ServiceNow Inc Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Alex Zukin - Wolfe Research LLC - Analyst : Hey guys, congratulations on another clearly elite quarter. Bill some of your peers, I think it's unclear if the demand environment has improved much maybe or changed much since the start of the year. But something seems different in the way that you guys are executing. Maybe you can you just talk about what's driving this seemingly better than expected execution. Is it something that's changed in the traction of the AI product? Is it something that's changed in the competitive field? Maybe just what's different this year, first half in spite of a difficult backdrop that's allowing you to maintain this level of execution.

Question: Alex Zukin - Wolfe Research LLC - Analyst : Super clear. Maybe, Gina, just quickly one for you. There's a lot of anxiety. I know from the investor community about DOGE, about federal activity in general in the public sector. It seems like it delivered to your expectations. But maybe can you give us a flavor for the pipeline, the conservatism in the numbers for Q3 and how we should think about that in the back half? Thank you guys.

Question: Mark Murphy - JPMorgan Chase & Co - Analyst : Thank you so much, Bill, with the AI control Tower, I think you said that it was beating targets for the full year already and it's only July. It's hard to comprehend. Are you seeing signs that customers might use that as the central control plane for all of their agents, including third-party agents from OpenAI and Microsoft and others. And then the -- if the Nemotron LLM, the one that you're building in conjunction with NVIDIA, if that succeeds, do you think the ServiceNow agents can offer better reasoning and maybe start to replace the third-party agents so they don't spread around like spare parts, I think that was your term? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 23, 2025 / 9:00PM, NOW.N - Q2 2025 ServiceNow Inc Earnings Call

Question: Mark Murphy - JPMorgan Chase & Co - Analyst : Thank you so much and congratulations.

Question: Brad Zelnick - Deutsche Bank AG - Analyst : Great. Thank you so much. Bill, ServiceNow, you guys have outlined very bold ambitions within front office workflows. Now with Logik.ai closed, can you talk more about the most immediate opportunities whether it's service, sales or marketing? And where do you see the lowest hanging fruit right ahead of you? Thank you.

Question: Brad Zelnick - Deutsche Bank AG - Analyst : Awesome stuff. Congrats to you both and the whole team. Thank you.

Question: Kash Rangan - Goldman Sachs Group Inc - Analyst : Great honor to follow the great Brad Zelnick. Bill management team, it's impressive that [$12 billion-plus] revenue run rate scale UTIs then put up 22% growth. So that's a great accomplishment. Bill, I wanted to ask you and anybody else want to chime in, that's great, too. There is a notion that this infrastructure build-out taking up on by the hyperscalers to help propel the open AI and topic models. This consumed a lot of capital and arguably, a lot of IT budgets as well. And that the lot of the cycle goes, the more the question becomes what to make of enterprise software since you are one of the -- you want to be the DESCO the 21st century. I'm curious to get your thoughts on what is at the end of the day, the core asset of ServiceNow that will allow the company to prosper in the world of AI when there is great unknowns about what is magical, we don't know anything about the AI, but it's going to medically do CRM. It's going to automate everything by itself of beating the need for some critical technologies that we've come to expect to be the foundational aspect of the softness. I'm sure you have a very different viewpoint being out there in the industry, but I'm curious to get your updated take on their thesis. Thank you so much.

Question: Kash Rangan - Goldman Sachs Group Inc - Analyst : Exemplary. Thank you so much.

Question: Karl Keirstead - UBS - Analyst : Oh thank you, Bill, I'm just wondering if you saw any even incremental change in broadly the selling environment in 2Q. What I'm getting at is perhaps three months ago in the midst of fairly historically high level of customer uncertainty about macro tariffs, maybe that resulted in some hesitation. And perhaps with the storm passing, the environment got a little bit better in May, June. I don't want to put words in your mouth, but I'd love to hear you describe how that demand environment changed, if at all? Thanks so much.

Question: Karl Keirstead - UBS - Analyst : Got it. Helpful, Bill. Thanks.

Question: Matthew Hedberg - RBC Capital Markets Inc - Analyst : Great, thanks for taking my questions. Congrats from me as well. The success with Pro Plus is certainly stunning and analysis ACV target is something that obviously we still all think about from Analyst Day. I'm curious, as you've started to see some early consumption adoption with analysis pack, can you talk about like how those are resonating with customers, how they're using them and how you might think that revenue source could grow?

Question: Matthew Hedberg - RBC Capital Markets Inc - Analyst : Congrats.

Question: Keith Weiss - Morgan Stanley - Analyst : Excellent. Thank you guys for taking the question and congratulations on another really solid quarter from ServiceNow overall. First question for Gina more on the margin side of the equation, outperformed really nicely in Q2 on overall operating margins. Both you and Bill are talking about some would seem like pretty significant productivity enhancements and productivity gains in engineering and sales productivity, yet the full year operating margin guide remains stable at 32% -- 30.5%, sorry. Is there incremental investments that you guys are making perhaps in the like sales engineers to get people up and running analysis? Or are there timing differences that we should be aware of? Or is it just conservatism in the guidance that more of that productivity gain doesn't flow through into the full year operating marketing?

Question: Keith Weiss - Morgan Stanley - Analyst : Got it. And those technical engineers that you're talking about, we sort from other vendors like SAP last night I was talking about a higher level of like engineering in the customer necessary to get people up on AI. Salesforce talking about similar dynamics. Is the cost of sale for AI just hires? Does it require you guys to be -- have more engineers like on site to help people understand agenetic, understand how to get their data together, understand all the steps necessary to actually make this work?

Question: Derrick Wood - TD Cowen - Analyst : Great, thanks. Gina, I had 2% upside to your revenue guide is pretty high relative to historic trends. Anything to call out on what drove such robust upside. Did you have a higher self-hosted mix? Was there better linearity that some part of the business come in much better than expected. And then the jump up in mix from technology workflows was pretty notable. Can you unpack what drove that? And if you think that was more onetime or a start to a new trend? Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 23, 2025 / 9:00PM, NOW.N - Q2 2025 ServiceNow Inc Earnings Call

Question: Derrick Wood - TD Cowen - Analyst : Thank you.

Question: Mike Cikos - Needham & Company LLC - Analyst : Great, thanks for taking the questions here guys. I just -- it's impressive to see the results here, and I know we're talking about a massive amount of innovation for the platform. We're talking about RaptorDB, what's happening with Now Assist. I'd just be curious to get a sense. Can you help unpack, I guess, new logos coming to the ServiceNow platform? Are you in any way seeing an increased volume of enterprises voting your way, just given this innovation and what you guys are tackling on the AI front?

Question: Mike Cikos - Needham & Company LLC - Analyst : That's great to hear. And maybe just for a quick follow-up. I know in the prepared remarks, Bill had also cited this this now next AI program. Can you just elaborate on that? Is there any additional hiring for that engineering team that we should anticipate? I'm assuming if there is, it's in the guide, but does that touch on enterprises versus commercial versus what we were just talking about. Any color on that program would be helpful.

Question: Gregg Moskowitz - Mizuho Securities USA LLC - Analyst : Great, thank you for taking the question. Truly remarkable now with this momentum that you guys are exhibiting. Maybe switching gears a bit. There have been several sales leadership changes at ServiceNow for the past few months or so in the US, Europe and APJ. Bill, how are you feeling

Question: Gregg Moskowitz - Mizuho Securities USA LLC - Analyst : Terrific. Thanks, Bill.

Question: Brad Sills - Bank of America - Analyst : Oh great, thank you so much. I wanted to ask a question about the business mix across the 3 major line items here. It's been pretty consistently in that low 50s for technology, call it, 30-ish for CRM and industry and core business workflows and in the mid-high teens for creator. I wonder if the analysis cycle with agents, could that shift the business materially in one direction or the other. In other words, could that bring you into workflows outside of IT in a more meaningful way? Or do you see that balance as kind of consistent with where it is today over time as the agent cycle unfolds? Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 23, 2025 / 9:00PM, NOW.N - Q2 2025 ServiceNow Inc Earnings Call

Question: Brad Sills - Bank of America - Analyst : Great. Thank you so much.

Question: Peter Weed - Bernstein - Analyst : Thank you for putting me in. Obviously, a fantastic performance. And that, I guess, leads to kind of one of my top of mind topics Gina, you talked about remaining judicious on budget and having capacity to invest where needed. I think over the last few quarters, the one area of head count that has been more modestly invested in sales and marketing. And I believe some of that was leading capacity to bring in the sales and Moveworks when that closes. Is there a point at which you would trigger bringing in and hiring more aggressively if you were worried about Moveworks not closing or that deal getting pushed out further and further? Because there seems like there's so much opportunity ahead that you want to make sure you've got ramped reps in the field. Like how are you thinking about that operational decision and when you might need to be bringing in more head count there?

Question: Peter Weed - Bernstein - Analyst : A fantastic momentum and thank you for the clarification and it's exciting the investment going on.