“And we continue to expect subscription gross margin of 84%, a free cash flow margin of 30%, and GAAP diluted weighted average outstanding shares of 206 million.”

In context

“Gina Mastantuono (CFO): Thank you, Bill. Q2 was another exceptionally strong quarter for ServiceNow. We exceeded the high-end of our guidance range for all of our key performance metrics, delivering robust subscription revenue and CRPO growth while continuing to drive operating margin expansion and very healthy free cash flow. In Q2, subscription revenues were $2.08 billion, growing 25% year-over-year in constant currency, exceeding the high-end of our guidance range by 100 basis points. RPO ended the quarter at approximately $14.2 billion, representing 22.5% year-over-year constant currency growth. Current RPO was approximately $7.2 billion, representing 24% year-over-year constant currency growth, a 150 basis point beat versus our guidance. From an industry perspective, transportation and logistics led the way with over 80% growth in Q2, followed by a very strong growth in education, business and consumer services, energy, utilities, and government. In fact, U.S. Federal had its best Q2 ever, continuing the trend of strong growth over the past several quarters. Our best-in-class renewal rate was 99% in Q2, demonstrating the resilience of our business, as the Now Platform remains a mission-critical part of our customers' operations. With that foundation from which to grow, top line strength in the quarter was further driven by a healthy expansion of our existing customers. We ended the quarter with 1,724 customers paying us over $1 million in ACV, including 45 paying us over $20 million, a 55% increase year-over-year. The Better Together story is continuing to resonate with C-suites, driving larger multiproduct deals, as enterprises are looking to consolidate purchasing with our strategic platforms like ServiceNow. In Q2, 19 of our top 20 deals contained five or more products, with nine of them containing ten or more products. In addition to our cross sales, our upsell motion also remained very strong. ITSM Pro had its strongest growth quarter since 2020, driven by both upsells from the standard SKU and seed expansions from existing customers. Overall, we closed 70 deals greater than $1 million in net new ACV in the quarter, up from 54 a year ago, representing 30% year-over-year growth. What's more, 12 of those deals were over $5 million, of which three were over $10 million. We also saw a strong performance from our industry SKUs, with our telco and technology SKUs closing six deals over $1 million in net new ACV, and our newly launched public sector SKU gaining further momentum, landing another seven-figure deal in the quarter. Turning to profitability, the non-GAAP operating margin was 25%, 200 basis points above our guidance, driven by continued disciplined spend management. Our free cash flow margin was 21%. I would also note that given our path to sustained profitability, in Q2, we recorded a large GAAP income tax benefit, reflecting a $965 million valuation allowance release related to our deferred tax assets in the U.S. We ended the quarter with a robust balance sheet, including $7.5 billion in cash and investments. Given the current macro environment and our strong cash position in May, the Board of Directors authorized the company's first-ever share repurchase program. The new program authorizes the purchase of up to $1.5 billion of common stock. The program's primary objective is managing the impact of dilution. Together, these results continue to demonstrate our ability to drive a strong balance of world-class growth, profitability, and shareholder value. Moving to our outlook. While we continue to prudently factor the evolving macro crosswind into our guidance, our first half outperformance has driven strong momentum as we head into the back half of the year. As a result, we are raising our top line and operating margin guidance. For 2023, we are raising our subscription revenue outlook by $95 million at the midpoint to a range of $8.58 billion to $8.6 billion, representing 24.5% to 25% year-over-year growth or 24% on a constant currency basis. We are raising our full-year operating margin target from 26% to 26.5%. And we continue to expect subscription gross margin of 84%, a free cash flow margin of 30%, and GAAP diluted weighted average outstanding shares of 206 million. For Q3, we expect subscription revenues between $2.185 billion and $2.195 billion, representing 25.5% to 26% year-over-year growth, or 23% to 23.5% on a constant currency basis. We expect CRPO growth of 25.5% or 21.5% on a constant currency basis. We expect an operating margin of 27%, and we expect 206 million GAAP diluted weighted average outstanding shares for the quarter. In conclusion, Q2 was another tremendous quarter of outstanding execution, and we are well positioned for the remainder of the year. Our pipeline remains strong as we've already seen $0.5 billion of pipeline generation from our Knowledge 2023 event in May. The week-long event of keynote, panels, and customer discussions showcase the power and the endless possibilities achievable through ServiceNow workflows, along with the incremental opportunities unlocked with our Gen AI roadmap. Over $3 billion in pipeline attended with an over 50% increase in executive program attendees. The response has been overwhelming. Our intelligent platform for end-to-end digital transformation uniquely positions us to seize the opportunities in front of us as we continue to deliver durable top line growth and margin expansion on our journey to becoming the defining enterprise software company in the 21st Century. Bill and I would also like to extend a heartfelt thank you to our employees around the globe for their continued hard work and dedication. It's their commitment to excellence that has propelled ServiceNow into the Fortune 500, and we couldn't be prouder. This distinction is a testament to our win as a team of core values and a culmination of the outstanding results we passionately delivered together in service to our customers, partners, and investors. With that, I'll open it up for Q&A.”