ServiceNow, Inc. 2025 Annual Report (10-K) Summary
Business Context and Reporting Period
This summary covers ServiceNow, Inc.'s fiscal year ended December 31, 2025. ServiceNow operates a cloud-based AI Platform designed to govern, secure, and manage artificial intelligence while digitalizing and streamlining enterprise workflows. The company serves approximately 8,700 customers globally, with a significant portion of revenue derived from enterprise and government sectors. In December 2025, the company executed a 5-for-1 stock split, with all share and per-share data in this report retroactively adjusted.
Key Financial Metrics
| Metric | 2025 | 2024 | Change |
|---|---|---|---|
| Total Revenue | $13.28 billion | $10.98 billion | +21% |
| Subscription Revenue | $12.88 billion | $10.65 billion | +21% |
| Gross Profit | $10.30 billion | $8.70 billion | +18% |
| Gross Margin | 78% | 79% | -100 bps |
| GAAP Operating Income | $1.82 billion | $1.36 billion | +34% |
| Net Income | $1.75 billion | $1.43 billion | +23% |
| Operating Cash Flow | $5.44 billion | $4.27 billion | +28% |
| Free Cash Flow (Non-GAAP) | $4.64 billion | $3.46 billion | +34% |
| Debt (2030 Notes) | $1.50 billion | $1.50 billion | — |
| Cash & Investments | $10.10 billion | $9.90 billion | +2% |
Key Business Metrics:
- Remaining Performance Obligations (RPO): $28.2 billion (up 27% YoY), with 46% expected to be recognized in the next 12 months.
- Customers with ACV > $5M: 603 (up from 502 in 2024).
- Renewal Rate: 98% (consistent with prior years).
Material Changes vs. Prior Period
- Revenue Growth: Driven by increased purchases from new and existing customers, particularly in subscription services. International revenue remained 37% of total revenue.
- Acquisitions: Completed the acquisition of Moveworks, Inc. (enterprise search/virtual agent) for $2.4 billion and Logik.io Inc. (CPQ solution) for $506 million. These deals significantly increased goodwill and intangible assets.
- Cost Structure: Cost of subscription revenues increased 32% due to higher headcount and data center capacity costs. Stock-based compensation rose 12% to $1.96 billion.
- Tax Rate: Effective tax rate increased to 23% from 18% in 2024, influenced by the mix of earnings and the enactment of the "One Big Beautiful Bill Act" (H.R. 1) in July 2025.
Guidance, Outlook, and Risks
Outlook: Management expects 2026 subscription revenue to increase in absolute dollars but remain relatively flat as a percentage of total revenue. Gross margins are expected to decrease slightly due to third-party cloud service usage and amortization of acquired intangibles. Operating expenses are projected to increase in absolute terms but decrease slightly as a percentage of revenue due to leverage.
Capital Allocation: The Board authorized an additional $5.0 billion in share repurchases in January 2026. As of December 31, 2025, $1.4 billion remained available under the prior authorization.
Risks and Contingencies:
- Government Investigation: The company is cooperating with the Department of Justice regarding an internal investigation into a potential conflict of interest involving the hiring of a former U.S. Army official. The President and COO resigned in July 2024 as a result of policy violations identified in this investigation.
- AI Regulation: Evolving laws such as the EU AI Act and data privacy regulations may increase compliance costs and restrict platform optimization.
- Acquisition Integration: Risks associated with integrating Moveworks and Logik.io, including potential goodwill impairment or failure to realize synergies.
- Geopolitical & Economic: Exposure to foreign currency fluctuations and global economic uncertainty affecting customer spending.
Investor Verification Checklist
- Acquisition Accounting: Verify the final valuation of intangible assets (specifically developed technology) for Moveworks and Logik.io, as these are subject to measurement period adjustments.
- Government Contract Exposure: Monitor the outcome of the DOJ investigation regarding the former COO and its potential impact on future government contracting eligibility.
- Margin Compression: Track the trend in subscription gross margins against the backdrop of increasing third-party cloud costs and amortization expenses from recent M&A.
- Stock-Based Compensation: Assess the trajectory of SBC as a percentage of revenue, which remains a significant expense driver (15% of revenue in 2025).
- Debt Covenants: Review compliance with covenants related to the $1.5 billion 2030 Notes, particularly regarding future indebtedness and asset dispositions.