Enterprise workflow software maker ServiceNow (NYSE: NOW) met Wall Street’s revenue expectations in Q1 CY2025, with sales up 18.6% year on year to $3.09 billion. Its non-GAAP profit of $4.04 per share was 5.4% above analysts’ consensus estimates.
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ServiceNow (NOW) Q1 CY2025 Highlights:
- Revenue: $3.09 billion vs analyst estimates of $3.08 billion (18.6% year-on-year growth, in line)
- cRPO (current remaining performance obligations) and RPO (remaining performance obligations) both exceeded expectations
- Subscription Revenue: $3.00 billion vs analyst estimates of $3.00 billion (20% year-on-year growth in constant currency, in line)
- Adjusted Operating Profit: $953 million vs analyst estimates of $928 million (2.7% beat)
- Adjusted EPS: $4.04 vs analyst estimates of $3.83 (5.4% beat)
- The company raised subscription revenue guidance for the full year of $12.66 billion at the midpoint
- Operating Margin: 14.6%, up from 12.8% in the same quarter last year
- Free Cash Flow Margin: 47.8%, up from 46.7% in the previous quarter
- Market Capitalization: $158.7 billion
“ServiceNow’s position as the platinum standard for enterprise-grade AI drove these outstanding first quarter results,” said ServiceNow Chairman and CEO Bill McDermott.
Company Overview
Founded by Fred Luddy, who coded the company's initial prototype on a flight from San Francisco to London, ServiceNow (NYSE: NOW) is a software provider helping companies automate workflows across IT, HR, and customer service.
Automation Software
The whole purpose of software is to automate tasks to increase productivity. Today, innovative new software techniques, often involving AI and machine learning, are finally allowing automation that has graduated from simple one- or two-step workflows to more complex processes integral to enterprises. The result is surging demand for modern automation software.
Sales Growth
A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last three years, ServiceNow grew its sales at a decent 22.4% compounded annual growth rate. Its growth was slightly above the average software company and shows its offerings resonate with customers.
This quarter, ServiceNow’s year-on-year revenue growth was 18.6%, and its $3.09 billion of revenue was in line with Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 18.7% over the next 12 months, a deceleration versus the last three years. We still think its growth trajectory is attractive given its scale and indicates the market is forecasting success for its products and services.
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Customer Acquisition Efficiency
The customer acquisition cost (CAC) payback period measures the months a company needs to recoup the money spent on acquiring a new customer. This metric helps assess how quickly a business can break even on its sales and marketing investments.
It’s relatively expensive for ServiceNow to acquire new customers as its CAC payback period checked in at 54.9 months this quarter. The company’s slow recovery of its sales and marketing expenses indicates it operates in a competitive market. A silver lining is that once it acquires its customers, they typically don’t leave and increase their spending - a sign of high switching costs. 
Key Takeaways from ServiceNow’s Q1 Results
This was a strong quarter, with cRPO (current remaining performance obligations) and RPO (remaining performance obligations) both beating. Although reported revenue just met expectations, profitability outperformed, leading to beats for adjusted operating income and adjusted EPS. Looking ahead, the company raised subscription revenue guidance for the full year, which is an encouraging sign. The stock traded up 9% to $887.71 immediately following the results.
Should you buy the stock or not? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.
