“We expect an operating margin of 32%, up 100 basis points year over year, driven by OpEx savings enabled by AI efficiencies.”

In context

“Gina Mastantuono (President and Chief Financial Officer): Thank you, Bill. Q4 was another strong quarter, concluding a remarkable year of AI innovation. Net new ACV growth accelerated both quarter over quarter and year over year. We exceeded our top-line growth and operating margin guidance metrics, showcasing our team's consistent execution and unwavering strength of our business. Emerging product areas, including Now Assist, workflow data fabric, Raptor, and CPQ, all outperformed in the quarter. Furthermore, AI is also driving significant cost efficiencies that have resulted in full-year profitability beats on top of our recently raised guidance. Turning to our results. Q4 subscription revenues were $3.466 billion, growing 19.5% year over year in constant currency, exceeding the high end of our guidance range by 150 basis points. RPO ended the quarter at approximately $28.2 billion, representing 22.5% year over year constant currency growth. Current RPO was $12.85 billion, representing 21% year over year constant currency growth, a 200 basis point beat versus our guidance. Moveworks contributed one point to both RPO and CRPO. From an industry perspective, transportation and logistics continued to lead the way with net new ACV growing over 80% year over year. Business and consumer services also posted impressive growth, surpassing 70% year over year, followed by financial services growing over 40% year over year. Telecom, media, and technology also delivered strong growth in the quarter. We achieved a robust 98% renewal rate in Q4, highlighting the importance and value that customers place in the ServiceNow AI platform. We closed 244 deals greater than $1,000,000 in net new ACV in the quarter, including nine with new logos. Our strategic focus on landing the right new continues to deliver results, as new logo net new ACV in EMEA and Japan was up nearly 30% year over year. We accelerated net new customer adds in 2025 to end the year with over 8,800 customers, including 603 generating over $5,000,000 in ACV. Even more impressive, the number of customers contributing $20,000,000 or more rose over 30% year over year. These trends reflect the resilient strength in our core accompanied by increasing momentum in our emerging growth sectors. Our technology workflows' net new ACV growth accelerated in Q4, both quarter over quarter and year over year, as customers embrace autonomous IT to accelerate ROI, integrated workflows, take out costs, and improve operational resilience. Service ops is in 16 of our top 20 deals, highlighted by a standout performance in ITOM, which grew net new ACV nearly 50% year over year. ITAM was in 17 of our top 20 deals. Security and risk was in 19 of our top 20 deals and drove nearly 40% net new ACV growth year over year. Core business workflows were in 13 of our top 20 deals, CRM was in 16, and both saw net new ACV accelerate sequentially. As Bill mentioned, CPQ had a phenomenal quarter. Logic is a perfect example of our M&A strategy creating demonstrable ROI. We identified an adjacent opportunity, moved decisively, integrated flawlessly, and we're already seeing outsized returns. Go-to-market synergies have unlocked significant opportunities as Logix's customer count as part of ServiceNow has nearly quadrupled. Finally, creator workflows were in 19 of our top 20 deals year over year in Q4, with an impressive 32 deals over $1,000,000 in ACV. Moving to our success in driving broader AI adoption, Now Assist continues to outperform all expectations, surpassing $600,000,000 in ACV and tracking well towards our $1,000,000,000 plus target for 2026. In Q4, deals greater than $1,000,000 nearly tripled quarter over quarter, and customers spending more than $1,000,000 grew over 40%. The number of deals that included five or more Now Assist products increased by over 10 times year over year as enterprises expand their Agentic AI capabilities across their deployments. We've also overachieved our initial AI control tower targets by more than 4 times for 2025. As we develop prescriptive roadmaps for Agentic deployments, we are seeing the pace of AI monetization accelerate. For example, our FDA FTEs engaged with a leading American fast-food chain to enable a path to scaling Agentic AI across their customer service operations. As a result, they expanded their assist entitlements by 13 times upon contract renewal in Q4, based upon anticipated value and usage. It's stories like these that have driven customer service Now assist deals to see over 70% upsell expansion at renewal in Q4. Turning to profitability. Non-GAAP operating margin was 31%, 100 basis points above our guidance, driven by the top-line outperformance, OpEx efficiencies, and disciplined spend management. Our free cash flow margin was 57%, up 950 basis points year over year, driven by strong collections, lower CapEx, and significant operating leverage. For the full year 2025, operating margin was 31%, up 150 basis points year over year. Free cash flow margin was 35%, up 350 basis points year over year, and 100 basis points above our guidance, which I would remind you we raised by 200 basis points just last quarter. Total free cash flow for 2025 was a robust $4.6 billion, up 34% year over year. We ended 2025 with a healthy balance sheet of over $10 billion in cash and investments. In Q4, we bought back approximately 3.6 million shares after adjusting for the stock split as part of our share repurchase program. As of the end of the quarter, we had approximately $1.4 billion of authorization remaining. Given our strong cash position, our strategy of managing the impact of dilution, and our confidence in the business, we announced today that the Board of Directors authorized the purchase of up to an additional $5 billion of common stock under this program. With the recent pullback in our stock, we also plan to launch a $2 billion accelerated share repurchase program. 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. For 2026, we expect subscription revenues between $15.53 billion and $15.57 billion, representing 19.5% to 20% year over year growth on a constant currency basis. This includes a one-point contribution from Moveworks. We expect a subscription gross margin of 82%, reflecting incremental data center investments related to public cloud, geo-expansion, and AI. We expect an operating margin of 32%, up 100 basis points year over year, driven by OpEx savings enabled by AI efficiencies. We expect a free cash flow margin of 36%, up 100 basis points year over year, and 350 basis points ahead of our target that we gave at Financial Analyst Day in May. This is driven by significant operational leverage and further opportunities to reduce CapEx. Finally, we expect GAAP diluted weighted average outstanding shares of 1.05 billion. For Q1, we expect subscription revenues between $3.65 billion and $3.655 billion, representing 18.5% to 19% year over year growth on a constant currency basis. This includes a one-point contribution from Loopworks and a one and a half point headwind with a mix shift of on-prem to hosted revenue partially driven by the strong adoption of our hyperscaler offerings. We expect CRPO growth of 20% on a constant currency basis. This also includes a one-point contribution from Moveworks. We expect an operating margin of 31.5%, and we expect 1.05 billion GAAP diluted weighted average outstanding shares for the quarter. In conclusion, 2025 has been an incredible year, and we're just getting started. The world is in the midst of an intelligence super cycle, and ServiceNow is capitalizing on this decisive moment in technology, where the strongest companies leverage rapid change to extend their market leadership. Our recent strategic acquisitions bring us incredible talent and create enormous new market opportunities while solidifying our ability to put AI to work securely across every corner of the enterprise. As we integrate these best-in-class capabilities into the ServiceNow AI platform, we're layering on advantages that position us for even stronger, more durable growth over the long term. Our organic growth engine remains fully intact. Our strategy, complete with a disciplined focus on margin expansion, remains unchanged. But the ambition is larger, and our confidence in sustained high organic growth has never been greater. Finally, Bill and I want to express our deepest gratitude to our employees around the world. Your relentless innovation and unwavering commitment to our customers are the foundation of everything we've accomplished. With that, I'll open it up for Q&A.”