It has been about a month since the last earnings report for ServiceNow (NOW Quick QuoteNOW - Free Report) . Shares have lost about 12% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is ServiceNow due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its latest earnings report in order to get a better handle on the important drivers.

NOW Q2 Earnings Beat Estimates, Revenues Rise Y/Y

ServiceNow reported second-quarter 2025 adjusted earnings of $4.09 per share, which beat the Zacks Consensus Estimate by 15.54% and increased 30.7% year over year.

Revenues of $3.22 billion beat the consensus mark by 3.02% and increased 22.4% year over year. At constant currency (cc), revenues increased 21.5% year over year to $3.19 billion.

NOW’s Q2 Top-Line Details

Subscription revenues improved 22.5% year over year, on a reported basis, to $3.11 billion. On a cc basis, revenues increased 21.5% to $3.09 billion.

Professional services and other revenues increased 20% year over year on a reported basis to $102 million and 18% on a cc basis to $101 million.

At the end of the second quarter, the current remaining performance obligations (cRPO) were $10.65 billion, up 21.5% year over year on a cc basis. Remaining performance obligations, on a cc basis, rose 25.5% year over year to $23.3 billion.

ServiceNow had 89 transactions over $1 million in net new annual contract value (ACV) in the second quarter. The company expanded its customer relationships, reaching 528 customers with more than $5 million in ACV at the end of the reported quarter, which represents 19.5% year-over-year growth in customers.

NOW’s Operating Details

In the second quarter, non-GAAP gross margin was 81%, down 160 basis points (bps) on a year-over-year basis. 

Subscription gross margin was 83.2%, contracted 160 bps year over year. Professional services and other gross margins were 13.7% compared with 16.5% reported in the year-ago quarter.

As a percentage of revenues, operating expenses decreased 350 bps on a year-over-year basis to 66.3%.

ServiceNow’s non-GAAP operating margin expanded 230 bps on a year-over-year basis to 29.7%.

AI Innovation Powers Q2 Results

ServiceNow continues to scale its AI-led enterprise transformation with major product launches, strategic partnerships, and targeted acquisitions. NOW launched AI Control Tower and AI Agent Fabric during the second quarter, providing organizations with centralized systems to govern and orchestrate AI agents across functions. 

ServiceNow introduced Core Business Suite, integrating HR, procurement, finance, and legal operations into one AI-powered platform. The Workflow Data Network expanded data capabilities through partner ecosystems for real-time intelligence.

Strategic partnerships strengthened NOW's AI capabilities across multiple sectors. The AWS collaboration launched bi-directional data integration solutions to eliminate enterprise silos. NVIDIA partnership introduced the Apriel Nemotron 15B reasoning model for enhanced AI agent performance. Additional alliances with UKG modernized workforce management, while Cisco integration deepened AI Defense capabilities within AI Control Tower.

ServiceNow's Knowledge event doubled attendance year over year, showcasing major innovations. The data.world acquisition closed during the quarter, enhancing AI agent understanding and enterprise data governance. Notable partnerships included Ferrari for race operations and CapZone Impact Investments for manufacturing modernization, expanding NOW's industry reach.

NOW’s Balance Sheet & Cash Flow

As of June 30, 2025, NOW had cash and cash equivalents and short-term investments of $6.13 billion compared with $6.6 billion as of March 31, 2025. Long-term investments were $4.66 billion.

During the reported quarter, cash from operations was $716 million compared with $1.68 billion in the previous quarter.

ServiceNow generated a free cash flow of $535 million in the reported quarter, down from $1.48 billion reported in the prior quarter.

NOW repurchased roughly 381,000 shares for $361 million. The company has approximately $2.6 billion available for future share repurchases.

NOW’s Provides Q3 & FY25 Guidance

For 2025, NOW expects subscription revenues to be $12.775-$12.795 billion, which suggests a rise of 20% from 2024 on a GAAP basis and 19.5%-20% on a non-GAAP constant currency basis.

ServiceNow expects the non-GAAP subscription gross margin to be 83.5% and the non-GAAP operating margin to be 30.5%. Moreover, the free cash flow margin is expected to be 32%.

For the third quarter of 2025, subscription revenues are projected between $3.26 billion and $3.265 billion, suggesting year-over-year growth in the range of 20%-20.5% on a GAAP basis. At cc, subscription revenues remain flat at 19.5%.

ServiceNow expects the non-GAAP operating margin to be 30.5% in the current quarter, with cRPO growth projected at 18.5% on a GAAP basis and 18% on a non-GAAP basis.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a flat trend in fresh estimates.

VGM Scores

Currently, ServiceNow has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a score of F on the value side, putting it in the fifth quintile for value investors.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

ServiceNow has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.