ServiceNow (NOW) Q2 2025: AI Agentic Deals Up 50%, Accelerating Enterprise Platform Adoption
ServiceNow’s Q2 saw a decisive inflection in enterprise AI adoption as agentic AI deals surged and platform breadth expanded across core and emerging workflows. Management’s narrative and execution point to accelerating customer consolidation around ServiceNow’s platform, with AI-driven product innovation, robust net new logo growth, and operational leverage underpinning both topline and margin outperformance. With a raised subscription outlook and a $1.2 billion pipeline, ServiceNow is positioning itself as the enterprise AI control layer for the coming decade.
Summary
- Agentic AI Penetration Deepens: AI-driven products and agentic workflows are now central to large deal wins and customer expansion.
- Platform Consolidation Momentum: Customers are increasingly choosing ServiceNow as their cross-functional enterprise platform, displacing legacy stacks.
- Pipeline and Guidance Strengthen: A $1.2 billion pipeline and raised subscription outlook signal confidence in sustained growth through 2026.
Performance Analysis
ServiceNow delivered broad-based outperformance across revenue, margin, and deal metrics, with AI and workflow expansion at the core of results. Subscription revenue and current remaining performance obligations (CRPO, a forward revenue indicator) both exceeded guidance by 200 basis points, reflecting robust demand across all workflow segments. Operating margin expanded to 29.5%, well above guide, aided by internal AI-driven productivity and disciplined expense management. Free cash flow margin also improved, supporting a healthy capital return profile.
Deal activity was a highlight: ServiceNow closed 89 deals over $1 million in net new annual contract value (ACV), with 11 exceeding $5 million. Notably, all top 20 deals included five or more products, illustrating platform adoption depth. AI-specific product traction was evident, with NowAssist and Plus SKUs included in 18 of the top 20 deals and agentic AI deal counts up 50% sequentially. Industry strength was broad, with transportation, TMT, retail, and energy all posting outsized growth.
- AI-Driven Deal Size Expansion: NowAssist and Plus product attach rates and deal sizes rose sharply, with ITAM NowAssist ACV up 6x quarter-over-quarter.
- Net New Logo Momentum: New logo ACV more than doubled year-over-year, and the number of $20 million-plus customers increased 30%.
- Workflow Breadth: Technology, CRM, and core business workflows all contributed, with ITSM, ITOM, and security/risk landing in most top deals.
Operational leverage from internal AI use (“Now on Now”) and strong renewal rates (98%) further reinforce the business model’s durability. The company’s capital allocation remained balanced, with share buybacks focused on offsetting dilution and $10.8 billion in cash and investments on hand.
Executive Commentary
"Our key AI ProPlus deal count, including ITSM, CSM, and HR, was up over 50% quarter on quarter. We also closed our largest NowAssist deal to date at over $20 million. The AI hype cycle has not slowed for good reason. Enterprises in every industry and every region of the world have AI transformation as priority number one."
Bill McDermott, Chairman and Chief Executive Officer
"Q2 was a spectacular quarter across the board. We significantly beat the high end of our guidance across all top line and profitability metrics. Strong adoption of our now assist products continued outperforming expectations in the quarter once again. AI efficiencies internally were also a meaningful tailwind to margin expansion."
Gina Mastantuono, President and Chief Financial Officer
Strategic Positioning
1. AI as the Core Enterprise Platform
ServiceNow’s platform is increasingly being positioned as the “control tower” for enterprise AI, integrating any cloud, data source, large language model (LLM), or agent. The company’s agentic AI vision—AI agents embedded across workflows, not siloed in applications—resonates with C-suites aiming to unify and govern cross-functional AI deployments. AI Control Tower, a governance and orchestration layer for both ServiceNow and third-party AI agents, has already surpassed full-year net new ACV targets just 60 days post-launch, underscoring demand for centralization and trust in the ServiceNow stack.
2. Workflow and Industry Expansion
All workflow segments—technology, CRM, core business, and creator—showed strength, with technology workflows (ITSM, ITOM, ITAM, security/risk) landing in the majority of top deals. CRM and industry workflows are emerging as a material growth vector, especially after the Logic AI acquisition, which is fueling rapid growth in Configure Price Quote (CPQ) and front-office workflows. The company is leveraging its workflow data fabric to deliver industry-tailored solutions, with notable wins in insurance, public sector, and manufacturing.
3. Product Innovation and Ecosystem Leverage
Rapid product innovation—such as Agentic Workforce Management, AI Agent Studio, and the Data.World acquisition for data governance— is expanding ServiceNow’s platform capabilities for the agentic AI era. The company’s open approach (supporting multiple LLMs and cloud providers) strengthens its appeal as a vendor-agnostic orchestrator. Strategic partnerships with Nvidia, UKG, and Zoom further embed ServiceNow at the center of enterprise AI ecosystems.
4. Go-to-Market and Customer Expansion
Net new logo growth and deeper customer penetration are both accelerating, with new customer ACV more than doubling and large enterprise adoption broadening globally. Sales leadership transitions in major regions have been executed to support scale and maintain execution discipline. The “Now Next AI” program targets rapid customer onboarding and value realization, leveraging senior engineering and consulting talent to co-innovate directly with C-suites.
5. Operational Discipline and Margin Expansion
AI-driven internal efficiencies (“Now on Now”) are unlocking material productivity gains, especially in engineering and sales. These savings are being reinvested in technical talent and go-to-market capacity to accelerate AI adoption, while still driving annual operating margin accretion. Management is balancing prudence with targeted investment, especially as the company prepares for the MoveWorks acquisition integration.
Key Considerations
ServiceNow’s Q2 demonstrated that its AI-centric strategy is translating into measurable financial and operational gains, but investors should weigh both the durability and scalability of these trends as competition intensifies and the AI market evolves.
Key Considerations:
- AI Product Attach Rates Accelerate: NowAssist and Plus SKUs are now central to large deals, with attach rates and deal sizes rising sharply.
- Workflow Breadth Drives Stickiness: All top 20 deals included five or more products, reinforcing the platform’s cross-functional value proposition.
- Industry and Use Case Diversification: Expansion into CRM, public sector, insurance, and manufacturing shows the platform’s applicability beyond IT.
- Margin Expansion from AI Efficiencies: Internal AI use is driving margin upside, freeing resources for reinvestment in growth areas and technical talent.
- Pipeline and Guidance Momentum: A $1.2 billion pipeline and raised subscription targets provide visibility, but execution on large, complex AI deployments will be key.
Risks
Competitive intensity in enterprise AI and workflow automation remains high, with hyperscalers and best-of-breed vendors vying for platform status. Public sector and federal demand remains subject to budget and mission volatility, and management is building prudence into guidance. Integration of acquisitions (such as MoveWorks) and maintaining sales execution at scale are additional watchpoints. Rapid AI adoption raises operational, compliance, and data governance challenges that ServiceNow must continue to address to maintain trust and differentiation.
Forward Outlook
For Q3, ServiceNow guided to:
- Subscription revenues of $3.26 billion to $3.265 billion, representing 20–20.5% YoY growth
- CRPO growth of 18.5% YoY (18% constant currency), reflecting a Q4 renewal cohort headwind
- Operating margin of 30.5%
For full-year 2025, management raised guidance:
- Subscription revenue midpoint up $125 million to $12.775–$12.795 billion (20% YoY growth)
- Subscription gross margin of 83.5%, operating margin of 30.5%, free cash flow margin of 32%
Management emphasized pipeline strength, ongoing AI product adoption, and readiness to invest in technical talent and go-to-market capacity as AI transformation accelerates.
- Raised targets reflect confidence in sustained demand and execution.
- Guidance excludes potential MoveWorks contribution, which is expected to close late 2025 or early 2026.
Takeaways
ServiceNow’s Q2 results highlight a business in the midst of a strategic inflection, with AI agentic workflows driving deeper customer engagement, platform consolidation, and operational leverage.
- AI-Driven Platform Adoption: The rapid rise in agentic AI deal counts and platform attach rates signals a durable shift in how enterprises approach digital transformation, with ServiceNow positioned as the orchestration layer.
- Operational and Financial Leverage: Internal AI use is driving margin expansion, enabling reinvestment in growth and technical capability while maintaining discipline.
- Execution Watchpoints: Sustaining new logo momentum, managing integration risk, and navigating competitive dynamics will be critical as ServiceNow seeks to scale its AI vision globally.
Conclusion
ServiceNow’s Q2 demonstrated that its agentic AI strategy is resonating with customers and translating into both topline and margin outperformance. With a raised outlook, expanding product breadth, and a robust pipeline, ServiceNow is cementing its role as the enterprise AI control layer, but ongoing execution and competitive vigilance will be essential to sustain this momentum into 2026 and beyond.
Industry Read-Through
ServiceNow’s results offer a clear read-through for the broader enterprise software and AI ecosystem: Customers are consolidating around platforms that can orchestrate AI, data, and workflows across silos, favoring vendors that combine open integration, governance, and rapid innovation. The shift toward agentic AI—autonomous, cross-functional agents embedded in workflows—will likely accelerate displacement of legacy CRM, ITSM, and point solutions. As enterprises prioritize AI governance and workflow automation, expect intensifying competition among platform vendors, increased demand for industry-specific AI solutions, and a premium on trust, compliance, and operational integration. ServiceNow’s trajectory signals that platform breadth, ecosystem partnerships, and vertical depth will be decisive in the next wave of enterprise AI adoption.