Summary
ServiceNow's first quarter fiscal 2025 results showed strong growth and improved profitability. Total revenues reached $3.09 billion, up 18.6% from the prior-year quarter. Net income was $460 million, up 32.6%, and operating income came in at $451 million, up 35.8%. Diluted earnings per share were $2.20, compared with $1.67 in the prior-year quarter. Gross margin declined to 78.9% from 80.0%, a decrease of 1.1 percentage points. Operating margin expanded to 14.6% from 12.8%, an increase of 1.9 percentage points. The quarter demonstrated solid top-line momentum and better operating leverage.
Cash flow and backlog metrics were robust. Operating cash flow was $1.68 billion, up 25.1% from the prior-year quarter. Capital expenditures were $205 million, up 51.9%. Free cash flow, a non-GAAP measure defined as operating cash flow plus certain costs and minus purchases of property and equipment, was $1,477 million, with a margin of 48%. Deferred revenue, current portion, stood at $6.74 billion, up 18.2%. Remaining performance obligations were $22.1 billion, up 24.9%. Current RPO, which represents contract revenue to be recognized in the next 12 months, was $10.31 billion, up 22% year-over-year. The company repurchased approximately 316,000 shares for $298 million, leaving $3 billion available under its repurchase authorization.
Operational highlights pointed to durable demand. ServiceNow ended the quarter with 508 customers generating more than $5 million in annual contract value, an increase of approximately 20% year-over-year. It signed 72 transactions over $1 million in net new ACV during the quarter. The renewal rate held steady at 98% for the three months ended March 31, 2025 and 2024. The company unveiled agentic AI innovations, including AI Agent Studio and AI Agent Orchestrator, and released the Yokohama platform. It also announced plans to acquire Moveworks and Logik.ai. Partnerships expanded with NVIDIA, Google Cloud, Aptiv, Vodafone Business, Devoteam, and DXC Technology. ServiceNow introduced a Government Transformation Suite for the public sector. It was also named a Leader in the IDC MarketScape Worldwide SaaS and Cloud-Enabled Facility Management Applications 2024-2025 Vendor Assessment and in The Forrester Wave Software Asset Management Solutions, Q1 2025.
Guidance for the second quarter of 2025 targets subscription revenues of $3,030 million to $3,035 million, representing 19% to 19.5% growth, or 19.5% in constant currency. The company expects cRPO growth of 19.5% for the quarter and a non-GAAP operating margin of 27%. For the full year 2025, subscription revenue guidance is $12,640 million to $12,680 million, with growth of 18.5% to 19%, or 19.5% in constant currency. Full-year non-GAAP operating margin is guided to 30.5%, free cash flow margin to 32%, and non-GAAP subscription gross profit margin to 83.5%. Weighted-average diluted shares are expected to be 209 million for both the second quarter and the full year. The guidance assumes a 31-day average of foreign exchange rates for March 2025 for entities reporting in currencies other than U.S. Dollars.
Several risks temper the outlook. Management noted that a weakening U.S. dollar provided a currency tailwind, but only part of that benefit was flowed into the full-year guidance to account for potential geopolitical risks. Other concerns include tariffs, inflation, interest rates, foreign currency fluctuations, cybersecurity events, data privacy regulations, and intense competition. The company also faces execution risk in converting RPO into revenue and integrating recent acquisitions. A leadership transition occurred as Paul Smith resigned as President, Global Customer and Field Operations, effective April 23, 2025. Paul Fipps was appointed President of Global Customer Operations. The 98% renewal rate over the last three years offers some stability, and the company has generated positive operating cash flows for more than ten years. Macroeconomic uncertainty remains elevated.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2025 | Q4 FY2024 | QoQ | Q1 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $3.09B | $2.96B | +4.4% | $2.60B | +18.6% |
| Gross profit | $2.44B | $2.33B | +4.8% | $2.08B | +17.0% |
| Gross margin | 78.9% | 78.7% | +0.3 pp | 80.0% | -1.1 pp |
| Research & development | $703.0M | $668.0M | +5.2% | $606.0M | +16.0% |
| Sales & marketing | $1.05B | $1.03B | +2.6% | $923.0M | +14.2% |
| General & administrative | $229.0M | $257.0M | -10.9% | $222.0M | +3.2% |
| Total operating expenses | $1.99B | $1.95B | +1.7% | $1.75B | +13.4% |
| Operating income (loss) | $451.0M | $374.0M | +20.6% | $332.0M | +35.8% |
| Operating margin | 14.6% | 12.7% | +1.9 pp | 12.8% | +1.8 pp |
| Net income (loss) | $460.0M | $384.0M | +19.8% | $347.0M | +32.6% |
| Net margin | 14.9% | 13.0% | +1.9 pp | 13.3% | +1.6 pp |
| Diluted EPS | $2.20 | $1.84 | +$0.36 | $1.67 | +$0.53 |
Risks
MD&A flags ongoing macroeconomic uncertainty from interest rates, global inflation and tariffs, and states that escalating Russia/Ukraine and Middle East conflicts could materially impact results if global economic disruptions worsen. The company says it has not yet experienced liquidity or operational impact but continues to monitor these direct and indirect effects.
Total gross margin fell to 79% in FY2025 Q1 from 80% a year earlier, with subscription gross profit percentage down to 81% from 83%. Management expects subscription gross profit percentage to decrease slightly for the year ending December 31, 2025, driven by headcount, data center capacity and costs to serve regulated-market customers.
Professional services and other flipped to a gross loss of 8% in FY2025 Q1 from a gross profit of 1% in FY2024 Q1, with cost of professional services and other revenues up 14% versus 4% revenue growth. The shortfall is attributed to partner ecosystem spend rising faster than revenue, and management expects the gross loss percentage to increase for the year ending December 31, 2025.
MD&A cites incremental costs to attract customers in regulated markets by adopting public cloud offerings and increased support for customers affected by new and evolving data residency requirements, which contribute to rising cost of subscription revenues and pressure subscription gross margin.
The company notes that a minority of customers self-host, recognizing a substantial portion of sales price upfront, and that $157 million of subscription revenue was recognized upfront in FY2025 Q1 versus $126 million in FY2024 Q1. RPO variability is also flagged from foreign exchange, contract duration and the rising mix of 12-month U.S. federal agreements.
Stock-based compensation rose to $470 million in FY2025 Q1 from $422 million in FY2024 Q1, and management expects it to keep increasing in absolute dollars through the year ending December 31, 2025. Dilution is being offset by buybacks, with 0.3 million shares repurchased for $298 million in the quarter and $3.0 billion remaining under the authorization.
SaaS KPIs
All quarters →Non-GAAP operating margin
Free cash flow margin
Free cash flow
Renewal rate
Non-GAAP income from operations
RPO
cRPO
Summary, forecast, risks and KPIs are extracted from ServiceNow, Inc.'s SEC filings for Q1 FY2025 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.