NOW 4Q25: Healthy but not Enough

Same old story not seeing inflection

Service Now delivered another steady quarter in 4Q25 without introducing anything meaningfully new to overturn the market’s bearish narrative. Following the 3Q25 pull-forward, the 4Q organic capo beat was the smallest over the past year. While management emphasized that AI product bookings were strong and ahead of internal expectations, 1Q26 and FY26 revenue guidance was broadly in-line with Street expectations. FY26 gross margin guidance came in below expectations given higher AI mix, partially offset by operating leverage at the operating profit line. Overall, we maintain a cautious stance on NOW and the broader application Maas group.

4Q25 results: skinnier beat than expected

• Subscription revenue grew +19.5% Oy cc, in-line with Street expectations.

• capo up +21% Oy on cc, including ~1ppt contribution from the Move works acquisition; organic capo up +20% Oy cc, a ~1ppt beat vs guidance—its smallest beat in the past year (vs a ~2.5ppt beat in 3Q25 driven by pull-forward; 4Q did not benefit from meaningful early renewals).

• GPM declined sequentially to ~80%; however, adj. OPM slightly exceeded expectations at ~31%, highlighting improved internal operating efficiency.Large-deal execution remained healthy: 244 net-new ACV deals >$1m in 4Q (+~40% Oy), including 7 deals >$10m.

• Data Fabric, Raptor, and security products were the most notable incremental drivers among newer offerings; the CRM module continued to strengthen and compete more directly with peers.

• Federal was weaker than expected in 4Q due to the U.S. government shutdown, but management expects Federal NNACV to return to growth in 2026.

1Q26 and FY26 guidance in-line