Summary
ServiceNow closed fiscal 2022 with fourth-quarter total revenues of $1.94 billion, up 20.2% from the prior-year quarter. Full-year revenue reached $7.24 billion, up 22.9%. Gross profit was $1.52 billion in the quarter, up 23.0%, and $5.67 billion for the full year, up 24.9%. Gross margin expanded to 78.6% in the quarter, up 1.8 percentage points, while full-year gross margin was 78.3%, up 1.2 percentage points. Operating income was $155 million in the quarter, up 342.9%, and $355 million for the full year, up 38.1%. Operating margin was 8.0% in the quarter, up 5.8 percentage points, and 4.9% for the full year, up 0.5 percentage points. Net income was $150.13 million in the quarter, up 471.4%, and $325 million for the full year, up 41.3%. Full-year diluted EPS was $1.60, up 41.6%.
The cash and backlog picture stayed strong. Operating cash flow was $1.16 billion in the quarter, up 37.7%, and $2.72 billion for the full year, up 24.3%. Capital expenditures were $144 million in the quarter, up 44.0%, and $550 million for the full year, up 40.3%. Deferred revenue was $4.66 billion at December 31, 2022, up 21.5%. Remaining performance obligations were $14.0 billion, up 21.7%. The company said it had 1,637 customers with more than $1 million in annual contract value, up 22% year-over-year. Its renewal rate was 98% for 2022. Management also said net new annual contract value from new logos grew more than 30% year-over-year. ServiceNow appointed Chirantan CJ Desai as President and COO, and named Masatoshi Suzuki as president of ServiceNow Japan, making Japan a fourth geographic region. The company rolled out new products including automated service suggestions, Service Request Playbook, and Workplace Scenario Planning, and expanded its partnership with Zoom.
Guidance points to continued growth but with a wider margin story. For the first quarter of 2023, non-GAAP subscription revenue growth is guided to 25% to 25.5% in constant currency, and non-GAAP operating margin is guided to 24%. For full-year 2023, non-GAAP subscription revenue growth is guided to 22.5% to 23.5%, non-GAAP subscription margin to 84%, non-GAAP operating margin to 26%, and non-GAAP free cash flow margin to 30%. The company based its outlook on December 2022 foreign exchange rates. Management said the business remains a strategic priority for customers and that durable demand positions it well for 2023. ServiceNow also announced a multi-year transformation of its Partner Program to support an estimated $500 billion market opportunity for the Now Platform and associated partner services.
Risks are familiar but real. The strengthening U.S. Dollar weighed on reported results. ServiceNow said the general strengthening of the U.S. Dollar relative to other major foreign currencies had an unfavorable impact on revenues, and a favorable impact on cost of revenues and operating expenses. The company also flagged the Russia-Ukraine conflict, inflation, interest rates, competition, and the ability to convert remaining performance obligations into revenue. It maintains a full valuation allowance on U.S. federal and state deferred tax assets, though it sees a reasonable possibility of a release within the next 12 months if sustained U.S. profitability continues. Seasonality remains a factor, with a significantly higher percentage of customer agreements signed in the fourth quarter, often in the last two weeks. Professional services and other gross loss increased for the full year, which management attributed to headcount costs, travel, and strategic investments. Non-cancelable purchase commitments total $1,271 million as of December 31, 2022, due primarily over the next five years, and operating lease obligations total $895 million. Cash, cash equivalents, short-term investments and long-term investments totaled $6.4 billion as of December 31, 2022.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2022 | Q3 FY2022 | QoQ | Q4 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $1.94B | $1.83B | +6.0% | $1.61B | +20.2% |
| Gross profit | $1.52B | $1.43B | +6.6% | $1.24B | +23.0% |
| Gross margin | 78.6% | 78.2% | +0.5 pp | 76.8% | +1.8 pp |
| Research & development | $454.0M | $456.0M | -0.4% | $392.0M | +15.8% |
| Sales & marketing | $722.0M | $697.0M | +3.6% | $632.0M | +14.2% |
| General & administrative | $194.0M | $187.0M | +3.7% | $181.0M | +7.2% |
| Total operating expenses | $1.37B | $1.34B | +2.2% | $1.21B | +13.7% |
| Operating income (loss) | $155.0M | $91.0M | +70.3% | $35.0M | +342.9% |
| Operating margin | 8.0% | 5.0% | +3.0 pp | 2.2% | +5.8 pp |
| Net income (loss) | $150.0M | $80.0M | +87.5% | $26.0M | +476.9% |
| Net margin | 7.7% | 4.4% | +3.4 pp | 1.6% | +6.1 pp |
| Diluted EPS | $0.74 | $0.39 | +$0.35 | $0.13 | +$0.61 |
Risks
Global economic conditions including inflation, rising interest rates, recession, and geopolitical instability could reduce or delay customer spending and affect renewal rates. The strengthening U.S. Dollar had an unfavorable impact on revenues for FY2022, and subscription revenues would have been $274 million higher if prior-year exchange rates had been used.
Competition is intensifying as AI, machine learning, low-code/no-code, and adjacent vendors enter the digital workflow market, including larger systems-of-record providers such as Oracle, SAP, Salesforce and Workday. Competitors may bundle or discount offerings, creating pricing pressure and requiring continued innovation.
The company faces increasingly sophisticated and state-supported cyberattacks, including phishing, ransomware, and supply chain risks such as the log4j vulnerability. Reliance on third-party cloud infrastructure and customer-administered access expands exposure even when a breach is unrelated to ServiceNow's own security programs.
Laws and customer expectations around data privacy, AI and machine learning, and data sovereignty may restrict how the platform can be optimized and offered globally. In 2022 the company began an EU-centric services delivery model that required significant financial and human resources, and noncompliance could lead to fines or reputational harm.
Greater focus on larger enterprise customers may lengthen and increase the cost of sales cycles and require more configuration and integration resources. These deals often involve enterprise-wide decisions, multiple approvals, and third-party consultants, which reduces predictability.
Competition for technology talent, particularly in AI and machine learning, remains intense and could increase costs. As of December 31, 2022, approximately 27.6% of employees had been employed for a year or less, and the company has made significant performance-based equity awards to executives to aid retention.
Government and heavily regulated customers expose the company to procurement delays, bid protests, audits, budget cycles, and contract termination rights. MD&A notes an increase in 12-month agreements with the U.S. federal government, with the highest number entered in the quarter ended September 30, driven by their annual budget expenditures.
An increasing portion of revenues is generated through partners, including managed service providers and resellers, and partners are relied upon for professional services. If partners fail to perform, misrepresent the platform, or require extensive training, sales and distribution could be harmed.
Changes in the effective tax rate or disallowance of tax positions could adversely affect results. The FY2022 effective tax rate was 19% compared to 8% in FY2021, and the company continues to maintain a full valuation allowance on U.S. federal and state deferred tax assets.
SaaS KPIs
All quarters →Non-GAAP operating margin
Free cash flow margin
Free cash flow
Renewal rate
Current remaining performance obligations (cRPO)
Remaining performance obligations (RPO)
Non-GAAP subscription gross margin
Customers with ACV > $1 million
Summary, forecast, risks and KPIs are extracted from ServiceNow, Inc.'s SEC filings for Q4 FY2022 (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.