“We continue to expect subscription gross margin of 83.5% and GAAP diluted weighted average outstanding shares of 210 million.”

In context

“Gina Mastantuono (President and Chief Financial Officer): Thank you, Bill. Once again, Q3 showcased another standout quarter of elite level execution with significant outperformances across all of our top line and profitability guidance metrics. Now Assist, Workflow Data Fabric and RaptorDB were all ahead of plan. ServiceNow's U.S. federal business also demonstrated its resilience, surpassing net new ACV expectations for the quarter as we work hand-in-hand with agency leaders to modernize how the government works for the American people. Q3 subscription revenues were $3.299 billion, growing 20.5% year-over-year at constant currency, 100 basis points above the high end of our guidance range, driven by strong execution with broad-based demand throughout the platform. RPO ended the quarter at approximately $24.3 billion, representing 23% year-over-year constant currency growth. Current RPO was $11.35 billion, representing 20.5% year-over-year constant currency growth, a 250 basis point beat versus our guidance. From an industry perspective, transportation and logistics led the way, growing net new ACV over 90% year-over-year, followed by momentum in retail and hospitality and education, both growing over 50%. Energy and utilities continue to see healthy demand and government was also an area of strength, driven by our U.S. federal business growing net new ACV over 30% year-over-year. Our renewal rate remained a strong 97% and an even more robust 98% when excluding the closure of a large federal agency. We ended Q3 with 553 customers generating over $5 million in ACV. Furthermore, the number of customers contributing $50 million or more increased by over 20% year-over-year. We closed 103 deals greater than $1 million in net new ACV in the quarter, including 3 deals over $20 million. The power of our Better Together platform model was evident as all of our top 20 deals included 6 or more products. Now Assist had a tremendous quarter, once again exceeding expectations, fueled by 12 deals over $1 million in net new ACV, including over $10 million. As Bill noted, our AI products are on pace to exceed $0.5 billion in ACV this year, underscoring the great progress we're making towards our $1 billion target for 2026. Key product areas of strength included ITSM and HR+ net new ACV, both doubling quarter-over-quarter, ITOM+ net new ACV surging more than 5x quarter-over-quarter and CSM+ deal volume tripling year-over-year. More broadly within CRM, our AI-powered CPQ solution has become a powerful entry point into front office transformation. We're seeing traction with displacement wins around the globe, including multiple million-dollar deals. Turning to profitability. Non-GAAP operating margin was 33.5%, 300 basis points above our guidance, driven by our top line outperformance, AI OpEx efficiencies, disciplined spend management and timing of some program spend. As we advance our AI agent deployments across the company, we're unlocking substantial organizational capacity, driving measurable efficiency gains and enhancing scalability. Our free cash flow margin was 17.5%, up 50 basis points year-over-year. We ended the quarter with a robust balance sheet, including $9.7 billion in cash and investments. In Q3, we bought back approximately 644,000 shares as part of our share repurchase program, up nearly 70% versus last quarter with the primary objective of managing the impact of dilution. As of the end of the quarter, we had approximately $2 billion of authorization remaining. Together, these results continue to demonstrate our ability to deliver a healthy balance of world-class growth, profitability and shareholder value. With our continued confidence in the trajectory of our business, today, we announced that the Board of Directors has approved a 5-for-1 stock split designed to make our shares more accessible to a broader base of investors and to provide employees with greater flexibility in managing their equity. A special meeting of shareholders will be held on December 5 to approve the split. Moving to our guidance. Given our Q3 outperformance, we are raising our 2025 growth and profitability outlook. For 2025, we are raising our subscription revenues by $55 million at the midpoint to $12.835 billion to $12.845 billion, representing 20.5% year-over-year growth or 20% on a constant currency basis. We are raising our full-year operating margin target by 50 basis points from 30.5% to 31% as AI operational efficiencies continue to drive incremental leverage. We're also raising our full-year free cash flow margin target by 200 basis points from 32% to 34%. We continue to expect subscription gross margin of 83.5% and GAAP diluted weighted average outstanding shares of 210 million. For Q4, I would note that while our public sector pipeline and demand is very strong, the ongoing government may impact deal timing in our U.S. federal business in Q4. Given the timeline requirements to complete standard procurement processes, we've prudently factored in this timing dynamic into our guidance. With that in mind, for Q4, we expect subscription revenues between $3.42 billion and $3.43 billion, representing 19.5% year-over-year growth or 17.5% to 18% on a constant currency basis. We expect cRPO year-over-year growth of 23% or 19% on a constant currency basis. We expect an operating margin of 30%. Finally, we expect 210 million GAAP diluted weighted average outstanding shares for the quarter. In conclusion, Q3 was an exceptional quarter with standout performances across the board. These results underscore the power of the ServiceNow AI platform and our multiple growth vectors from core workflow expansion to the accelerating adoption of innovative new products in areas like security and risk, sales and order management and data and analytics. Massive platform demand combined with AI-driven efficiencies not only fueled fantastic results but also reinforced our ability to scale with accelerating margin expansion. Before we close, Bill and I want to take a moment to thank our incredible employees around the world. Your unwavering commitment, tireless execution and passion for excellence continue to be the driving force behind our success. With that, I'll open it up for Q&A.”