10-Q · April 22, 2026
ServiceNow reported quarterly revenue of $3,770 million, up 22% year-over-year, driven by subscription growth; non-GAAP free cash flow was $1,665 million (up 13%). Gross margin and professional services gross loss…
Earnings analysis · 10-Q
NOW earnings analysis
Filed July 22, 2026 · Our reading of the company's report
The latest report
ServiceNow delivered Q2 revenue of $3.987 billion, up 24% year over year and about 6% sequentially, while non-GAAP EPS of $0.90 exceeded the $0.76 consensus estimate. Demand indicators remained robust, with $29.0…
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ServiceNow delivered Q2 revenue of $3.987 billion, up 24% year over year and about 6% sequentially, while non-GAAP EPS of $0.90 exceeded the $0.76 consensus estimate. Demand indicators remained robust, with $29.0 billion of RPO and 21% year-over-year growth in both RPO and cRPO. The principal offset is substantial GAAP-margin pressure: gross margin declined to 71% from 77% and operating margin fell to 4.1% from 11.1%, driven by cloud capacity, acquisition-related amortization, services investment and higher operating costs. Liquidity remains ample at $6.7 billion of cash and marketable securities, but the Armis-related financing added $4.0 billion of notes and $2.1 billion of commercial paper.
Gross and operating margin
How much of each revenue dollar the business keeps.
One point per quarterly or annual filing. Both margins are shares of that report's revenue.
From revenue to operating profit
Where each $100 of revenue went in this report.
Cost of sales, operating expenses, and what remained. Figures are rounded to whole dollars.
Where revenue came from
The business segments reported by the company.
Shares of the segments disclosed in this filing, largest first.
How we read each report
Our analysis across the last few reports.
Our model's reading of each filing, not the share price or the market's reaction. Annual and quarterly reports each occupy one position.
Reported figures
- Earnings per share
- $0.9
What stood out
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Revenue grew 24% and adjusted EPS beat
Q2 revenue was $3.987 billion, up $772 million (24%) from $3.215 billion a year earlier and up approximately $217 million (6%) from $3.770 billion in Q1 2026. Non-GAAP diluted EPS of $0.90 exceeded the $0.76 consensus estimate.
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Subscription growth remained the core driver
Subscription revenue grew $764 million, or 25%, to $3.877 billion, while professional services and other revenue increased $8 million, or 8%, to $110 million. Subscription represented 97% of total revenue.
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Backlog and large-customer base expanded
RPO reached $29.0 billion at June 30, 2026, with 46% current; both RPO and cRPO rose 21% year over year. Customers with more than $5 million of ACV increased to 658 from 533.
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GAAP profitability compressed sharply
GAAP gross margin was 71%, down from 77% a year ago and approximately 75% in Q1. GAAP operating income was $162 million, down 55% from $358 million, producing a 4.1% operating margin versus 11.1% a year ago and about 13.3% in Q1.
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Cash generation remained strong despite costs
For the first six months, operating cash flow was $2.257 billion, down 6% year over year, while non-GAAP free cash flow rose 14% to $2.299 billion. Capital expenditures were $255 million, equal to roughly 3.3% of six-month revenue of $7.757 billion.
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Management signals further gross-margin pressure
Management expects 2026 subscription gross margin to decline as third-party cloud usage and acquired-intangible amortization grow. Q2 subscription gross margin fell to 73% from 80%, while professional-services gross margin moved to negative 26% from positive 3%.
What to watch
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Cloud and acquisition costs pressure margins
Cost of revenue grew 61% to $1.169 billion, materially faster than 24% revenue growth, reducing total gross margin to 71% from 77%. Management expects subscription cost of revenue to rise as a percentage of revenue during 2026.
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Acquisition financing increases leverage exposure
Debt and short-term funding increased following acquisition financing: the company issued $4.0 billion of senior notes and had $2.1 billion of commercial paper outstanding at June 30, 2026, at a 3.98% weighted-average rate and 81-day weighted-average remaining term.
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Acquisition spending reduced cash balance
Six-month investing cash outflow increased to $7.105 billion from $640 million, primarily reflecting an $8.700 billion increase in cash used for business combinations. Operating cash flow declined $136 million to $2.257 billion over the same period.
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Higher and volatile tax rate weighs on earnings
The effective tax rate increased to 32% from 18%, and Q2 income-tax expense rose 63% to $140 million. Management says tax obligations may fluctuate further as Armis is integrated into its corporate structure and intercompany arrangements.
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No formal risk-factor update; macro exposure remains
The company states there were no material changes to risk factors from its January 29, 2026 Form 10-K; however, it continues to monitor macroeconomic uncertainty, including interest rates, inflation, tariffs and global conflicts. International revenue was 37% of Q2 revenue.
Management's outlook
The 10-Q provides no quantitative revenue or EPS guidance. Management expects 2026 subscription and professional-services revenue to increase in absolute dollars and remain relatively flat as a percentage of revenue; it expects subscription gross margin to decrease, while sales and marketing expense should decline slightly as a percentage of revenue.
Earlier filings 4
10-Q · April 23, 2025
ServiceNow reported solid Q1 results with revenues of $3,088 million, up 18.6% year-over-year (Q1 2024: $2,603 million). Gross margin was 78.9% while operating margin expanded to 14.6%; diluted EPS was $2.20 and…
10-K · January 30, 2025
ServiceNow reported strong full-year 2024 results driven by subscription growth and expanding RPO, with total revenues of $10.984 billion, GAAP diluted EPS of $6.84 and free cash flow of $3.455 billion. RPO increased to…
10-Q · October 24, 2024
ServiceNow reported strong Q3 results with revenues of $2,797 million (up $509 million YoY) and diluted EPS of $2.07 (vs $1.17 prior year). Operating profit and margins expanded materially (income from operations $418…
This is our reading of a public filing, not the filing itself. Analysis can contain errors; check the source document for full context.