Analyst(s): Keith Kirkpatrick
Publication Date: April 24, 2025
ServiceNow reported its Q1 FY 2025 earnings report, highlighting how sustained demand for workflow automation and AI-powered solutions supported strong subscription growth and margin expansion during the quarter. The company’s beat on EPS and cRPO reflects continued momentum despite macro pressures, positioning ServiceNow as a resilient enterprise platform amid public-sector scrutiny and broader IT budget constraints.
What is Covered in this Article:
- ServiceNow’s Q2 FY 2025 financial results
- AI-led subscription growth and large deal momentum
- Expansion in CRM and core workflows with new acquisitions
- Public sector traction amid U.S. budget uncertainty
- FY 2025 guidance with conservative outlook and upside levers
The News: ServiceNow Inc. (NYSE: NOW) reported its Q1 FY 2025 results, posting total revenue of $3.1 billion (on par with consensus estimates), marking a 19.5% year-on-year (YoY) increase in constant currency (cc). Subscription revenue grew 20% YoY in cc, while Professional Services and Other revenue advanced 6% YoY. Non-GAAP operating income stood at $953 million (Q1 FY 2024: $791 million), 2.7% above street expectations. Non-GAAP operating margin stood at 31.0%, expanding 50 basis points YoY. Non-GAAP net income rose 20% YoY to $846 million, 4.9% above consensus expectations. Non-GAAP diluted earnings per share (EPS) reached $4.04 (+5.4% above consensus estimates), up from $3.41 in Q1 FY 2024. Current remaining performance obligations (cRPO) grew 22% YoY in cc to $10.3 billion (+2.1% above consensus estimates), highlighting strong demand and robust customer renewals, which remained high at 98%.
“The team outperformed on both Now Assist and broader net new ACV goals, delivering a significant cRPO beat versus our guidance,” said Gina Mastantuono, CFO and President of ServiceNow. “Our use of AI internally also continues to drive meaningful opex efficiencies, yielding strong profitability and free cash flow.”
ServiceNow Q1 FY 2025 Results Top Expectations as AI, Subscription Sales Grow
Analyst Take: ServiceNow’s Q1 FY 2025 results affirm the company’s execution strength and resilience in the face of macro volatility. A 22% YoY cRPO increase (cc), continued traction in large deal activity, and operating margin expansion highlight robust demand for its AI-driven workflow automation platform. Strong subscription growth and AI monetization progress highlight ServiceNow’s positioning as a strategic partner for digital transformation across enterprises and government sectors.
AI-Powered Workflows Catalyse Large Deal Growth and Platform Monetisation
ServiceNow’s Q1 FY 2025 performance was underpinned by robust adoption of its AI-centric offerings and deeper enterprise integration. The company closed 72 net-new ACV deals exceeding $1 million (vs. 63 YoY), including nine deals over $5 million. Its large customer base continued to scale, with 508 customers now contributing over $5 million in ACV (up 20% YoY), and those generating $20 million+ growing nearly 40% YoY.
The adoption of the SKU was a key growth lever, along with the quadrupling of deal count on a YoY basis, with 39 transactions that included three or more Now Assist products. AI-led modules were integral to major wins: ITSM Pro Plus was present in 15 of the top 20 deals; ITOM Pro Plus net-new ACV rose ~70% quarter-on-quarter QoQ; SecOps Pro Plus quadrupled; and Creator Pro Plus average deal size tripled.
Within ServiceNow, AI also drove measurable operational efficiency. Deployment of Now Assist resulted in a 16x improvement in lead-to-sale conversion and an 86% deflection of repetitive tasks. Together, these capabilities underpinned 20% YoY subscription revenue growth (cc), showcasing the dual impact of AI in driving customer outcomes and operating leverage.
CRM and Core Workflows Fuel New Growth Engines
ServiceNow is scaling new growth vectors beyond its core ITSM roots, with CRM and Core Business Workflows emerging as high-velocity contributors to net-new ACV. In Q1 FY 2025, CRM and industry workflows accounted for 34% of total net-new ACV, reflecting strong front-office momentum. CRM net-new ACV rose over 50% YoY in EMEA and Japan, while Finance and Supply Chain workflows expanded by 60% YoY, and HR Service Delivery grew 40% YoY. This signals rising demand for digital transformation across sales, operations, and employee functions.
ServiceNow reinforced this momentum through targeted acquisitions. It announced the purchase of Logik.ai to accelerate Configure, Price, Quote (CPQ) automation, integrating AI-powered configuration, pricing, and quoting directly into its CRM suite. The planned acquisition of Moveworks will further enhance ServiceNow’s front-end AI capabilities with enterprise search and a unified self-service layer. These moves support a broader strategy to consolidate fragmented CRM stacks and offer a unified, AI-native alternative, positioning ServiceNow as a strong contender in the front-office application market.
As workflows are increasingly driven by or incorporating AI and agentic processes, the need for a unified data layer to access and activate data across the entire organization is critical for seamless operation and fast ROI. ServiceNow’s strong foundation as a data-led platform should help the company position itself as a strong contender for any organization seeking to derive ROI from AI investments quickly.
Public Sector Momentum Validates Platform’s Government Readiness
ServiceNow’s public sector performance remained strong in Q1 FY 2025, with net-new ACV growing over 30% YoY despite fiscal tightening. The company closed 11 U.S. federal deals above $1 million (vs. 8 in Q1 FY 2024), including two above $5 million, and added six new federal customers, reflecting robust agency adoption. This momentum stems from ServiceNow’s alignment with evolving priorities under Elon Musk’s Department of Government Efficiency.
During the quarter, ServiceNow launched its Government Transformation Suite to meet agency demands for transparency, cost-efficiency, and digital automation. AI agents within the suite are already being used for contract reviews and approval workflows. While budget constraints remain a potential headwind due to ServiceNow’s sizable public sector exposure, management emphasized that its government-focused strategy is well-aligned with broader digital modernization efforts across federal and local agencies in the U.S. and abroad.
Measured FY 2025 Guidance Signals Discipline, While AI and Federal Tailwinds Offer Upside
ServiceNow modestly raised its FY 2025 subscription revenue guidance by $5 million at the midpoint to $12.64–12.68 billion (+18.5–19.0% YoY; +19.5% cc), supported by Q1 outperformance and FX tailwinds. Given geopolitical tensions and ongoing federal budget uncertainty, management chose to embed conservatism in the full-year outlook. CRPO growth is guided at +19.5% YoY in Q2, moderating from +22% in Q1 due to known seasonality and the timing of large public sector deals. Operating margin guidance remains unchanged at 30.5% despite anticipated M&A integration costs, highlighting ServiceNow’s margin discipline through AI-led operational efficiencies and controlled marketing spend.
ServiceNow’s updated guidance reflects strategic caution amid external volatility but retains multiple embedded levers for upside. AI momentum, strong cRPO execution, expanding federal adoption, and inorganic growth from recent acquisitions (Moveworks and Logik.ai) may support the long-term revenue growth trajectory. Notably, ServiceNow’s digital, B2B focus also insulates the company against any tariff-related volatility, and thus far, the company has remained focused on cost discipline, a key success factor in uncertain economic periods.
See the complete press release on ServiceNow’s fiscal Q1 FY 2025 financial results on the ServiceNow website.
Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.
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Author Information
Keith has over 25 years of experience in research, marketing, and consulting-based fields.
He has authored in-depth reports and market forecast studies covering artificial intelligence, biometrics, data analytics, robotics, high performance computing, and quantum computing, with a specific focus on the use of these technologies within large enterprise organizations and SMBs. He has also established strong working relationships with the international technology vendor community and is a frequent speaker at industry conferences and events.
In his career as a financial and technology journalist he has written for national and trade publications, including BusinessWeek, CNBC.com, Investment Dealers’ Digest, The Red Herring, The Communications of the ACM, and Mobile Computing & Communications, among others.
He is a member of the Association of Independent Information Professionals (AIIP).
Keith holds dual Bachelor of Arts degrees in Magazine Journalism and Sociology from Syracuse University.
