“We continue to expect subscription gross margin of 83.5%, operating margin of 30.5%, free cash flow margin of 32%, and GAAP diluted weighted average outstanding shares of 209 million.”

In context

“Gina Mastantuono (CFO): Thank you, Bill. Q1 was a quarter of relentless execution in a dynamic market. We beat the high end of our guidance across all top-line and profitability metrics once again. The team outperformed net new ACV goals, delivering a significant CRPO beat versus our guidance. Our use of AI internally also continues to drive meaningful OpEx efficiencies yielding strong profitability and free cash flow. An outstanding performance across the board. Q1 subscription revenues were $3.005 billion, growing 20% year over year in constant currency, slightly above the high end of our guidance range. These are strong results, especially when factoring in an unexpected shift of some on-prem US federal deals to hosted in the quarter, which impacts the timing of revenue recognition. RPO ended the quarter at approximately $22.1 billion, representing 25.5% year over year constant currency growth. Current RPO was $10.31 billion, representing 22% year over year constant currency growth, a 150 basis point beat versus our guidance. From an industry perspective, manufacturing delivered a standout performance growing net new ACV over 100% year over year. Healthcare and life sciences had a great quarter going over 70% year over year. Government also saw strength led by the US Federal which exceeded expectations in the quarter. Our renewal rate remained best in class at 98%, underscoring the consistent value that ServiceNow delivers to our customers. The strategic importance of the NOW platform continues to grow with 508 customers now generating over five million in ACV. Additionally, the number of customers contributing $20 million or more in ACV increased by nearly 40% year over year. Due to the continued momentum in large enterprise deals, we closed 72 deals greater than a million in net new ACV in the quarter. Among them, nine deals were over five million. In Q1, 19 of our top 20 deals included five or more products. The growing volume of large deals highlights the better together value of our portfolio. Our Now Assist net new ACV today can beat expectations once again. As Bill noted, the number of Pro Plus deals more than quadrupled year over year. This included 39 deals with three or more Now Assist products, illustrating how customers are embracing our intelligent platform strategy and deploying AI across multiple workflows. What's driving that? ICSM Plus was included in 15 of our top 20 deals. ITOM Plus net new ACV was up nearly 70% quarter over quarter. SecOps Plus quadrupled net new ACV quarter over quarter. Creator Plus average deal size is tripled quarter over quarter. The list goes on and on. And I'd remind you, that's off of Q4, our seasonally largest quarter of the year. Orca, one of the world's leading mining and infrastructure solutions providers, saw IT support deflections increase from 18% to 94% using Now Assist. A massive improvement. What's more, case summarization has helped them deliver a one and a half day reduction in average incident resolution time. Allowing agents to complete work faster and upscale to higher value tasks. And we can relate. But now on now, we’re drinking our own champagne. Deploying AI agents across our operations. For instance, system admin use cases that typically took almost 20 minutes to resolve are happening in seconds. Utilizing Now Assist. It's driving real efficiencies across the company. Raptor DB Pro also continues to gain track with net new ACV accelerating quarter over quarter including five deals over a million. With the Yokohama release, customer enthusiasm has only grown. Driven by new performance analytics capabilities. That make it easier than ever to uncover deeper insights with multilevel drill downs. Turning to profitability, Non-GAAP operating margin was 31%, 100 basis points above our guidance, driven by OpEx efficiencies and the timing of marketing spend. Our free cash flow margin was 48%, up approximately 100 basis points year over year. We ended the quarter with a robust balance sheet including $10.9 billion in cash and investments. In Q1, we bought back approximately 316,000 shares as part of our share repurchase program with the primary objective of managing the outflow of cash. As of the end of the quarter, we had approximately $3 billion of authorization remaining. 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. Over the course of Q1, we've seen the US dollar weaken, providing a currency tailwind to our business. In Q1, we also beat the high end of our subscription revenue guidance. While demand remains strong, we've taken a prudent approach to the remainder of 2025 and are only flowing through part of those benefits into our full year outlook. This allows us to factor in potential risks as they pertain to the current geopolitical environment. We all know that US federal agencies are navigating changes from tightening budgets and evolving mission demands and are being asked to move quickly. After agencies realigned to this baseline, we expect significant growth opportunities driven by operational needs expressed by these customers and addressed by solutions across our portfolio. We're deepening our focus on federal customers, helping them boost operational efficiency and enhance digital governance. With the launch of our government transformation suite, we're meeting agencies where they are with purpose-built solutions that accelerate digital transformation, increase transparency, and improve public service delivery. We are confident that our updated guidance sets us up for success throughout the year. With that in mind, for 2025, we're raising our subscription revenues by $5 million at the midpoint to $12.64 billion to $12.68 billion, representing 18.5% to 19% year-over-year growth or 19.5% on a constant currency basis. We continue to expect subscription gross margin of 83.5%, operating margin of 30.5%, free cash flow margin of 32%, and GAAP diluted weighted average outstanding shares of 209 million. For Q2, we expect subscription revenues between $3.030 billion and $3.035 billion, representing 19% to 19.5% year-over-year growth or 19.5% on a constant currency basis. We expect CRPO growth of 19.5% on both a reported and constant currency basis, expect an operating margin of 27%. Finally, we expect 209 million GAAP diluted weighted average outstanding shares for the quarter. In conclusion, the team delivered a strong quarter despite significant macro crosswinds. The team stayed focused and performed with elite level execution throughout the quarter. And I would like to thank all of our employees worldwide for their continued hard work and dedication. Looking ahead, we remain as confident as ever in our journey to becoming the enterprise need a platform that empowers real-time decision making more than ever. In times of uncertainty, customers focus on maximizing ROI and reducing costs. That's exactly where the NOW platform excels. It helps organizations drive greater efficiency from their existing tools and teams increasing profitability. And we're at the forefront of the AI opportunity to drive even greater value for our customers. Autonomous AI agents have the power to unlock game-changing productivity especially when they're seamlessly connected to every part of the business. ServiceNow brings together AI, data, and workflows to drive actions and incredible business outcomes. As demonstrated by the success we continue to see in AI Assist, Raptor DB Pro, and workflow data fabric. Finally, our federal team is reimagining how government work gets done introducing new ideas and solutions that help agencies consolidate contracts and standardize on the NOW platform. Our federal business has been exceptional over the past several years and our opportunity remains stronger than ever as we look out to the mid and long term. I'd like to invite you to hear more about these trends how ServiceNow is putting AI to work at our upcoming financial analyst day on May fifth. Which will be webcast on our Investor Relations website. With that, I'll open it up now for Q and A.”