Servicenow Overview
ServiceNow is the dominant workflow-orchestration layer of the modern enterprise, and it is now attempting the most consequential repositioning in its history: from "the digital workflow company" to, in management's own 2026 language, "the AI control tower for business reinvention." Its structural advantage is architectural rather than functional. A single data model, a configuration management database that most large enterprises already trust as their system of record for technology estate, and two decades of accumulated process knowledge give ServiceNow a privileged position as the execution layer beneath generative models that can reason but cannot act. That advantage is being pressed hard through capital deployment — $10.2 billion of acquisitions announced or closed between March 2025 and April 2026, principally Moveworks, Veza and Armis — which converts a debt-free, cash-rich balance sheet into a levered one and moves the company into direct competition with the security platform vendors. Execution risk has risen materially; so has the addressable opportunity.
ServiceNow, Inc. is a Delaware-incorporated enterprise software company headquartered in Santa Clara, California, that sells a single multi-tenant cloud platform — now branded the ServiceNow AI Platform — on which customers automate, orchestrate and govern cross-functional business workflows. Founded in 2004 by Fred Luddy as Glidesoft, Inc., renamed Service-now.com in 2006 and ServiceNow in 2011, the company listed on the New York Stock Exchange in June 2012 and has compounded revenue at roughly 22.5% annually over the last four fiscal years (derived from Forms 10-K FY2021–FY2025).
The company's own description
ServiceNow describes itself in its FY2025 Form 10-K in terms that have shifted decisively toward artificial intelligence. The company states that it delivers solutions helping public and private organisations govern, secure and manage artificial intelligence while digitalising and streamlining workflows to drive collaboration, productivity and better experiences across the enterprise. It offers a suite of products, including AI-powered applications, and services designed to automate workflows, integrate systems and empower employees regardless of existing systems, cloud environments or collaboration tools. At the core sits the ServiceNow AI Platform — a cloud-based platform facilitating delivery of workflows and driving digital transformation across all departments and personas.
The 10-K articulates a specific and defensible strategic thesis about where value accrues in the AI stack. Management's argument is that AI excels at analysing data and generating information, but converting that information into business outcomes requires infrastructure capable of orchestrating action across systems, enforcing governance policies and managing complex workflows. Models can identify patterns, recommend and surface insights, but cannot independently execute transactions, route approvals, update systems of record or enforce compliance with business rules. ServiceNow positions its platform as the infrastructure connecting AI-generated insight to the operational systems where work actually happens — the capability to direct, control and manage what happens after information is generated. In the company's framing, this represents a substantial share of the value enterprises seek when adopting AI.
By the Q2 FY2026 release the corporate boilerplate had been rewritten again: ServiceNow is "the AI control tower for business reinvention," a platform that integrates with any cloud, any model and any data source, unifying legacy systems, departmental tools, cloud applications and AI agents into a single pane of glass, with more than 100 billion workflows running annually.
Independent characterisation
Stripped of marketing language, ServiceNow is a horizontal workflow platform-as-a-service business with three distinguishing economic characteristics.
First, it is a land-and-expand seat-and-consumption hybrid. The company began in IT service management, a category with an unusually clear buyer (the CIO), an unusually measurable ROI (ticket deflection, mean time to resolution) and an unusually sticky artefact (the CMDB, the configuration management database). Having established that beachhead it has repeatedly extended the same platform into adjacent functional domains — IT operations, security operations, risk, HR, customer service, legal, procurement, facilities, and most recently sales and order management. The economics of that expansion are extraordinarily favourable because the incremental product rides on infrastructure, sales relationships and implementation partners already paid for. Management disclosed at its May 2026 Financial Analyst Day that 91% of net new annual contract value in 2025 came from deals containing five or more products, which is the clearest single quantification of the cross-sell engine.
Second, the revenue model is overwhelmingly subscription. Subscription revenue was $12,883 million of $13,278 million total in FY2025 — 97.0% of the total (Form 10-K FY2025). Professional services and other revenue was $395 million, or 3.0%, and is deliberately run at or below break-even; the FY2025 GAAP professional services gross loss was $19 million, a negative 4.5% margin (Q4 FY2025 earnings release). ServiceNow does not want to be a services business; it wants systems integrators to be the services business, which is why Accenture, Deloitte, EY, KPMG, Infosys, Cognizant and NTT DATA are named partners in the FY2025 10-K.
Third, and newly material, pricing is migrating away from seats. Management stated at the May 2026 analyst day that half of net new ACV had already shifted to non-seat-based pricing models, and that new AI-native bundles were expected to drive average price lift of roughly 20% or more. The FY2025 10-K confirms that certain AI and data solutions now include a consumption-based component that applies when customer usage exceeds the fixed number of service credits under the subscription agreement. This is the company's structural answer to the "seat compression" bear case: if AI reduces the number of human agents an enterprise employs, ServiceNow wants to be paid for the work performed rather than the people performing it.
Customers, value-chain position and end markets
ServiceNow sells almost exclusively to large enterprises and government. As of 31 December 2025 the company had approximately 8,700 customers (Form 10-K FY2025). Concentration among very large accounts is high and rising: 603 customers with more than $5 million in annual contract value at 31 December 2025, against 502 at 31 December 2024 and 420 at 31 December 2023 (Form 10-K FY2025). By Q2 FY2026 that count had reached 658, approximately 23% year-over-year growth (Q2 FY2026 earnings release).
Go-to-market is a global direct sales organisation supplemented by managed service providers and resale partners; the FY2025 10-K explicitly notes that an increasing portion of revenue is generated through the partner network, and that a substantial majority of United States government sales are made indirectly through distributors, resellers or service providers.
End markets served, per the FY2025 10-K's industry solutions disclosure, are financial services, healthcare and life sciences, manufacturing, public sector, retail, technology and telecommunications. Public sector is a disproportionately important and disproportionately risky vertical: it drives contract-duration mix effects that management repeatedly calls out in cRPO guidance, and it is the source of the company's principal open legal exposure.
In value-chain terms ServiceNow occupies the orchestration and governance layer: above the infrastructure providers (AWS, Microsoft Azure, Google Cloud, on which an increasing share of ServiceNow instances are hosted), above the frontier model providers (Anthropic, OpenAI, NVIDIA-enabled inference), and above or alongside the systems of record (SAP, Oracle, Workday, Salesforce) whose data it federates without replicating. That position is simultaneously its greatest asset and its greatest dependency, because the same hyperscalers and model providers are its most credible long-run competitors.
Strategy
Stated corporate strategy
The FY2025 10-K states the company's ambition directly: to become "the defining AI enterprise software company of the 21st century." This is the successor to the earlier "defining enterprise software company of the 21st century" formulation and the insertion of "AI" is the entire strategic story of 2025–2026. The stated corporate purpose is "make the world work better for everyone," supported by four values centred on customer-centricity, teamwork, continuous learning and empathy.
Beneath the ambition, the 10-K articulates a concrete competitive thesis worth quoting in substance because it is unusually specific for a risk-averse document. Management argues that its two decades partnering with enterprise customers produce a deep understanding of how work actually flows across departments, systems and organisational silos — expertise in operational processes specific to industries, functional areas and user roles that "cannot be readily replicated." The platform architecture allows organisations to deploy AI-enhanced workflows without replacing existing infrastructure or disrupting established processes. And operating a SaaS platform at scale gives operational expertise in reliability, security and performance as customers entrust increasingly critical functions to AI-enabled systems.
Management also concedes the counter-case in the same document: competitive dynamics may shift as new approaches emerge and customer preferences evolve. This is the correct posture and unusually candid.
Medium-term financial targets
| Metric | FY2026 guidance (as of Q2 FY2026) | 2030 target |
|---|---|---|
| Subscription revenue (USD M) | 15760 to 15780 | 30000 plus |
| Subscription revenue growth, reported (%) | 22.5 | 0 |
| Subscription revenue growth, constant currency (%) | 21.0 | 0 |
| Non-GAAP subscription gross margin (%) | 81.0 | 0 |
| Non-GAAP operating margin (%) | 31.5 | 0 |
| Non-GAAP free cash flow margin (%) | 35.0 | 0 |
| Diluted weighted-average shares (billions) | 1.04 | 0 |
| AI annual contract value (USD M) | 1,500 | 0 |
| AI share of total ACV (%) | 0 | 30 plus |
| Stock-based compensation as % of revenue | 0 | less than 10 by 2029 |
| Rule of X (growth plus FCF margin) | 56 | 60 plus |
Table 10.1 — Management guidance and long-term targets
Sources: Q2 FY2026 earnings release (FY2026 guidance); Financial Analyst Day, 4 May 2026, as reported by Bloomberg, Fortune and Yahoo Finance (long-term targets). Zeros denote metrics for which no target was given at that horizon.
The Financial Analyst Day of 4 May 2026 was the most consequential communication event of the period. Mastantuono stated that ServiceNow was on track to beat its prior 2026 $15 billion subscription revenue target by roughly half a billion dollars organically, and outlined a path to $30 billion-plus by 2030, with an upside scenario of $32 billion. Critically, McDermott stated that the 2030 outlook does not assume large-scale M&A, characterising Armis and Veza as TAM-expanding strategic moves rather than revenue-plugging acquisitions. The $30 billion 2030 target implies a roughly 19% compound annual growth rate from the FY2026 guided base — below recent quarterly growth rates, which management framed as deliberately conservative.
The AI monetisation numbers underpinning the target: Now Assist ACV crossed $600 million in 2025, more than doubling year-over-year, and reached $750 million entering Q1 2026. The full-year 2026 AI ACV target was raised from $1 billion to $1.5 billion at the analyst day. ServiceNow AI crossed $1 billion of ACV during Q2 2026 (Q2 FY2026 earnings release), keeping the raised target credible. By 2030 management expects AI to represent more than 30% of total ACV.
The pricing logic management presented deserves recording because it is the core rebuttal to the seat-compression bear case. Mastantuono's worked example: a team of 20 support analysts costs over $1 million annually, roughly 90% of which is labour. ServiceNow's argument is that AI does not compress its revenue but compounds it, because the company can price against the labour pool it displaces rather than against the seats it replaces.
Strategic initiatives announced in the last 24 months
Product and platform
Now Assist expansion (2024–2026): Extended from IT to virtually every workflow family, with named AI agents per product line.
AI Control Tower (2025, expanded 2026): Governance, discovery, observation, security and measurement across every AI system, agent and workflow regardless of where it runs. Recognised as a Leader in the 2026 Gartner Magic Quadrant for AI Governance Platforms.
AI Experience (Q3 2025): Context-aware, multimodal user interface serving as the intelligent entry point for employees.
Zurich platform release (September 2025): Multi-agentic development acceleration; secure, scalable AI systems into production.
Otto (May 2026): Unified AI experience combining Now Assist, Moveworks and AI Experience.
Autonomous Workforce (April–May 2026): AI specialists executing enterprise jobs end-to-end; first out-of-the-box specialist is a Level 1 Service Desk agent; specialists subsequently launched for IT, CRM, employee services, and security and risk (the last combining Armis, Veza and AI Control Tower).
Context Engine and Autonomous Data Analytics (2026): - Action Fabric (May 2026), with Anthropic as first design partner.
Build Agent general availability (2026): across ServiceNow Studio, Cursor, Windsurf, Claude Code and GitHub Copilot.
Healthcare Operations (Q1 2026): and Industrial Connected Workforce (Q1 2026) — new industry solutions.
Project Arc (2026): with NVIDIA — enterprise autonomous desktop agent secured by NVIDIA OpenShell.
Commercial model
- AI-native experience across every commercial tier (April 2026): AI, data connectivity, workflow execution, security and governance included by default.
Consumption-based pricing component: introduced for AI and data solutions where usage exceeds contracted service credits (Form 10-K FY2025).
Partner Program overhaul (Q1 2026): simplified pricing model, expanded partner incentives and co-marketing investment, and a reimagined Build Program strengthening the ServiceNow Store as a marketplace for partner-built AI agents.
Capital allocation
$3 billion buyback authorisation: (January 2025), $5 billion additional authorisation (January 2026), $2 billion accelerated share repurchase launched Q1 2026. Approximately $4.2 billion remained available at 31 March 2026. Management targets being "dilution net neutral for 2026."
Five-for-one stock split: effective 17 December 2025.
$8.75 billion of security M&A: (Armis and Veza), funded with cash on hand plus $8 billion of new debt and commercial paper.
Sustainability and public commitments
Net-zero greenhouse gas emissions by 2030: across Scopes 1, 2 and 3, with SBTi-validated science-based targets.
CA$110 million multi-year Canadian public-sector commitment: (Q4 2025) including Canadian-hosted AI-ready infrastructure, a Canada Centre of Excellence and approximately 100 new Canada-based jobs.
ServiceNow University and RiseUp with ServiceNow: free AI-powered learning available to employees, customers and partners across the ecosystem, with an upskilling track for individuals without traditional technology backgrounds.
Cost programmes. ServiceNow has not announced a named cost-reduction programme with public targets. It has, however, recognised $74 million of severance in FY2025 and $80 million in the first half of FY2026, alongside $37 million of contract termination costs in Q4 FY2025 — evidence of continuous rather than programmatic restructuring. Management's principal stated efficiency lever is internal AI deployment through the "Now on Now" programme, cited as the mechanism expected to normalise operating and free cash flow margin expansion in FY2027 after the Armis drag.
Products & Services
The catalogue below follows the FY2025 10-K product taxonomy. Pricing is disclosed for essentially no individual product; ServiceNow sells bundled, negotiated enterprise agreements, and management confirmed at the May 2026 analyst day that roughly half of net new ACV is now non-seat-based. Individual list prices are therefore marked not publicly disclosed throughout.
Platform foundation — the ServiceNow AI Platform
The Platform is the substrate for everything else and is sold as the entitlement layer beneath every product. Its three declared pillars in the FY2025 10-K are AI, Data and Workflows.
AI layer — Now Assist. The integrated AI offering. Tools operate autonomously with human oversight within predefined guardrails. Customers may use ServiceNow's own language models or integrate third-party or proprietary models; depending on the model selected, text, image, audio and video may be processed. All integrated models are regularly evaluated against platform-representative data. Customers can deploy thousands of out-of-the-box ServiceNow AI agents, integrate agents built into third-party applications, or create custom agents in natural language. Agent development follows a human-in-the-loop governance model. Launch year 2023 (Vancouver release); continuously extended. Target customer: all.
AI governance — AI Control Tower. Formally documented in the 10-K under Risk Management: a dashboard giving a comprehensive view of AI governance status, delivering insight into compliance metrics, risk scores and performance data, enabling monitoring and optimisation of AI workflows. Expanded at Knowledge 2026 with new discovery, observation, governance, security and measurement capabilities covering every AI system, agent and workflow "regardless of where it runs" (Q2 FY2026 earnings release). This is the single most strategically significant product ServiceNow has launched since Now Assist and is the anchor of the "AI control tower" corporate positioning.
Data layer — Workflow Data Fabric (WDF). Provides access to structured or unstructured, streaming or static data both within and outside the platform. Built on the foundation of the legacy Automation Engine product. Supports integrations with a large network of certified partners; connects to real-time external data without copying or moving it from source (zero-copy federation). Includes a semantic layer allowing users to interpret and use data without technical knowledge of underlying database structures.
Data layer — RaptorDB. A high-performance database purpose-built for platform workloads, processing high volumes of workflow transactions with low latency and consistent throughput, reducing the need for separate data infrastructure. Introduced 2024; named by the CFO in the Q4 FY2025 release as one of the outperforming emerging products.
Context Engine and Autonomous Data Analytics. Launched April/May 2026. Context Engine is described as the organisational intelligence grounding every AI decision in live enterprise context — which asset ties to which regulated process, which approval chain applies, which decision precedent governs the outcome. Autonomous Data Analytics enables plain-language queries across the data estate (Q1 and Q2 FY2026 earnings releases).
Action Fabric. Introduced at Knowledge 2026, enabling ServiceNow and third-party AI to take action securely through ServiceNow workflows. Anthropic was the first design partner, connecting Claude directly to ServiceNow workflows and actions.
Otto. Launched May 2026 as a unified AI experience combining Now Assist, Moveworks and AI Experience. Understands intent, routes work to the right agent, and executes tasks to completion within enterprise guardrails.
Release cadence. Two major platform upgrades per year (Form 10-K FY2025). Recent named releases include Vancouver (2023), Washington DC and Xanadu (2024), Yokohama and Zurich (2025).
Technology products
| Product | Description and capabilities | Target customer | AI overlay |
|---|---|---|---|
| IT Service Management (ITSM) | Predictive intelligence, incident management and response, routine task and request automation, performance analytics, process optimisation, real-time tracking and validation for change management and DevOps, integrated knowledge management and collaboration. The company's founding product line and largest single franchise. | CIO, IT service desk | Automates incident triage, generates summaries, provides resolution recommendations |
| IT Operations Management (ITOM) | Identifies, monitors and manages physical and cloud IT infrastructure; simultaneously detects issues across physical servers and digital components; maintains the single record of all IT configurable items (the CMDB). Management identified ITOM in Q2 FY2026 as seeing "strong demand tailwinds for the CMDB to serve as an essential governance and data foundation." | CIO, infrastructure and operations | Simplifies technical language, recommends resolutions, supports autonomous IT management |
| IT Asset Management | Manages the lifecycle of software, hardware and cloud IT assets; used for software audits, cloud FinOps and hardware inventory; analytics across financial, contractual and inventory dimensions. | IT asset managers, procurement | Summarises software compliance requirements; recommends cost-avoidance actions from utilisation data |
| Enterprise Asset Management | Manages the lifecycle of physical business assets — planning, deployment, maintenance, retirement. | Operations, facilities, manufacturing | Identifies and locates items to fulfil requests; automates approvals; executes transfers or orders |
| Operational Technology (OT) Management | Visibility and context into technology assets used for operational purposes and connected devices; OT vulnerability management, issue resolution and lifecycle management; triggers incident management with business context. | Industrial operations, critical infrastructure | Summarises incident history; generates solution notes and knowledge articles |
| Risk Management (formerly Integrated Risk Management) | Enterprise risk across compliance, operational resilience, cyber, technology, business continuity, corporate sustainability, privacy and third-party reliance. Includes AI Control Tower. | Chief Risk Officer, compliance, audit | Summarises issue and risk assessments, rationalises control objectives, identifies control gaps, maps regulations to controls |
| Security Operations | Addresses security incidents and vulnerabilities; prioritises threats by potential impact; integrates internal and third-party security and vulnerability data. | CISO, SOC | Natural-language analyst interaction; context-aware insights; vulnerability assessment support |
| Strategic Portfolio Management (SPM) | Plan, visualise and track value realisation across portfolios of projects, initiatives and digital assets; aligns strategy with investment and operations. Named a Leader in The Forrester Wave: Strategic Portfolio Management Tools, Q2 2026. | PMO, transformation office | Replaces intake forms with conversational interface; summarises demands and stakeholder feedback |
Security acquisitions layered into Technology (post-FY2025). Armis Centrix provides continuous, real-time, agentless visibility, management and security across connected cyber assets — tracking nearly 7 billion devices in real time across IT, OT, IoT, medical devices, physical AI, code and cloud (company press release, April 2026). Veza's Access Graph provides cross-system visibility into every permission held by every human, machine and AI agent identity (company press release, April 2026). Armis had itself acquired Silk Security in 2025, adding remediation augmentation (Forrester analysis).
CRM and Industry products
| Product | Description | Target customer |
|---|---|---|
| Customer Service Management (CSM) | Cross-channel customer self-service, centralised interactions, routing to the appropriate representative within a unified workspace; automates complex cross-functional processes; identifies bottlenecks. Named a Leader in The Forrester Wave: Customer Service Solutions, Q1 2026. | Chief Customer Officer, service operations |
| Field Service Management (FSM) | Planning, scheduling and execution of field work; technicians dispatched from the same platform managing customer cases; resource optimisation, technician productivity, first-time-fix improvement. Recognised in the 2026 ISG Buyers Guide for Field Service Management. | Field operations |
| Sales and Order Management (SOM) | Lead and opportunity management, configure-price-quote for complex offerings, automated order delivery and fulfilment; captures order details across channels, manages fulfilment across systems, assesses risk of order delay. Materially strengthened by the Logik.io acquisition (May 2025). Management named CPQ as an outperforming emerging product in Q4 FY2025. | CRO, sales operations |
| Financial Services Operations (FSO) | Orchestrates work across departments, systems and third parties for banks and insurers; reduces contact-centre volumes, supports personalised service and regulatory compliance. Fiserv announced in January 2026 that it would scale its use of Now Assist for FSO. | Banks, insurers |
| Healthcare and Life Sciences Service Management | For pharmaceutical companies, providers and payers; streamlines operations, reduces inefficiency, manages cost and supports patient care under regulatory constraint. Extended April 2026 with Healthcare Operations, embedding a shared operational system of record directly into the electronic medical record. | Providers, payers, pharma |
| Manufacturing Commercial Operations | Automates sales, support and service processes; integrates order-to-cash and service operations; improves issue resolution, claims processing and revenue workstreams. Extended 2026 with Industrial Connected Workforce, connecting quality, warranty, orders and quoting in a single operational view. | Discrete and process manufacturers |
| Public Sector Digital Services | Tools for governments to deliver services at scale; improves employee productivity and consistency of issue resolution. Named a Leader in The Forrester Wave: Industry Cloud Solutions for Public Sector, Q1 2026. Management stated in Q2 FY2026 that nearly all 50 U.S. states use the platform. | Federal, state, local government |
| Retail Service Management / Retail Operations | Automates retail customer care; simplifies store operations and gives headquarters visibility into store performance. | Retailers |
| Technology Provider Service Management | With SOM, manages sales, delivery, support and customer success across the customer lifecycle for technology providers. | Technology vendors and MSPs |
| Telecom Service Management / Network Inventory Management / Telecom Service Operations Management | With SOM, enables telecom operators to manage customer service and infrastructure operations across front, middle and back office. | Telecom carriers |
Core Business products
| Product | Description | Target customer |
|---|---|---|
| HR Service Delivery (HRSD) | Automates routine HR tasks; supports onboarding, leave management, transfers, offboarding, service requests and career development; integrates with external HR systems of record. | CHRO, HR shared services |
| Legal and Contract Operations (LCO) | Comprises Contract Management Pro (cross-department contract management integrating legal, procurement and sales) and Legal Service Delivery (centralised intake and tracking of legal matters, replacing email-based processes). AI detects non-standard contract language, recommends pre-approved clauses, extracts termination and renewal data. | General Counsel, legal operations |
| Source-to-Pay Operations (SPO) | Connects existing ERP and procurement systems to support purchasing, supplier management, performance monitoring and accounts payable. AI pre-fills request details and validates against spending policy. | CPO, procurement, AP |
| Workplace Service Delivery (WSD) | Manages workplace services, facilities and real estate: space planning and maintenance, visitor management, wayfinding; integrates with intelligent building systems. Recognised as a Leader in the 2026 Gartner Magic Quadrant for Workplace Experience Applications. | Facilities, real estate, workplace |
| ServiceNow EmployeeWorks | Announced April 2026. A conversational front door for the enterprise connecting intent to governed action across any system, combining Moveworks' AI and enterprise search with ServiceNow's autonomous workflows. | CHRO, employee experience |
Creator and Other products
| Product | Description | Target customer |
|---|---|---|
| App Engine | Low-code and no-code development of enterprise-class workflows, AI-supported, requiring no formal coding experience, designed for scale, security and rapid deployment. Documented use cases in the 10-K include product-development milestone tracking, loyalty-programme automation, supply-chain logistics management, and licensing/contracting/compliance examination automation. Now Assist for Creator provides text-to-code, text-to-flow, text-to-service-catalog and text-to-app. | Enterprise architects, citizen developers |
| Build Agent | Reached general availability in ServiceNow Studio in 2026 and extended across Cursor, Windsurf, Claude Code and GitHub Copilot, so developers can build from any environment with full platform context. A Figma integration launched in Q4 FY2025 lets Figma designs serve as direct prompts. | Professional developers |
| Platform Privacy and Security | Security, privacy and encryption controls protecting sensitive cloud data and supporting regulatory compliance; enforcement of data-protection policies and rapid incident response; AI auto-classifies data and recommends or initiates protective actions. | CISO, DPO |
| RaptorDB | See Platform foundation above. | Platform owners |
| Workflow Data Fabric | See Platform foundation above. | Data and analytics leaders |
Services and customer success offerings
| Offering | Description | Commercial model |
|---|---|---|
| Customer Support | Standard and enhanced support delivered by technical resources worldwide, plus a self-service support portal with documentation, knowledge articles, online training, forums and case creation. | Subscription |
| Professional Services | Design, implementation, architecture and optimisation services delivered directly and through partners. Deliberately run at approximately break-even; FY2025 GAAP gross loss $19 million. | Time-and-materials / fixed fee |
| ServiceNow Impact | Software tools, guided plans and AI-driven recommendations supporting product adoption; platform health monitoring, metric reporting, designated experts and technical support. | Subscription |
| ServiceNow University | Launched 2025. AI-powered learning hub, free to employees, customers and partners across the ecosystem; supports the RiseUp with ServiceNow upskilling initiative. | Free |
| Now Next AI | Engineering programme deploying ServiceNow engineers to co-build agentic AI solutions with strategic customers. Extended with NTT DATA in Q4 FY2025. | Programme |
Deployment and technology architecture
ServiceNow operates a multi-instance architecture giving each customer a dedicated application layer and database — an important technical and commercial differentiator versus multi-tenant-shared-database SaaS peers, particularly in regulated industries. Cloud infrastructure comprises industry-standard servers, network and storage. Delivery is through ServiceNow's own private cloud and, increasingly, public cloud providers. Data centres are configured in pairs for replication, redundancy and high availability, and operate in North America, South America, Europe, Asia and Australia. Customers may deploy on dedicated hardware within ServiceNow data centres, or self-host in customer-managed or third-party data centres where regulatory or security requirements demand it — a minority of customers use these options, but they matter disproportionately to revenue recognition timing, as management repeatedly explains in guidance commentary (Form 10-K FY2025; Q1 and Q2 FY2026 earnings releases).
Financial Narrative
Income statement
Table 6.1 — Consolidated income statement, FY2021–FY2025 (USD millions except per-share and percentages)
Sources: Forms 10-K FY2021–FY2025; Q4 earnings releases FY2021–FY2025; FY2022 Annual Report to Shareholders (cash-flow statement, for FY2021–FY2022 stock-based compensation). FY2023 stock-based compensation of $1,604 million is derived from the FY2023 GAAP-to-non-GAAP operating income bridge. FY2021 and FY2022 income before income taxes derived from reported pre-tax margin applied to reported revenue and reconciled against reported net income. FY2021 interest income was immaterial and is shown as zero. EBITDA is calculated as income from operations plus depreciation and amortisation and excludes stock-based compensation, which ServiceNow expenses in full.
Revenue CAGR, FY2021–FY2025: total revenue 22.5%; subscription revenue 23.3% (derived).
Commentary on income-statement trends, inflections and drivers
The margin inflection of 2023–2025 is the defining feature of the period. GAAP operating margin tripled from 4.4% in FY2021 to 13.7% in FY2025, and non-GAAP operating margin expanded from 24.9% to 31.2%. The mechanism is almost entirely operating leverage in sales and marketing, which fell from 38.9% of revenue in FY2021 to 33.0% in FY2025 — a 590 basis point improvement worth roughly $780 million of annualised margin at FY2025 revenue (derived). Research and development fell more modestly from 23.7% to 22.3% of revenue, and general and administrative from 10.1% to 8.5%. This is a textbook enterprise-software leverage curve, and it is genuine rather than cosmetic: it was achieved while headcount grew 73% over the same four years.
Stock-based compensation deserves separate attention because it is the largest single reconciling item and the largest single governance question. At $1,955 million in FY2025 it exceeded GAAP operating income by a factor of 1.07 and consumed 14.7% of revenue. The trend is favourable — down 450 basis points as a share of revenue since FY2021 — and management committed at the May 2026 analyst day to reducing it below 10% of revenue by 2029, having already achieved a sub-15% goal in 2025. An investor should nonetheless note that the entirety of GAAP profitability at ServiceNow is a function of whether one treats this expense as real. It is real. The company's response has been to offset dilution with buybacks rather than to reduce grants: repurchases rose from $696 million in FY2024 to $1,840 million in FY2025 and $2,225 million in Q1 FY2026 alone.
The FY2023 net income figure of $1,731 million is not comparable to any other year and analysts should not read a margin trend through it. It reflects a $723 million income tax benefit from the release of a valuation allowance on deferred tax assets, producing a negative tax provision. Underlying pre-tax income that year was $1,008 million. Stripping the release, FY2023 net income would have been approximately $1,008 million less a normalised provision — roughly $800 million (derived). On that basis net income progressed smoothly: roughly $800 million, $1,425 million, $1,748 million across FY2023–FY2025.
Interest income became a material earnings contributor and is now reversing. Rising rates on a $9.9 billion cash and securities portfolio drove interest income from effectively nil in FY2021 to $451 million in FY2025 — 20% of pre-tax income. In Q2 FY2026 interest income fell to $70 million from $116 million a year earlier as the portfolio was liquidated to fund Armis. This is a real and permanent headwind to pre-tax income of the order of $200–300 million annualised, now compounded by interest expense on $8.5 billion of gross debt.
Gross margin peaked in FY2024 and is declining structurally. Subscription gross margin fell from 82.0% (FY2024) to 80.0% (FY2025) to 73.5% in Q2 FY2026 on a GAAP basis. Three forces are at work, and only one is transitory. First, purchased-intangible amortisation from Armis, Veza and Moveworks — $177 million in Q2 FY2026 against $23 million a year earlier, or 4.5% of subscription revenue — is non-cash and will amortise away. Second, migration of hosted workloads to hyperscaler infrastructure trades capital intensity for cost of revenue; management's FY2026 guidance explicitly attributes gross margin pressure to "more customers utilizing our hyperscaler partnerships." Third, AI inference costs scale with usage. Full-year 2026 guidance calls for non-GAAP subscription gross margin of 81%, against 83.5% delivered in FY2025 — a 250 basis point structural step-down.
Revenue growth has not decelerated as expected, and in 2026 it re-accelerated. Growth ran 30.5%, 22.9%, 23.8%, 22.4% and 20.9% across FY2021–FY2025, a gentle and predictable decay. In FY2026 that reversed: Q1 total revenue grew 22.0% and Q2 grew 24.0%. Approximately 125 basis points of the Q2 rate is Armis (per Q1 FY2026 guidance commentary), meaning organic growth also accelerated. Management raised full-year 2026 subscription revenue guidance to $15,760–15,780 million, 22.5% growth, at the Q2 print.
Balance sheet
Table 6.3 — Consolidated balance sheet, FY2021–FY2025 and Q2 FY2026 (USD millions)
Sources: Forms 10-K FY2021–FY2025; Q2 FY2026 earnings release condensed balance sheet; balance-sheet line items for FY2021–FY2023 compiled by S&P Global Market Intelligence from company filings. FY2023 long-term marketable securities and strategic investments split derived. Net cash/(net debt) is total cash and marketable securities less total borrowings, excluding operating lease liabilities.
Commentary on the balance sheet
ServiceNow ceased to be a net-cash company in the second quarter of 2026. This is the single largest change to the investment case in a decade. For its entire post-IPO history the company carried a modest $1.5 billion of 1.40% notes against a growing securities portfolio; net cash peaked at $8,564 million at 31 December 2025. Six months later net debt stood at $810 million (derived), gross borrowings at $7,517 million, and working capital at negative $3,639 million. The transformation was funded by three instruments: a $4.0 billion term loan drawn 17 April 2026 (since refinanced), $4.0 billion of senior notes issued 15 May 2026 across five tranches, and a $3.0 billion commercial paper programme of which $2,082 million was outstanding at 30 June 2026.
Intangibility of the balance sheet has increased dramatically. Goodwill plus intangibles rose from 7.3% of total assets at end-FY2024 to 18.1% at end-FY2025 to 43.0% at 30 June 2026 — $13,618 million against $12,516 million of book equity, meaning tangible book value is now negative $1,102 million (S&P Global Market Intelligence). This is a normal consequence of large software acquisitions, but it materially raises the stakes on Armis integration: impairment would be visible and painful.
Deferred revenue remains the strongest single indicator of business quality. Current deferred revenue of $8,314 million at end-FY2025 grew 21.9% year-over-year, in line with subscription revenue, and represents 64.5% of FY2025 subscription revenue already contracted and invoiced (derived). Revenue recognised from beginning-period deferred revenue was $6.9 billion in FY2025 against $5.7 billion in FY2024 (Form 10-K FY2025, revenue note).
Strategic investments have grown into a real, and volatile, asset. From nil in FY2022 to $1,542 million at end-FY2025 and $2,073 million at 30 June 2026, with $1,056 million of purchases in FY2025 alone. These generated $273 million of unrealised gains in Q2 FY2026 and $360 million in the first half — a swing that flatters GAAP net income and which the company now excludes from non-GAAP net income (a presentation change applied retroactively in 2026). Analysts should treat this line as a private-market venture portfolio, not operating income.
Cash flow
Table 6.5 — Cash flow, FY2021–FY2025 (USD millions)
Sources: Forms 10-K FY2021–FY2025; Q4 FY2023, Q4 FY2024, Q4 FY2025 earnings releases. FY2021 and FY2022 company-defined free cash flow figures are approximate and are flagged accordingly; FY2023–FY2025 are as reported. FY2021–FY2022 cash used for business combinations and repurchases compiled from the FY2022 Annual Report cash-flow statement and are approximate for acquisitions.
Half-year 2026: operating cash flow $2,257 million (down from $2,393 million), capex $255 million, non-GAAP free cash flow $2,299 million (up from $2,012 million), and business combinations consuming $8,776 million of cash (Q2 FY2026 earnings release).
Commentary on cash generation
Cash conversion is the strongest element of the ServiceNow financial profile and the primary justification for its multiple. Non-GAAP free cash flow margin expanded from 30.5% in FY2021 to 34.9% in FY2025, and operating cash flow margin from 37.2% to 41.0%. FY2025 free cash flow of $4,636 million grew 34%, well ahead of the 20.9% revenue growth — genuine, accelerating cash leverage.
Two structural features drive this. First, deferred revenue: customers pay annually in advance, so growth is self-funding. Second, capital intensity is falling as workloads migrate to hyperscalers: capex fell from 7.8% of revenue in FY2024 to 6.5% in FY2025 and is guided to roughly 4% for FY2026. This is the mirror image of the gross-margin compression discussed above — ServiceNow is converting capital expenditure into cost of revenue, which is neutral to free cash flow and negative to reported gross margin.
FY2026 free cash flow margin is guided to 35%, unchanged from FY2025 despite management's Q1 warning that Armis would create an approximately 200 basis point headwind. Management stated that internal AI efficiency gains from the "Now on Now" programme and platform leverage are expected to normalise operating and free cash flow margin expansion in FY2027.
Ratio analysis
Table 6.7 — Key ratios, FY2021–FY2025 (percentages and multiples)
Derived by the analyst from Forms 10-K FY2021–FY2025. ROE and ROA use year-end balances, not averages, and are therefore conservative in a period of rapid equity growth. ROIC is estimated as income from operations multiplied by (1 minus 20%) divided by the sum of total borrowings, lease liabilities and equity. Net debt to EBITDA is negative throughout because ServiceNow held net cash in every year shown. Interest coverage uses an estimated interest expense of approximately $27 million per annum on the 1.40% 2030 notes; ServiceNow does not present interest expense as a separate income-statement line. Cash conversion cycle is not meaningful: ServiceNow carries no inventory and the DSO measure above is the relevant working-capital indicator.
Current-period ratios (trailing twelve months to 30 June 2026, per S&P Global Market Intelligence): ROE 14.24%; ROA 4.25%; ROIC 10.28%; ROCE 9.36%; current ratio 0.70; debt/equity 0.68; debt/EBITDA 2.77; interest coverage 22.0x; asset turnover 0.55; Altman Z-Score 5.48.
The ratio set tells a coherent story. Returns on capital have improved steadily as the margin structure matured, from a genuinely poor 3.5% ROIC in FY2021 to 9.5% in FY2025 — but note that 9.5% is only marginally above the estimated 9.08% weighted average cost of capital. On a strict economic-value-added basis ServiceNow has only just begun to create value at the corporate level; the equity story has been driven by growth and multiple, not by spread over cost of capital. The Armis transaction pushes ROIC down again in the near term, because $7.75 billion of capital has been added ahead of the associated earnings. This is the central financial tension in the 2026 story.
Days sales outstanding improving from 86 to 72 days is an under-appreciated positive: it reflects both billing discipline and the growing weight of large, well-capitalised customers.
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View Subscription PlansFinancial Detail
Revenue by Segment and Revenue by Segment (%)
| Metric | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|
Subscription revenue (USD Mn) | 5,573 | 6,891 | 8,680 | 10,646 | 12,883 |
Professional services and other revenue (USD Mn) | 323 | 354 | 291 | 338 | 395 |
Total revenue (USD Mn) | 5,896 | 7,245 | 8,971 | 10,984 | 13,278 |
Subscription share of total (%) | 94.5 | 95.1 | 96.8 | 96.9 | 97.0 |
Subscription revenue YoY growth (%) | 29.6 | 23.6 | 26.0 | 22.6 | 21.0 |
Total revenue YoY growth (%) | 30.5 | 22.9 | 23.8 | 22.4 | 20.9 |
Results by Segment and Segment Margins & Growth (%)
| Metric | FY2023 | FY2024 | FY2025 |
|---|---|---|---|
Subscription gross profit (USD Mn) | 7,074 | 8,704 | 10,314 |
Subscription gross margin (%) | 81.5 | 82.0 | 80.0 |
Professional services and other gross profit/(loss) (USD Mn) | -24 | -7 | -19 |
Professional services gross margin (%) | -8.0 | -2.0 | -4.5 |
Total gross profit (USD Mn) | 7,050 | 8,697 | 10,295 |
Total gross margin (%) | 79.0 | 79.0 | 77.5 |
Product Area Details
| Product area | Contents | Buyer |
|---|---|---|
Technology | Asset Management, IT Operations Management, IT Service Management, Operational Technology Management, Risk Management, Security Operations, Strategic Portfolio Management | CIO, CISO, CTO, Chief Risk Officer |
CRM and Industry | Customer Service Management, Field Service Management, Sales and Order Management, and vertical solutions for financial services, healthcare and life sciences, manufacturing, public sector, retail, technology and telecom | Chief Customer Officer, Chief Revenue Officer, line-of-business heads |
Core Business | HR Service Delivery, Legal and Contract Operations, Source-to-Pay Operations, Workplace Service Delivery | CHRO, General Counsel, CPO, CFO |
Creator and Other | App Engine, Platform Privacy and Security, RaptorDB, Workflow Data Fabric | Enterprise architects, platform owners, developers |
Income Statement and Margin Analysis (%)
| Metric | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|
Total revenue (USD Mn) | 5,896 | 7,245 | 8,971 | 10,984 | 13,278 |
Subscription revenue (USD Mn) | 5,573 | 6,891 | 8,680 | 10,646 | 12,883 |
Professional services and other revenue (USD Mn) | 323 | 354 | 291 | 338 | 395 |
Total cost of revenue (USD Mn) | 1,353 | 1,573 | 1,921 | 2,287 | 2,983 |
Gross profit (USD Mn) | 4,543 | 5,672 | 7,050 | 8,697 | 10,295 |
Gross margin (%) | 77.1 | 78.3 | 78.6 | 79.2 | 77.5 |
Sales and marketing expense (USD Mn) | 2,292 | 2,814 | 3,300 | 3,854 | 4,388 |
Research and development expense (USD Mn) | 1,397 | 1,768 | 2,124 | 2,543 | 2,960 |
General and administrative expense (USD Mn) | 597 | 735 | 864 | 936 | 1,123 |
Total operating expenses (USD Mn) | 4,286 | 5,317 | 6,288 | 7,333 | 8,471 |
Income from operations (USD Mn) | 257 | 355 | 762 | 1,364 | 1,824 |
GAAP operating margin (%) | 4.4 | 4.9 | 8.5 | 12.4 | 13.7 |
Depreciation and amortisation (USD Mn) | 472 | 433 | 562 | 564 | 738 |
EBITDA (USD Mn) | 729 | 788 | 1,324 | 1,928 | 2,562 |
EBITDA margin (%) | 12.4 | 10.9 | 14.8 | 17.6 | 19.3 |
Interest income (USD Mn) | 0 | 44 | 249 | 419 | 451 |
Income before income taxes (USD Mn) | 249 | 399 | 1,008 | 1,738 | 2,261 |
Provision for income taxes (USD Mn) | 19 | 74 | -723 | 313 | 513 |
Net income (USD Mn) | 230 | 325 | 1,731 | 1,425 | 1,748 |
Net margin (%) | 3.9 | 4.5 | 19.3 | 13.0 | 13.2 |
EPS basic, split-adjusted (USD) | 0.23 | 0.32 | 1.70 | 1.38 | 1.69 |
EPS diluted, split-adjusted (USD) | 0.23 | 0.32 | 1.68 | 1.37 | 1.67 |
Dividends per share (USD) | 0 | 0 | 0 | 0 | 0 |
Stock-based compensation (USD Mn) | 1,131 | 1,401 | 1,604 | 1,746 | 1,955 |
Stock-based compensation as % of revenue | 19.2 | 19.3 | 17.9 | 15.9 | 14.7 |
Non-GAAP income from operations (USD Mn) | 1,467 | 1,794 | 2,489 | 3,254 | 4,149 |
Non-GAAP operating margin (%) | 24.9 | 24.8 | 27.7 | 29.6 | 31.2 |
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View Subscription PlansBalance Sheet
| Metric | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 | Q2FY2026 |
|---|---|---|---|---|---|---|
Cash and cash equivalents (USD Mn) | 1,728 | 1,470 | 1,897 | 2,304 | 3,726 | 2,503 |
Short-term marketable securities (USD Mn) | 1,576 | 2,810 | 2,980 | 3,458 | 2,558 | 2,161 |
Long-term marketable securities (USD Mn) | 1,729 | 2,369 | 3,203 | 4,111 | 3,771 | 2,043 |
Total cash and marketable securities (USD Mn) | 5,033 | 6,649 | 8,080 | 9,873 | 10,055 | 6,707 |
Strategic investments (USD Mn) | 0 | 0 | 268 | 472 | 1,542 | 2,073 |
Accounts receivable, net (USD Mn) | 1,390 | 1,725 | 2,036 | 2,240 | 2,627 | 2,201 |
Property and equipment, net (USD Mn) | 1,357 | 1,735 | 2,073 | 1,763 | 2,289 | 2,177 |
Goodwill (USD Mn) | 777 | 824 | 1,231 | 1,273 | 3,578 | 9,837 |
Intangible assets, net (USD Mn) | 287 | 232 | 224 | 209 | 1,121 | 3,781 |
Total assets (USD Mn) | 10,798 | 13,299 | 17,387 | 20,383 | 26,038 | 31,666 |
Current portion of deferred revenue (USD Mn) | 3,836 | 4,660 | 5,785 | 6,819 | 8,314 | 8,057 |
Short-term debt, net (USD Mn) | 92 | 0 | 0 | 0 | 0 | 2,082 |
Long-term debt, net (USD Mn) | 1,484 | 1,486 | 1,488 | 1,489 | 1,491 | 5,435 |
Total borrowings (USD Mn) | 1,576 | 1,486 | 1,488 | 1,489 | 1,491 | 7,517 |
Operating lease liabilities, total (USD Mn) | 638 | 746 | 796 | 789 | 912 | 936 |
Total liabilities (USD Mn) | 7,103 | 8,267 | 9,759 | 10,774 | 13,074 | 19,150 |
Stockholders' equity (USD Mn) | 3,695 | 5,032 | 7,628 | 9,609 | 12,964 | 12,516 |
Net cash / (net debt), excl. leases (USD Mn) | 3,457 | 5,163 | 6,592 | 8,384 | 8,564 | -810 |
Working capital (USD Mn) | 271 | 649 | 412 | 829 | 28 | -3,639 |
Goodwill and intangibles as % of total assets | 9.9 | 7.9 | 8.4 | 7.3 | 18.1 | 43.0 |
Cash Flow and Margin Analysis (%)
| Metric | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|
Net cash provided by operating activities (USD Mn) | 2,191 | 2,723 | 3,398 | 4,267 | 5,444 |
Operating cash flow margin (%) | 37.2 | 37.6 | 37.9 | 38.8 | 41.0 |
Purchases of property and equipment (capex) (USD Mn) | 392 | 550 | 694 | 852 | 868 |
Capex as % of revenue | 6.6 | 7.6 | 7.7 | 7.8 | 6.5 |
Simple free cash flow (OCF less capex) (USD Mn) | 1,799 | 2,173 | 2,704 | 3,415 | 4,576 |
Company-defined non-GAAP free cash flow (USD Mn) | 1,801 | 2,176 | 2,728 | 3,455 | 4,636 |
Non-GAAP free cash flow margin (%) | 30.5 | 30.0 | 30.4 | 31.5 | 34.9 |
Cash used for business combinations, net (USD Mn) | 40 | 65 | 380 | 113 | 1,084 |
Purchases of strategic investments (USD Mn) | 0 | 0 | 137 | 181 | 1,056 |
Repurchases of common stock (USD Mn) | 0 | 0 | 535 | 696 | 1,840 |
Taxes paid on net share settlement of equity awards (USD Mn) | 0 | 0 | 460 | 700 | 770 |
Dividends paid (USD Mn) | 0 | 0 | 0 | 0 | 0 |
Returns & Leverage Ratios (%) and Financial Ratios (x)
| Metric | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|
Return on equity, year-end basis (%) | 6.2 | 6.5 | 22.7 | 14.8 | 13.5 |
Return on assets, year-end basis (%) | 2.1 | 2.4 | 10.0 | 7.0 | 6.7 |
Return on invested capital, estimated (%) | 3.5 | 3.9 | 6.2 | 9.2 | 9.5 |
Current ratio (x) | 1.05 | 1.11 | 1.06 | 1.10 | 1.00 |
Debt to equity, including leases (x) | 0.60 | 0.44 | 0.30 | 0.24 | 0.19 |
Net debt to EBITDA (x) | -4.74 | -6.55 | -4.98 | -4.35 | -3.34 |
Interest coverage, EBIT to interest expense (x) | 9.5 | 13.1 | 28.2 | 50.5 | 67.6 |
Asset turnover (x) | 0.55 | 0.54 | 0.52 | 0.54 | 0.51 |
Days sales outstanding (days) | 86 | 87 | 83 | 74 | 72 |
Research and development as % of revenue | 23.7 | 24.4 | 23.7 | 23.2 | 22.3 |
Sales and marketing as % of revenue | 38.9 | 38.8 | 36.8 | 35.1 | 33.0 |
General and administrative as % of revenue | 10.1 | 10.1 | 9.6 | 8.5 | 8.5 |
Revenue by Region
| Region | FY2023 | FY2024 | FY2025 |
|---|---|---|---|
North America (USD Mn) | 5,702 | 6,909 | 8,348 |
EMEA (USD Mn) | 2,298 | 2,834 | 3,402 |
Asia Pacific and other (USD Mn) | 971 | 1,241 | 1,528 |
Total revenue (USD Mn) | 8,971 | 10,984 | 13,278 |
Revenue by Region (%) and Region Margins & Growth (%)
| Metric | FY2023 | FY2024 | FY2025 |
|---|---|---|---|
North America share of total (%) | 63.6 | 62.9 | 62.9 |
EMEA share of total (%) | 25.6 | 25.8 | 25.6 |
Asia Pacific and other share of total (%) | 10.8 | 11.3 | 11.5 |
North America YoY growth (%) | 0 | 21.2 | 20.8 |
EMEA YoY growth (%) | 0 | 23.3 | 20.0 |
Asia Pacific and other YoY growth (%) | 0 | 27.8 | 23.1 |
Valuation Snapshot
| Metric | Value |
|---|---|
Share price, close 11 September 2026 (USD) | 132.53 |
Market capitalisation (USD Bn) | 137.02 |
Enterprise value (USD Bn) | 138.76 |
Shares outstanding (billions) | 1.03 |
Float (billions) | 1.03 |
52-week price change (%) | -28.25 |
50-day moving average (USD) | 119.53 |
200-day moving average (USD) | 117.98 |
Beta, five-year | 0.97 |
Relative Strength Index | 52.78 |
Average daily volume, 20 days (shares) | 16,268,706 |
Short interest (shares) | 30,320,000 |
Short interest as % of shares outstanding | 2.93 |
Short ratio, days to cover | 1.62 |
Institutional ownership (%) | 83.56 |
Insider ownership (%) | 0.14 |
Consensus Rating Details
| Consensus rating | Strong Buy |
|---|---|
Analyst count | 49 |
Average price target (USD) | 142.28 |
Implied upside to target (%) | 7.36 |
Three-year revenue growth forecast (%) | 19.87 |
Three-year EPS growth forecast (%) | 19.96 |
Valuation Multiples (x)
| Metric | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 | Current |
|---|---|---|---|---|---|---|
Price to earnings, trailing (x) | 561.6 | 240.9 | 83.5 | 153.5 | 90.9 | 82.8 |
Price to earnings, forward (x) | 96.2 | 45.3 | 59.5 | 67.7 | 39.5 | 29.3 |
Price to sales (x) | 21.9 | 10.8 | 16.1 | 19.9 | 12.0 | 9.3 |
Price to free cash flow (x) | 71.8 | 36.0 | 53.5 | 64.1 | 34.7 | 29.9 |
Price to book (x) | 0 | 0 | 0 | 0 | 0 | 11.0 |
EV to sales (x) | 0 | 0 | 0 | 0 | 0 | 9.4 |
EV to EBITDA (x) | 0 | 0 | 0 | 0 | 0 | 47.9 |
EV to free cash flow (x) | 0 | 0 | 0 | 0 | 0 | 30.3 |
PEG ratio (x) | 0 | 0 | 0 | 0 | 0 | 1.20 |
Free cash flow yield (%) | 0 | 0 | 0 | 0 | 0 | 3.34 |
Dividends & Capital Returns and Share Count (millions)
| Metric | FY2022 | FY2023 | FY2024 | FY2025 | H1FY2026 |
|---|---|---|---|---|---|
Shares repurchased, value (USD Mn) | 0 | 535 | 696 | 1,840 | 2,225 |
Cumulative treasury stock at period end (USD Mn) | 0 | 535 | 1,219 | 3,045 | 5,371 |
Shares outstanding at period end (millions) | 1,014 | 1,024 | 1,032 | 1,047 | 1,034 |
Capital Instruments
| Instrument | Principal (USD Mn) | Coupon (%) | Maturity |
|---|---|---|---|
Commercial paper | 2,082 | Variable | Under 12 months (rolling) |
1.400% senior notes | 1,500 | 1.400 | 1 September 2030 |
4.250% senior notes | 750 | 4.250 | 15 May 2028 |
4.700% senior notes | 600 | 4.700 | 15 August 2031 |
5.050% senior notes | 650 | 5.050 | 15 May 2033 |
5.400% senior notes | 1,250 | 5.400 | 15 May 2036 |
6.300% senior notes | 750 | 6.300 | 15 May 2056 |
Total borrowings | 7,582 | 0 | 0 |
Tranche Details
| Tranche | Principal (USD Mn) | Yield to maturity (%) | Spread to Treasury (bps) | Price to public (%) |
|---|---|---|---|---|
2028 Notes | 750 | 4.441 | 45 | 99.638 |
2031 Notes | 600 | 4.822 | 70 | 99.420 |
2033 Notes | 650 | 5.192 | 90 | 99.175 |
2036 Notes | 1,250 | 5.513 | 105 | 99.140 |
2056 Notes | 750 | 6.384 | 135 | 98.884 |
Analyst Conclusions
Management guidance
| Metric | Q3 FY2026 guidance | FY2026 guidance |
|---|---|---|
| Subscription revenue (USD M) | 3975 to 3980 | 15760 to 15780 |
| Subscription revenue growth, reported (%) | 20.5 | 22.5 |
| Subscription revenue growth, constant currency (%) | 20.0 | 21.0 |
| cRPO growth, reported (%) | 19.5 | 0 |
| cRPO growth, constant currency (%) | 20.0 | 0 |
| Non-GAAP subscription gross margin (%) | 0 | 81.0 |
| GAAP operating margin (%) | 8.0 | 10.0 |
| Non-GAAP operating margin (%) | 31.0 | 31.5 |
| Non-GAAP free cash flow margin (%) | 0 | 35.0 |
| Diluted weighted-average shares (billions) | 1.05 | 1.04 |
Source: Q2 FY2026 earnings release, 22 July 2026. Zeros denote metrics for which no guidance was given at that horizon.
Management flagged an estimated $35 million year-over-year FX headwind to Q3 2026 cRPO from dollar strengthening since 31 March 2026, and noted that Q2's beat was partly attributable to U.S. Federal on-premise revenue pulled forward from Q3 — meaning the Q3 subscription growth guide of 20.5% is optically softer than underlying momentum.
Consensus expectations
Consensus is 19.87% revenue growth and 19.96% EPS growth over three years across 49 analysts, with an average price target of $142.28 and a Strong Buy consensus rating (S&P Global Market Intelligence, September 2026). This tracks management's 2030 framework almost exactly, implying that the sell side has adopted the analyst-day model rather than underwriting a differentiated view.
Bull case
1. Growth is accelerating at $15 billion of scale, and that is close to unprecedented. Subscription growth ran 21.0% in FY2025 and then 22.0% and 24.5% in the first two quarters of FY2026. Even netting the roughly 125 basis points of Armis contribution, organic growth improved. Enterprise software companies do not normally accelerate through $15 billion of revenue; Salesforce grew 9.6% at $41.5 billion and Workday 13.1% at $9.6 billion. If ServiceNow can sustain even 19% compound growth, the $30 billion 2030 target is met and the shares are cheap at 29.3x forward earnings and a 1.20 PEG.
2. AI monetisation is real, quantified and ahead of plan. ServiceNow AI ACV went from $600 million (2025) to $750 million (Q1 2026) to over $1 billion (Q2 2026), with the FY2026 target raised from $1 billion to $1.5 billion. Now Assist customers spending over $1 million in ACV grew over 130% year-over-year in Q1 2026, and Q4 2025 Now Assist net new ACV more than doubled. This is the sharpest contrast with peers, most of whom describe AI enthusiasm without disclosing attached revenue. It also directly refutes the displacement thesis: enterprises are paying ServiceNow more because of AI, not less.
3. The security acquisitions expand the addressable market at a moment of maximum urgency, and early evidence is favourable. Armis and Veza together are expected to more than triple ServiceNow's security and risk TAM. Six months after the Armis close, management reported the AI Control Tower "supercharging" the security business, an Autonomous Security and Risk unit formed, an Accenture joint migration offering launched, and a 2026 Gartner Leader placement in AI Governance Platforms. The strategic logic — that the company holding the CMDB and the asset graph is uniquely positioned to govern agentic AI — is sound, and the market has begun to accept it.
Bear case
1. GAAP economics are deteriorating and the levering event removed the balance-sheet cushion. Q2 2026 GAAP operating margin of 4.0% and net income of $298 million — down year-over-year on 24% revenue growth — is the true reported picture. Net cash of $8,564 million at end-2025 became net debt of $810 million six months later. Interest income has halved while $7.5 billion of borrowings at 4.25%–6.30% accrue expense, a combined pre-tax swing of roughly $500 million annualised. Tangible book value is negative $1,102 million and goodwill plus intangibles are 43% of total assets. The company that could previously absorb any shock now carries a current ratio of 0.70 and negative working capital of $3.6 billion.
2. Gross margin compression is structural, not transitory, and the guidance path proves it. FY2026 non-GAAP subscription gross margin guidance was cut three consecutive times — 82% in January, 81.5% in April, 81% in July — against 83.5% delivered in FY2025. Management attributes the drift to hyperscaler mix and accelerating AI adoption, both of which are permanent and both of which increase with success. If AI inference costs scale with usage while pricing does not scale proportionately, the 30%-of-ACV-from-AI target arrives with a materially lower incremental margin than the workflow business it supplements. The gap between a 31.5% non-GAAP and a 10% GAAP operating margin in FY2026 guidance is $1.5 billion of adjustments, and $1.4 billion of that is cash-equivalent stock compensation and acquisition amortisation.
3. Execution risk is now concentrated in a domain ServiceNow has never operated in, against the best-capitalised competitors in software. $7.75 billion — the largest deal in company history by more than 3x — deployed into cyber exposure management, against Palo Alto Networks, CrowdStrike and Microsoft. Forrester's assessment noted ServiceNow typically builds natively and is mid-refactor on its data architecture, which will add integration complexity. Meanwhile the DOJ investigation into government contracting has remained open and unresolved for over two years, in a vertical where debarment is an explicitly disclosed possible consequence and where the federal channel runs through "a small number" of third-party resellers. A single adverse federal outcome would strike the fastest-growing part of the business at the moment leverage is highest.
Catalysts and monitorables for the next twelve months
| Item | Timing | Why it matters |
|---|---|---|
| Q3 2026 results | 28 October 2026 (estimated) | First clean quarter with Armis fully consolidated and no U.S. Federal pull-forward distortion; watch cRPO growth against the 19.5% guide |
| AI ACV against the raised $1.5 billion FY2026 target | Q3 and Q4 2026 | The single most important disclosed metric; a miss would break the 2030 model |
| Subscription gross margin trajectory | Every quarter | Whether the 81% FY2026 non-GAAP guide holds or is cut a fourth time |
| FY2027 guidance | January 2027 | Management has promised margin expansion resumes in FY2027; this is the test of that commitment |
| Armis and Veza revenue disclosure | Ongoing | Whether ServiceNow begins disclosing security ACV separately, and whether the Autonomous Security and Risk unit becomes a reportable segment |
| DOJ investigation resolution | Unknown | Any accrual, settlement or Army Suspension and Debarment Office action |
| Commercial paper and refinancing | Rolling; $750 million of notes mature May 2028 | Whether the $2.1 billion of commercial paper is termed out and at what cost |
| Buyback execution | Quarterly | $4.2 billion remaining; whether the "dilution net neutral for 2026" commitment is met |
| Stock-based compensation trajectory | Annual | Progress toward the sub-10%-of-revenue 2029 commitment; FY2025 was 14.7% |
| International mix | Quarterly | Whether non-North American revenue breaks above the 37% plateau, and whether Middle East deals close |
| Renewal rate disclosure | Quarterly | Historically 98–99%; any deterioration would be the earliest signal of AI displacement |
| Microsoft competitive response | Ongoing | Agent 365 is currently a partnership; if it becomes a substitute, the thesis changes |
Analyst verdict
ServiceNow enters the final quarter of 2026 as the most interesting risk-reward in large-cap application software, and the reason is a divergence between fundamentals and price that has now persisted for four quarters. Over the twelve months in which the shares fell 28.25%, subscription revenue growth accelerated from 21.0% to 24.5%, remaining performance obligations grew 21% to $29.0 billion, customers spending over $5 million annually rose 23% to 658, and the AI product line crossed $1 billion of annual contract value from a standing start three years ago. Very few companies have posted that combination of operating results against that share-price reaction, and the explanation is not a fundamental deterioration but a narrative one: the market spent the first half of 2026 pricing the possibility that general-purpose AI would eat application software. That narrative has begun to unwind.
The bear case that deserves respect is not displacement — it is arithmetic. ServiceNow has converted an unassailable balance sheet into a leveraged one, retiring $8.6 billion of net cash and adding $7.5 billion of debt to buy into a market it has never operated in. GAAP operating margin fell to 4.0% in the June quarter. Subscription gross margin guidance has been cut three consecutive times, and the cuts are attributable to forces — hyperscaler hosting and AI inference — that intensify with success rather than abate. Estimated return on invested capital of 9.5% in FY2025 barely exceeded an estimated 9.08% cost of capital before $7.75 billion of new capital was deployed ahead of its earnings. On a strict economic-profit basis this company has only recently begun creating value, and the Armis transaction resets that clock.
What tips the balance is the quality of the disclosed evidence. ServiceNow is one of very few enterprise software companies publishing a specific, growing, auditable AI revenue number rather than describing enthusiasm. It has already shifted half of net new annual contract value to non-seat-based pricing, which is the structural answer to the headcount-compression fear rather than a rhetorical one. It holds the configuration management database, which is becoming the governance substrate for agentic deployment, and management's Q2 commentary that CMDB demand is being driven by AI governance needs is the most important sentence in this year's disclosures. And it retains renewal rates near 99% with $29.0 billion of contracted backlog.
At 29.3x forward earnings, 9.3x sales, a 3.34% free cash flow yield and a PEG of 1.20, the valuation embeds neither the bull case nor a disaster. The appropriate stance is constructive with disciplined monitoring: own the operating momentum, watch the gross margin line every quarter, and treat the DOJ matter as a genuine and unresolved tail risk rather than a legacy footnote. The next four quarters will determine whether the Armis pivot was ServiceNow's most valuable strategic move or its most expensive distraction. On the evidence available in September 2026, the former is more likely — but the margin for error is thinner than at any point in the company's public history.
DATA LIMITATIONS AND CAVEATS
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ServiceNow reports a single operating segment. No segment-level revenue, operating income or margin exists in audited disclosure. Section 4 reflects this constraint.
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Product-level revenue is not disclosed. All product-family commentary derives from unaudited ACV statements made on earnings calls and at the May 2026 Financial Analyst Day.
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Country-level revenue is not disclosed beyond the three-region split.
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Emissions figures cited are secondary-sourced.
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Board composition discrepancy. The May 2025 Form S-4/A carries twelve director signatures including Deborah Black and Jeffrey A. Miller, while the 2025 and 2026 proxies nominate nine directors. Eric S. Yuan appears in the 2026 proxy ownership table with nil shares. Departure and appointment disclosures for these directors were not located; the discrepancy is flagged rather than resolved.
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FY2021–FY2022 figures for company-defined non-GAAP free cash flow, stock-based compensation within R&D, and cash used for business combinations are approximate and flagged where used.
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FY2023 stock-based compensation of $1,604 million is derived from the FY2023 GAAP-to-non-GAAP operating income bridge rather than reported directly in the retrieved sources.
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Interest coverage ratios use an estimated interest expense of approximately $27 million per annum for FY2021–FY2025; ServiceNow does not present interest expense as a discrete income-statement line.
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Market data is as of 11–13 September 2026 and will move. Consensus estimates reflect 49 contributing analysts and change continuously.
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View Subscription PlansExecutive Leadership
Executive Leadership Team
| Executive | Position | Salary | Bonus | Stock awards | Non-equity incentive | All other comp | Total |
|---|---|---|---|---|---|---|---|
William R. McDermott | Chairman and Chief Executive Officer | 1,516,667 | 0 | 43,481,651 | 3,522,375 | 3,030,264 | 51,550,957 |
Amit Zavery | President, Chief Product Officer and Chief Operating Officer | 900,000 | 2,000,000 | 21,679,933 | 1,136,250 | 45,273 | 25,761,456 |
Paul Smith | Former President, Global Customer and Field Operations | 573,991 | 0 | 19,024,571 | 0 | 499,440 | 20,098,002 |
Gina Mastantuono | President and Chief Financial Officer | 891,667 | 0 | 16,306,558 | 1,126,046 | 148,442 | 18,472,713 |
Paul Fipps | President, Global Customer Operations | 1,072,228 | 0 | 14,687,373 | 1,100,083 | 24,234 | 16,883,918 |
Jacqueline C. Canney | Chief People and AI Enablement Officer | 741,667 | 0 | 10,328,892 | 749,337 | 63,876 | 11,883,772 |
Directors' Remuneration
| Metric | FY2023 | FY2024 | FY2025 |
|---|---|---|---|
McDermott total compensation (USD) | 37,606,244 | 37,558,118 | 51,550,957 |
McDermott salary (USD) | 1,325,000 | 1,350,000 | 1,516,667 |
McDermott stock awards (USD) | 32,777,514 | 31,460,267 | 43,481,651 |
Mastantuono total compensation (USD) | 14,405,973 | 16,245,017 | 18,472,713 |
Canney total compensation (USD) | 9,061,276 | 10,853,144 | 11,883,772 |
Executive Leadership Team by Name
| Name | Title | Notes |
|---|---|---|
William R. "Bill" McDermott | Chairman and Chief Executive Officer | CEO since 2019; Chairman since October 2022. Formerly CEO of SAP SE. Age 64 (based on age 63 in the 2025 proxy). Serves on one other public company board. |
Gina Mastantuono | President and Chief Financial Officer | CFO since 2020; elevated to President in 2025. Principal financial officer signatory on SEC filings. |
Amit Zavery | President, Chief Product Officer and Chief Operating Officer | Joined October 2024 from Google Cloud, where he was head of platform. Consolidated product and operating responsibility. |
Paul Fipps | President, Global Customer Operations | Elevated 2025 following Paul Smith's departure; employment agreement includes a quarterly cash incentive component (DEF 14A 2026). |
Jacqueline C. Canney | Chief People and AI Enablement Officer | Chief People Officer since 2021; title expanded in 2025 to include AI enablement. |
Kevin T. McBride | Chief Accounting Officer | Principal accounting officer signatory (Form S-4/A 2025). |
Pablo Stern | EVP and General Manager, Technology Workflow Products | Publicly represented the company on the Armis rationale (CIO, December 2025). |
Lou Fiorello | Group Vice President and General Manager, Risk and Security Products | Presented at the Bernstein TMT Forum, February 2026. |
Gaurav Rewari | EVP and General Manager, Data and Analytics | Presented at the Evercore Global TMT Conference, June 2026. |
Darren Yip | Head of Investor Relations | Investor contact on all earnings releases. |
Executive Leadership Team by Director
| Director | Role and background | Director since | Age | Committees |
|---|---|---|---|---|
William R. McDermott | Chairman and CEO of ServiceNow | 2019 | 64 | — |
Susan L. Bostrom | Lead Independent Director. Former EVP, Chief Marketing Officer and Head of Worldwide Government Affairs, Cisco Systems (1997–2011). B.S. Business, University of Illinois; M.B.A., Stanford GSB. Also director of GitLab and Samsara; formerly Nutanix and Cadence Design Systems. | 2014 | 65 | Leadership Development and Compensation (Chair) |
Frederic B. Luddy | Founder of ServiceNow (2004); President and CEO 2004–2011; Chief Product Officer 2011–2016; Chairman April 2018–October 2022. Formerly CTO of Peregrine Systems; founder of Enterprise Software Associates. Trustee, Salk Institute. | 2004 | 71 | — |
Teresa Briggs | Former Vice Chair and West Region Managing Partner, Deloitte LLP; retired CPA. Serves on three other public boards. | 2019 | 65 | Audit (financial expert) |
Jonathan C. Chadwick | Former EVP, CFO and COO of VMware; previously CFO of McAfee and Skype. | Not specified in retrieved excerpt | 60 | Audit |
Paul E. Chamberlain | Former Managing Director, Morgan Stanley. | Not specified in retrieved excerpt | 62 | Audit / Nominating and Governance |
Lawrence J. Jackson, Jr. | Former Global Creative Director, Apple Music. | Not specified in retrieved excerpt | 45 | Not specified |
Joseph "Larry" Quinlan | Former Global Chief Information Officer, Deloitte LLP. Also director of Jones Lang LaSalle and Booking Holdings. | 2021 | 63 | Audit |
Anita M. Sands | Venture Partner, New Enterprise Associates; former Group Managing Director and Head of Change Leadership, UBS Wealth Management Americas. | Not specified in retrieved excerpt | 49 | Not specified |
Eric S. Yuan | Founder and CEO of Zoom Communications. Appears in the 2026 proxy beneficial ownership table with nil shares, indicating recent appointment or nomination. | — | Not disclosed in retrieved excerpt | Not specified |
Major Shareholders
| Holder | Shares | Percent |
|---|---|---|
BlackRock, Inc. | 91,252,660 | 8.8 |
The Vanguard Group, Inc. | 90,591,730 | 8.7 |
William R. McDermott | 2,212,904 | less than 1 |
Frederic B. Luddy | 768,565 | less than 1 |
Gina Mastantuono | 253,321 | less than 1 |
Jacqueline C. Canney | 116,758 | less than 1 |
Amit Zavery | 67,324 | less than 1 |
All current executive officers, directors and nominees (15 persons) | 3,566,103 | less than 1 |
Board & Management Changes
| Date | Change | Context |
|---|---|---|
24 July 2024 | CJ Desai resigns as President and Chief Operating Officer | Mutual agreement following board determination that he violated company policy regarding a possible conflict relating to the hiring of the U.S. Army CIO. |
October 2024 | Amit Zavery joins as President, Chief Product Officer and Chief Operating Officer | Recruited from Google Cloud; fills the Desai vacancy with expanded scope. |
August 2025 | Paul Smith separates as President, Global Customer and Field Operations | Reason not disclosed. Received no 2025 annual cash incentive. |
| 2025 | Paul Fipps appointed President, Global Customer Operations | Succeeds Smith with a modified remit; employment agreement includes a quarterly cash incentive. |
| 2025 | Gina Mastantuono elevated to President and CFO | Recognises expanded operational remit. |
| 2025 | Jacqueline Canney's title expanded to Chief People and AI Enablement Officer | Reflects internal AI-adoption mandate ("Now on Now"). |
Competitive Landscape
Competitors by Segment
| Domain | Named competitors | ServiceNow position |
|---|---|---|
IT Service Management | BMC Software (private, KKR-owned), Atlassian (Jira Service Management), Ivanti (private), Freshworks, SolarWinds, Microsoft (via Dynamics/Power Platform), Zendesk (private) | Clear category leader; recognised as a Leader in The Forrester Wave: Enterprise Service Management Platforms, Q4 2025 |
IT Operations Management and AIOps | Datadog, Dynatrace, Splunk (Cisco), New Relic (private), BMC, IBM | Strong; recognised in the IDC MarketScape: Worldwide AIOps 2026 Vendor Assessment |
Customer Service Management | Salesforce (Service Cloud), Zendesk, Microsoft Dynamics, Freshworks, Pegasystems, HubSpot | Challenger with growing share; Leader in The Forrester Wave: Customer Service Solutions, Q1 2026 |
Sales and CPQ | Salesforce (Sales Cloud, Revenue Cloud), Microsoft Dynamics, Oracle, SAP, Conga | New entrant, materially strengthened by Logik.io |
HR Service Delivery | Workday, SAP SuccessFactors, Oracle HCM, Microsoft Viva, Atlassian | Complementary rather than replacement — ServiceNow orchestrates around HR systems of record |
Governance, Risk and Compliance | Archer, MetricStream, IBM OpenPages, LogicGate, Diligent, SAP GRC | Leader; recognised in The Forrester Wave: Governance, Risk, and Compliance |
Security operations and exposure management | Palo Alto Networks (Cortex/XSIAM), CrowdStrike, Microsoft (Defender/Sentinel), Splunk (Cisco), Rapid7, Tenable, Qualys, Wiz (Google) | New scaled entrant post-Armis; Armis was itself a Gartner-recognised CPS Protection Platform vendor in the 2026 Magic Quadrant |
Identity security | CyberArk, Okta, SailPoint, Saviynt, Microsoft Entra | New entrant post-Veza |
Low-code application development | Microsoft Power Platform, Salesforce Platform, Appian, Pegasystems, OutSystems, Mendix (Siemens) | Credible but not category-leading; Microsoft Power Platform is the most formidable competitor by distribution |
Enterprise AI governance | IBM watsonx.governance, Credo AI, Microsoft, Dataiku, DataRobat, Collibra | Leader, 2026 Gartner Magic Quadrant for AI Governance Platforms |
Agentic AI assistants | Microsoft Copilot, Salesforce Agentforce, Google Gemini Enterprise, Glean, OpenAI enterprise offerings | Now Assist plus Otto; competitive on governance and execution, disadvantaged on model frontier |
Enterprise search and employee front door | Glean, Microsoft, Google, Coveo | Materially strengthened by Moveworks and Raytion |
Peer Comparison FY2025
| Metric | ServiceNow | Salesforce | Workday | Atlassian |
|---|---|---|---|---|
Fiscal year end | Dec 2025 | Jan 2026 | Jan 2026 | Jun 2026 |
Total revenue (USD Mn) | 13,278 | 41,530 | 9,552 | 6,572 |
Revenue growth (%) | 20.9 | 9.6 | 13.1 | 26.0 |
Subscription revenue (USD Mn) | 12,883 | 0 | 8,833 | 6,262 |
Subscription revenue growth (%) | 21.0 | 0 | 14.5 | 27.0 |
GAAP operating margin (%) | 13.7 | 0 | 7.5 | 0 |
Non-GAAP operating margin (%) | 31.2 | 0 | 29.6 | 0 |
R&D expense (USD Mn) | 2,960 | 0 | 0 | 0 |
R&D as % of revenue | 22.3 | 0 | 0 | 0 |
Operating cash flow (USD Mn) | 5,444 | 15,000 | 2,939 | 0 |
Free cash flow (USD Mn) | 4,636 | 0 | 2,777 | 0 |
Remaining performance obligations (USD Mn) | 28,200 | 72,400 | 28,101 | 0 |
Employees | 29,187 | 83,334 | 21,070 | 0 |
Recent Developments
The following register covers March 2025 through September 2026.
*Layoffs and hiring. Headcount grew 11.0% in FY2025 to 29,187. Severance charges of $74 million (FY2025) and $80 million (first half FY2026) indicate continuous role rationalisation, including post-acquisition overlap, rather than a public restructuring.
*Guidance revisions. ServiceNow raised full-year subscription revenue guidance at the Q1 2026 print (to $15,735–15,775 million) and again at Q2 (to $15,760–15,780 million). FY2026 non-GAAP operating margin guidance moved from 32.0% (January) to 31.5% (April, on Armis dilution) and held at 31.5% (July). FY2026 non-GAAP free cash flow margin guidance moved from 36% (January) to 35% (April) and held at 35% (July). FY2026 non-GAAP subscription gross margin guidance moved from 82% (January) to 81.5% (April) to 81% (July) — a consistent, disclosed drift attributable to hyperscaler mix and accelerating AI adoption.
