Release Date: April 23, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- ServiceNow Inc (NOW, Financial) reported its biggest Q1 ever for net new ACV, with subscription revenue growing 20% year over year in constant currency.
- The company achieved an operating margin of 31%, which was approximately 100 basis points above their guidance.
- ServiceNow Inc (NOW) saw a significant increase in large deals, with 72 deals greater than a million in net new ACV, up from 63 a year ago.
- The company reported strong growth in its AI initiatives, with the number of Pro Plus deals more than quadrupling year over year.
- ServiceNow Inc (NOW) raised its guidance for the full year 2025, reflecting strong demand and a healthy pipeline.
Negative Points
- There is uncertainty in the global economy, which could impact future performance and decision-making among enterprise customers.
- The company is facing potential risks from geopolitical factors, including tariffs and trade negotiations.
- ServiceNow Inc (NOW) acknowledged the challenges in the public sector, with federal agencies navigating changes from tightening budgets.
- Despite strong performance, the company is taking a conservative approach to its full-year outlook due to potential macroeconomic headwinds.
- There is a risk of deal elongations or delays in decision-making among enterprise customers due to the uncertain environment.
Q & A Highlights
Q: Gina, when considering your guidance, what are you seeing in your enterprise customers? Is there any delay in decision-making or elongation in the sales cycle, and have you factored any potential risks into the guidance?
A: Gina Mastantuono, CFO: We conducted a rigorous analysis of our business, considering potential impacts from the current geopolitical environment. Demand remains strong, and our guidance reflects real-world complexity with a healthy degree of conservatism. Our platform is a deflationary tool that customers lean into during uncertainty, setting us up for success for the remainder of the year.
Q: What does the Moveworks acquisition allow ServiceNow to execute that couldn't be done with the existing platform?
A: Amit Zavery, President, COO, and CPO: Moveworks brings AI expertise and a unified user experience, including enterprise search, which complements ServiceNow's strengths in understanding intent and completing tasks. This acquisition accelerates our roadmap and broadens our solution set, enhancing our conversations with customers on AI.
Q: How grand are your aspirations in the CRM market, and how does this align with your platform's capabilities?
A: William McDermott, CEO: Our ambitions in CRM go beyond being a system of record. We aim to reimagine sales and order management with a fully integrated AI-powered front office, connecting sales and service to streamline operations and improve time to revenue. Our approach is to make CRM faster, smarter, and purpose-built for modern business.
Q: Can you clarify the 30% growth in the public sector and how it reflects in your guidance for the year?
A: Gina Mastantuono, CFO: The 30% growth refers to net new ACV in the quarter. While we are pleased with the Fed team's execution, we have incorporated some conservatism in our guidance due to the uncertain federal environment. However, the mid- and long-term opportunities in the federal sector remain strong.
Q: How do you view the adoption of Pro Plus through the year, and where does it rank in terms of growth initiatives?
A: Amit Zavery, President, COO, and CPO: Pro Plus adoption has accelerated, with customers using Now Assist to improve efficiency. We expect this trend to continue, driven by AI agentic capabilities. Pro Plus is a key growth initiative, alongside our core workflows, CRM, and other areas, contributing to our 20% CAGR target through 2026.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
