ServiceNow beats Q4 with AI governance approach winning enterprise budgets at scale

ServiceNow's Q4 beat - how solving AI's governance bottleneck is winning enterprise budgets

Today ServiceNow announced its Q4 and FY 2025 results, highlighting a year of consistent performance in an industry full of AI noise. The company beat expectations across all topline growth and profitability metrics in Q4, with subscription revenues of $3.47 billion representing 21% year-over-year growth (19.5% in constant currency). For the full year, subscription revenues reached $12.88 billion, also up 21% year-over-year, with total revenues hitting $13.28 billion. Current remaining performance obligations reached $12.85 billion, up 25% year-over-year, while total remaining performance obligations hit $28.2 billion, up 26.5%. The company closed 244 transactions over $1 million in net new annual contract value during Q4, nearly 40% growth compared to last year, and ended the year with 603 customers spending more than $5 million annually, representing approximately 20% year-over-year growth. And sitting down with ServiceNow Chief Product and Operating Officer Amit Zavery ahead of the numbers being released, it's clear that there's a lot of important enterprise context that financial analysts might not address. It became clear during our conversation that ServiceNow is running a very similar playbook to the one that made it successful over the past decade, just adapted for the AI era. The "platform of platforms" approach that allowed ServiceNow to orchestrate workflows across fragmented enterprise systems is now being positioned as the AI Control Tower that orchestrates AI agents across those same fragmented systems. It's a clever approach and one that plays directly to ServiceNow's strengths. While competitors are building departmental AI capabilities or chasing differentiation through model performance or claiming they have the whole stack, ServiceNow is trying to solve the enterprise-wide governance challenge that's actually preventing AI adoption at scale. What used to be "we'll help you get work done across all your systems" is now "we'll help you safely deploy AI across all your systems." I've been writing about ServiceNow's platform advantages for a decade, and this feels like the moment where that investment could help buyers surface that enterprise-wide AI ROI that they are desperately seeking. The platform play adapted for AI Prior to 'AI' as we know it, ServiceNow had positioned itself as the layer that sits above departmental applications and enabled work to flow across them. It wasn't trying to replace your ERP or CRM or HCM - it was the workflow engine that connected them and let employees get things done without navigating multiple systems. That "platform of platforms" approach required deep integrations, a unified data model via the CMDB, and cross-functional workflow capabilities that most vendors couldn't replicate because they'd built departmental solutions. Now ServiceNow is leveraging that integration capability and knowledge for AI. AI Control Tower, launched early last year, positions ServiceNow as the layer that sits above all your AI systems - whether they're from ServiceNow or third parties - and gives you visibility, control, and governance over how those AI agents operate. Zavery explained the value proposition when I asked about how AI Control Tower fits into the broader strategy: We can discover all your AI systems, third party, ServiceNow, it doesn't matter. We're heterogeneous and we'll do that end-to-end. Then we give buyers the ability to manage AI proliferation - not just discover it, but who's doing what? What are AI systems allowed to do? How much are you paying for it? What results did you get? What controls do you have around it? This is important because enterprises aren't going to standardize on a single AI vendor any more than they standardized on a single application vendor. They're going to have AI agents from multiple sources operating across their environment. Someone needs to orchestrate that complexity, and ServiceNow is betting that the same capabilities that let it orchestrate workflows will let it orchestrate AI agents. The technical foundation makes sense. ServiceNow already has the CMDB that maps enterprise assets and their relationships. It already has the integration framework for connecting disparate systems. It already has the workflow engine for coordinating actions across multiple applications. Extending all of that to cover AI agents and their permissions is a natural evolution, not a fundamental rebuild. However, the sell is different. Workflow orchestration was about efficiency and user experience. AI orchestration is about governance and trust. According to Zavery, that shift is important for customers: When we started having that conversation and people started implementing AI Control Tower, they said, 'Now I can open up new agentic use cases. I can start investing in a lot of new things I couldn't before.' The governance infrastructure removes the barrier that, in theory, has been keeping organizations cautious about AI deployment. This aligns with what we've been hearing from CIOs in the diginomica network. They're not struggling to find AI use cases. They're struggling to get past the security challenges and are finding it difficult to establish an answer to an enterprise-wide solution, without backing away from sunk investments. It's worth remembering that AI in isolation will only ever generate limited returns, which is why we are seeing tension in the market around who will ultimately accrue the value. Security acquisitions 2025 was ServiceNow's most aggressive year for M&A to date. It made a number of acquisitions, many of them focused on filling gaps for AI - but perhaps not in areas you might expect. The company announced its intent to acquire Veza for identity security and Armis for $7.75 billion to address cyber exposure management. These aren't just 'AI companies'. They're investments in the specific capabilities ServiceNow needs to credibly claim it can govern AI deployments across the entire enterprise. I asked Zavery about this, particularly whether governance and security were proving to be bottlenecks for AI adoption. His response confirmed what I suspected. Customers were pushing ServiceNow to manage identity and access for AI agents: Customers were asking, 'You're doing all these things...but can you also make sure user identity is managed [at a granular level]? Especially now with non-human identity with agents, because their identities change very fast depending on the use case and request." ServiceNow's security and risk business has also been growing faster than expected, crossing $1 billion in annual revenue a couple of quarters before they'd planned. Zavery said: Security and risk is probably the biggest problem people are facing in AI, and none of these large language models or hyperscalers solve those problems. This is where ServiceNow's platform approach creates some advantages, in theory. If you're orchestrating AI agents across the enterprise, you need comprehensive visibility into what those agents can access, what actions they're authorized to take, and how to audit their decisions. Veza provides the identity governance piece. Armis provides visibility into the full attack surface including operational technology and IoT devices. Combined with ServiceNow's existing CMDB and workflow capabilities, you get something that looks like decent AI governance. As I wrote following the Armis acquisition announcement in December, ServiceNow is systematically answering the question "Why wouldn't you choose ServiceNow?" for enterprise AI management. Each acquisition plugs a capability gap that might otherwise give buyers reason to look elsewhere or force them to cobble together multiple point solutions. The platform play only works if you have comprehensive capabilities. ServiceNow is building that comprehensiveness through acquisition because developing everything internally would take too long - and as Zavery put it, the company has other things to focus on. Enterprise productivity Zavery also pointed to how ServiceNow's platform advantages matter for AI in ways they didn't for traditional applications. I asked him to explain the difference between ServiceNow's "autonomous employees" (multi AI agents working in coordination to complete tasks that replicate what an employee does) and the AI agents other vendors are building. His answer: As a human, you have multiple skills and you can do things. Even though you might be specialized in one area, you understand the context around many other things. We bring in the context of enterprise use cases and 20 years of workflow data. Then he added: A lot of the tools out there are all about employee productivity - I can help you find content, I can summarize this. But when you free that up, it doesn't guarantee that the enterprise will be productive. Can I do this at an enterprise level? This is likely a nod to the departmental application vendors that are surfacing AI in their systems and the likes of Microsoft and Google - Individual productivity tools that might help employees work faster, but they don't necessarily translate to enterprise-level efficiency gains. ServiceNow is arguing you need end-to-end workflow automation with AI embedded throughout, not AI tools bolted onto existing processes. The argument is that when you have cross-functional workflows, a unified data model, and two decades of workflow patterns, you can build AI capabilities that understand enterprise context rather than just departmental tasks. An autonomous employee in ServiceNow can handle a laptop provisioning request that touches IT, procurement, finance, and security because the platform already connects those functions. This is harder for competitors to replicate than you might think. Building a CRM copilot that helps sales reps is straightforward. Building an AI capability that can coordinate actions across CRM, ERP, ITSM, and HCM requires the kind of cross-functional integration that ServiceNow has been building for years. Zavery gave an example of autonomous IT, where ServiceNow eliminates level one support by handling service requests automatically end to end: Maybe ordering a laptop, password reset, login requests, completely end-to-end, done through an autonomous employee. Once we show that, budget shows up. Where the budget actually comes from The platform positioning also helps with something I've been trying to understand about how buyers will consider budget for enterprise AI. Who pays for enterprise AI when there are competing agendas, institutional knowledge, investments and relationships? When I asked Zavery about budget allocation, particularly given that competitors like Salesforce target customer-facing budgets while ServiceNow has IT heritage, his answer revealed how AI spending differs from traditional software purchases: Budget is coming from many angles. CIOs have budget. CISOs have budget. Line of business owners want to make their departments more efficient and AI-first. You're seeing a lot of alignment at the C-suite level that this is an area they want to invest in, as long as you can show them value and great outcomes. This C-suite alignment around AI investment creates opportunities for vendors who can demonstrate enterprise-wide value rather than departmental improvements. ServiceNow's platform approach naturally addresses enterprise-wide challenges because that's what the platform was built to do. You're not pitching point solutions to individual departments. You're pitching governance infrastructure that lets the entire organization deploy AI safely. Partnerships that reinforce This week ServiceNow also announced partnerships with Anthropic, OpenAI, Microsoft, and others alongside the earnings release. On the surface, these look like standard enterprise software announcements - dime a dozen. But Zavery's comments show how the partnership strategy reinforces ServiceNow's platform play rather than threatening it. The core principle is the same as it's always been for ServiceNow: We support any system out there. Any cloud, any data sources, any LLMs, any persona, any industry, any data models. I probably sound like a broken record at this point, but ServiceNow is placing itself at the center of this ecosystem (well, it is trying to) and if it can do that - and convince buyers that governance is key - it sees an opportunity. As CEO Bill McDermott told me last year: We'll have the control tower that works with all those agents. Our agents will control those agents in the form of a business process or an automated workflow. The Anthropic partnership provides a good example of how these partnerships work in the AI era. Claude powers ServiceNow's Build Agent for application development, but customers who prefer different models can choose them. ServiceNow maintains the orchestration layer regardless. Zavery explained they do prompt engineering across multiple LLMs to deliver the same outcomes, but there might be specific use cases where one model works better: Anthropic is pretty good at code generation. They've really been focusing on it. Our Build Agent can benefit from that. But if customers don't want to use Claude and prefer Gemini instead, ServiceNow is fine with that. The value isn't in the model - it's in the orchestration and governance layer. This mirrors exactly how ServiceNow has always approached partnerships. They'll integrate with anyone and support any system, but ServiceNow remains the workflow layer that sits above everything. Now that workflow layer is becoming the AI governance layer, but the strategic logic is identical. Whether this holds up as partners pursue their own enterprise orchestration ambitions is an open question. Microsoft in particular isn't going to hand over AI orchestration to ServiceNow without a fight. But ServiceNow's platform foundation and cross-functional capabilities give it advantages that will be hard for departmentally-focused vendors to replicate quickly. My take What was workflow orchestration across systems is becoming AI orchestration with governance, and that shift appears to be unlocking enterprise budgets. The growth in Now Assist ACV and deals over $1 million and $5 million appear to validate this. If ServiceNow can help solve the enterprise-wide governance challenge that actually determines whether AI gets deployed at scale, it could have a strong hand to play. CIOs might champion AI initiatives, but CISOs control whether those initiatives go into production. ServiceNow is positioning itself to answer the CISO's questions. However, this partnership strategy also has inherent tensions built in. ServiceNow says it is agnostic, supporting any model, any cloud, any system. But the underlying ambition is clearly to own the orchestration layer that sits above everything else. Competitors aren't going to hand over that position, and we're already seeing aggressive responses from Microsoft, Salesforce, and others who recognize what's at stake. For buyers, ServiceNow's platform approach does address real challenges. I'm hearing from CIOs consistently that they need enterprise-wide visibility and governance for AI deployments, not just departmental capabilities. They need answers to questions about control, security, and audit trails before they can move beyond pilots. ServiceNow has built infrastructure to provide those answers, and the platform foundation means those capabilities extend across the enterprise rather than remaining siloed in individual departments. And for buyers, ServiceNow has history with them in this way, way before AI. But the proof remains in production deployments that deliver measurable returns, not impressive demos or strong quarterly results. As Zavery noted, the test is straightforward - does it work, and can you prove it? The next twelve months will be telling.

ServiceNow CFO: AI Deployments 'Driving Real, Measurable Value'

'I want to be direct: Anyone suggesting enterprise software has run its course is not looking at the data. Our ServiceNow platform is more strategically relevant than ever before. We're seeing record deal sizes, expanding customer adoption, and AI deployments that are driving real, measurable value,' says ServiceNow President and CFO Gina Mastantuono. Increased AI adoption and a growing backlog point to continued strong growth for ServiceNow. ServiceNow President and Chief Financial Officer Gina Mastantuono told CRN that the company beat the high end of guidance across all top-line and bottom-line metrics. "I truly believe that results like these come from a powerful combination of relentless innovation and discipline execution," Mastantuono told CRN in an interview ahead of ServiceNow's earnings call Wednesday. "I think it shows that the strength of our business is unwavering and that we truly are one of one company. [Related: ServiceNow CEO McDermott: 'We're Running The Table In CRM'] By "one of one company," Mastantuono referred to ServiceNow CEO Bill McDermott's claim in the past that ServiceNow is in "a market of one" thanks to its development of the Now platform, which he called a "platform of platforms." Mastantuono said ServiceNow's fourth fiscal quarter 2025 shows that the company is accelerating its growth in a number of ways. Total revenue for the quarter, which ended December 31, reached $3.57 billion, up 20.5 percent over that of its fourth fiscal quarter 2024. Subscription revenue grew even faster, 21 percent over last year, to reach $3.47 billion. On a constant currency basis, subscription revenue increased 19.5 percent, which Mastantuono said exceeded guidance by 150 basis points. CRPO, or current remaining performance obligation, which measures the sum of deferred revenue and backlog a company has to deliver in the next 12 months, grew 21 percent over last year, exceeding guidance by 200 basis points, she said. RPO, or remaining performance obligation, a measure of deferred revenue and backlog, reached $28.2 billion, up 22.5 percent, she said. "That strength across the board is really coming from real momentum on the ground," she said. "We're actually accelerating net new business. We have more users on the platform than ever before, and we have deep, expanding adoption across our workflows. [Our backlog] reflects the massive runway ahead. And if you pair that backlog of $28 billion with our $600 billion total addressable market, it reinforces just how early we still are in this growth story." While ServiceNow continues to hire personnel to meet its expanding business, headcount growth is only about half that of its backlog, Mastantuono said. "We're extremely disciplined in how we think about growth," she said. "The other thing that's really important to note is that Now on Now, which is our internal use of our own platform and our own software, is driving significant efficiencies within the organization, especially as we built AI into the platform. And as I've talked about before, about $100 million of savings fell to the bottom line in 2025 alone as a result of the reduction in potential headcount growth because of all the efficiencies that AI is driving. AI is truly driving incredible efficiencies internally, which is helping as we think about continued discipline, margin accretion, as well as best-in-class top-line growth." ServiceNow's focus on AI in its Now platform is also showing strong customer acceptance, Mastantuono said. The company in the quarter closed 244 deals with greater than $1 million in net new ACV, or annual contract value, which she said was up 40 percent over last year. "Customers with $20 million or more in annualized revenue grew over 30 percent," she said. "We run 80 billion workflows every year for our customers. And we're the fastest enterprise software company that ever reached $1 billion, $5 billion, and $10 billion organically at scale." The data shows that AI is driving real business results at ServiceNow, Mastantuono said. "For our customers around the world, Now Assist surpassed $600 million in ACV this year, firmly on track toward our billion-dollar-plus target for 2026," she said. "And as we develop the prescriptive roadmap for agentic deployment for our customers, the pace of AI monetization is accelerating, which is fantastic. We had Now Assist net new ACV in Q4 more than double year-over-year. The number of AI licensed users grew 21 percent, while monthly active users grew 25 percent. We're really excited about what the data is showing about how ServiceNow is AI business is driving real business results and real impact for our customers around the world." ServiceNow's channel partner business is also contributing to that growth as partners continue to grow with the company, Mastantuono said. "Our partners continue to grow with us, and continue to lean in and build much, much stronger businesses with us. ... One of the reasons why we're seeing what I think is pretty incredible AI momentum is our ecosystem. We built a platform that collaborates with all three hyperscalers, all of the big system integrators and channel partners, and the language models. This brings me to two announcements that we made over the last week with Anthropic and OpenAI. What hopefully this is showing is that our relationship in the ecosystem, whether it's our SI (systems integrator) partners, our tech partners, or the hyperscalers, remains extremely strong, and it's all about giving flexibility to our customers. We can connect to any hyperscaler, any software provider, any large language model, and it really gives our customers flexibility and choice, which is a really strong value-add and differentiator for ServiceNow." ServiceNow currently has about $10 billion in cash, Mastantuono said. The company's board of directors recently approved an additional $5 billion under its share repurchase program on top of the $1.5 billion remaining in its current share repurchase authorization and is launching a $2 billion accelerated share repurchase program, she said. "We're driving a very disciplined capital allocation strategy. ... That demonstrates our commitment to what I think is very valid capital deployment, so organic investment first, strategic M&A when it unlocks meaningful TAM (total addressable market), and shareholder returns throughout. ServiceNow's acquisitions in 2025, including acquisitions of Armis for security, Veza for identity security, and Moveworks for agentic AI, do not represent a pivot away from organic growth, Mastantuono said. "They represent an acceleration of it," she said. "We're very focused on acquiring strategic capabilities that, when integrated into our platform, really unlock exponential value, and so we're very excited. You'll continue to see us do the tuck-in acquisitions that we've always been known for. But we're not pivoting away from our organic growth stories. We will always be, first and foremost, an incredible organic innovation and growth company. And we will always look at potential M&A where we think it's going to accelerate value for our customers and value for our shareholders." Looking ahead, ServiceNow said it expects first fiscal quarter 2026 subscription revenue to grow year-over-year by 21.5 percent to reach between $3.65 and $3.66 billion. Full year 2026 subscription revenue is slated to grow by 20.5 percent to 21.0 percent over fiscal 2025 to $15.53 billion to $15.57 billion. "Very strong guidance," Mastantuono said. "Though given our Q4 outperformance, we're very confident in the bold guidance that we put forth in 2026. And so I want to be direct: Anyone suggesting enterprise software has run its course is not looking at the data. Our ServiceNow platform is more strategically relevant than ever before. We're seeing record deal sizes, expanding customer adoption, and AI deployments that are driving real, measurable value."

ServiceNow projects annual subscription revenue above estimates, signals AI strength

Jan 28 (Reuters) - - ServiceNow forecast annual subscription revenue above Wall Street estimates on Wednesday, signaling strong demand for its artificial intelligence-powered software products. The Santa Clara, California-based company is doubling down on AI integration across its platform through partnerships with Claude chatbot-maker Anthropic and ChatGPT parent OpenAI, aiming to fend off growing competition from autonomous AI agents. The company, under its expanded deal with Anthropic, will integrate Claude models more deeply into its products, it said on Wednesday, after signing a similar deal with OpenAI. ServiceNow, which helps enterprise clients automate complex workflows and IT operations, said its board had authorized an additional $5 billion for its share repurchase program, with plans for an imminent $2 billion accelerated share buyback. The results come as the company focuses on spending heavily on mergers and acquisitions, which has pressured its stock. Its shares were down about 28% last year. The company agreed to buy cybersecurity startup Armis for $7.75 billion, marking its biggest-ever deal. It has bought security firm Veza, AI company Moveworks and sales automation platform Logik.ai, formerly known as Logik.io. ServiceNow expects fiscal 2026 subscription revenue to be between $15.53 billion and $15.57 billion, above analysts' average estimate of $15.21 billion, according to data compiled by LSEG. The company said its Moveworks acquisition contributed to its annual subscription revenue growth forecast by about 100 basis points. It forecast first-quarter subscription revenue of $3.65 billion to $3.66 billion, above estimates of $3.57 billion. ServiceNow's fourth-quarter revenue rose 20.5% to $3.57 billion from a year ago, beating estimates of $3.53 billion. Its adjusted profit of 92 cents per share also surpassed estimates of 88 cents. (Reporting by Jaspreet Singh in Bengaluru and Juby Babu in Mexico City; Editing by Shreya Biswas)