NOW Q2 Earnings Beat Estimates, Revenues Rise Y/Y, Shares Rise

ServiceNow NOW reported second-quarter 2025 adjusted earnings of $4.09 per share, which beat the Zacks Consensus Estimate by 15.54% and increased 30.7% year over year.Revenues of $3.22 billion beat the consensus mark by 3.02% and increased 22.4% year over year. At constant currency (cc), revenues increased 21.5% year over year to $3.19 billion.ServiceNow, Inc. Price and Consensus ServiceNow, Inc. price-consensus-chart | ServiceNow, Inc. QuoteNOW’s Q2 Top-Line DetailsSubscription revenues improved 22.5% year over year, on a reported basis, to $3.11 billion. On a cc basis, revenues increased 21.5% to $3.09 billion.Professional services and other revenues increased 20% year over year on a reported basis to $102 million and 18% on a cc basis to $101 million.At the end of the second quarter, the current remaining performance obligations (cRPO) were $10.65 billion, up 21.5% year over year on a cc basis. Remaining performance obligations, on a cc basis, rose 25.5% year over year to $23.3 billion.ServiceNow had 89 transactions over $1 million in net new annual contract value (ACV) in the second quarter. The company expanded its customer relationships, reaching 528 customers with more than $5 million in ACV at the end of the reported quarter, which represents 19.5% year-over-year growth in customers.AI Innovation Powers Q2 ResultsServiceNow continues to scale its AI-led enterprise transformation with major product launches, strategic partnerships, and targeted acquisitions. NOW launched AI Control Tower and AI Agent Fabric during the second quarter, providing organizations with centralized systems to govern and orchestrate AI agents across functions. ServiceNow introduced Core Business Suite, integrating HR, procurement, finance, and legal operations into one AI-powered platform. The Workflow Data Network expanded data capabilities through partner ecosystems for real-time intelligence.Strategic partnerships strengthened NOW's AI capabilities across multiple sectors. The AWS collaboration launched bi-directional data integration solutions to eliminate enterprise silos. NVIDIA partnership introduced the Apriel Nemotron 15B reasoning model for enhanced AI agent performance. Additional alliances with UKG modernized workforce management, while Cisco integration deepened AI Defense capabilities within AI Control Tower.ServiceNow's Knowledge event doubled attendance year over year, showcasing major innovations. The data.world acquisition closed during the quarter, enhancing AI agent understanding and enterprise data governance. Notable partnerships included Ferrari for race operations and CapZone Impact Investments for manufacturing modernization, expanding NOW's industry reach.NOW’s Operating DetailsIn the second quarter, non-GAAP gross margin was 81%, down 160 basis points (bps) on a year-over-year basis. Subscription gross margin was 83.2%, contracted 160 bps year over year. Professional services and other gross margins were 13.7% compared with 16.5% reported in the year-ago quarter.As a percentage of revenues, operating expenses decreased 350 bps on a year-over-year basis to 66.3%.ServiceNow’s non-GAAP operating margin expanded 230 bps on a year-over-year basis to 29.7%.NOW’s Balance Sheet & Cash FlowAs of June 30, 2025, NOW had cash and cash equivalents and short-term investments of $6.13 billion compared with $6.6 billion as of March 31, 2025. Long-term investments were $4.66 billion.During the reported quarter, cash from operations was $716 million compared with $1.68 billion in the previous quarter.ServiceNow generated a free cash flow of $535 million in the reported quarter, down from $1.48 billion reported in the prior quarter.NOW repurchased roughly 381,000 shares for $361 million. The company has approximately $2.6 billion available for future share repurchases.NOW’s Provides Cautious Q3 & FY25 GuidanceFor 2025, NOW expects subscription revenues to be $12.775-$12.795 billion, which suggests a rise of 20% from 2024 on a GAAP basis and 19.5%-20% on a non-GAAP constant currency basis.ServiceNow expects the non-GAAP subscription gross margin to be 83.5% and the non-GAAP operating margin to be 30.5%. Moreover, the free cash flow margin is expected to be 32%.For the third quarter of 2025, subscription revenues are projected between $3.26 billion and $3.265 billion, suggesting year-over-year growth in the range of 20%-20.5% on a GAAP basis. At cc, subscription revenues remain flat at 19.5%.ServiceNow expects the non-GAAP operating margin to be 30.5% in the current quarter, with cRPO growth projected at 18.5% on a GAAP basis and 18% on a non-GAAP basis.Zacks Rank & Stocks to ConsiderServiceNow currently has a Zacks Rank #3 (Hold).Lam Research LRCX, Enovix ENVX and Meta Platforms META are some better-ranked stocks that investors can consider in the broader Zacks Computer and Technology sector.Meta Platforms shares have returned 22% year to date. The social-networking giant is scheduled to release second-quarter 2025 results on July 30. Meta Platforms sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. Lam Research shares have surged 34.4% year to date. This wafer fabrication equipment and services provider is scheduled to release fourth-quarter fiscal 2025 results on July 30. Lam Research currently has a Zacks Rank #2 (Buy).  Enovix shares have surged 33.9% year to date. The silicon-anode battery provider is set to report its second-quarter 2025 results on July 31. Enovix has a Zacks Rank #2.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.5% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Lam Research Corporation (LRCX): Free Stock Analysis Report ServiceNow, Inc. (NOW): Free Stock Analysis Report Meta Platforms, Inc. (META): Free Stock Analysis Report Enovix Corporation (ENVX): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks