face today. AI adoption is expanding the attack surface exponentially. Companies are deploying autonomous agents across their operations, but they're only able to see a small fraction of their digital estate. Traditional security tools do not address connected assets, especially unmanaged IoT devices, operational technology, and medical equipment. To make matters worse, leaders have no control over who and what can access critical systems and data, and they have no coordinated way to remediate vulnerabilities before they become breaches. And here's where ServiceNow's strategic vision comes into play. First, Armis will solve the visibility problem. Armis provides real-time agentless discovery and classification of every asset across the entire enterprise. IT, OT, IoT, medical devices, industrial controllers, and even shadow IT that bypasses procurement. This creates a continuously updated map of the enterprise environment. Armis is already protecting over 40% of the Fortune 100, precisely because they've cracked the visibility challenge. Second, VESA will solve the identity governance problem through its patented access graph technology. VESA maps access relationships and privileges across humans, machines, and AI agents in real time. This is critical because AI agents need dynamic, context-aware permissions. An agent working for a senior manager needs different access than the same agent working for a junior employee, and those permissions must be governed continuously, not set once and forgotten. CISOs have told us this is the bottleneck preventing AI agent deployment at scale. When both of these are integrated into ServiceNow's AI platform and AI control tower, this is how orchestration goes from theory to reality. When we combine Armis asset visibility with VESA's identity governance and ServiceNow's business context CMDB, which maps every asset to the services, processes, and teams it supports, you create something highly differentiated, a unified end-to-end security exposure and operation stack that can see, decide, and act across the entire technology footprint. Let's make this concrete for you. Armis discovers a vulnerability on an unmanaged IoT device in a manufacturing plant. That exposure insight automatically flows into ServiceNow's AI control tower. Now you understand which production line depends on that device, which team owns it, and what the financial impact of downtime would be. Simultaneously, VESA maps who and what has access to that device and related systems. ServiceNow then automatically prioritizes the risk based on business impact, triggers the appropriate remediation workflow, routes it to the right team with the right permissions, and tracks resolution all before an incident has a chance to occur. This is autonomous, proactive cybersecurity, not alerts that sit in a queue, not manual coordination across fragmented tools, not security theater either. This is intelligent action at machine speed governed by unified policies executed through an automated workflow machine. We just closed the largest quarter ever for OT in Q4. Customers recognize the expanded security capabilities these acquisitions will unlock, and they are encouraging us to go even deeper and broader with them on OT. Our customers are very excited, and so are we. In closing, ServiceNow is exactly where the world needs it to be. the AI control tower for business reinvention, situated in the core of the enterprise in the core of enterprise AI with the capabilities to automate, orchestrate, and integrate any business process. With Moveworks from ServiceNow, we put AI to work for people, a front door to the agentic enterprise for every single employee in the world. We have the workflow data fabric to map the right information to the right workflows. We have the most innovative technology operating system in the world, the only one capable of delivering fully autonomous IT. We have the customer demand to deliver AI native solutions for the employee experience and the customer experience to modernize expensive legacy systems. With Vesa and Armis, will have the most comprehensive approach to secure the agentic enterprise. There's only two measurements that matter in enterprise technology. Is there completeness of vision? Is there proven capability to execute? On both counts, it's an enthusiastic yes for ServiceNow. And two things can be true at the same time. You can have fast growing new market participants building exciting use cases, especially for personal productivity at work. You can also have fast growing market leaders at the core of enterprise grade AI. Many postmortems have been written in the enterprise over the years. Most of them, ironically, have been dead wrong. The great Lou Gerstner once said, Changing business processes in a company is like setting your hair on fire and then using a hammer to put it out. This is hard work. It requires deep domain expertise, industrial-grade technology, and a global distribution engine to reach global enterprises and meet the customer where they are. Operating plans exist to organize a business. Dreams exist to unleash the imagination. Unprecedented fast time to value for our customers. 30 billion plus in revenue. Consistent expansion of free cash flow. Best in class profitable growth. One trillion market cap. Our dreams for ServiceNow are clear. And no operating plan will hold us back. The world works with ServiceNow isn't a tagline. It's a hard line. If you have any doubts that we're building to greatness, I look forward to your questions later in the call. Thank you for your time and attention. I'll hand it over to our president and chief financial officer, Gina Mastantuno. Gina, over to you.