ServiceNow (NOW) Q4 2025: AI Control Tower Drives 33% Workflow Expansion as Platform Strategy Accelerates
ServiceNow’s Q4 showcased surging AI-driven workflow adoption, robust platform expansion, and a deliberate shift toward enterprise orchestration at scale. The company’s AI control tower and workflow data fabric are now embedded in the largest deals, driving broader customer transformation and deeper platform integration. Management’s confident 2026 outlook and expanded buyback reinforce the strategic pivot from SaaS point solutions to a full-stack enterprise platform, with AI and security at the core.
Summary
- AI Workflow Penetration: Embedded AI and workflow orchestration are fueling customer expansion and platform stickiness.
- Security Integration: Acquisitions of Armis and Vesa position ServiceNow as the enterprise AI security orchestrator.
- Platform Strategy Commitment: Leadership signals unwavering focus on organic growth and platform consolidation over revenue-driven M&A.
Performance Analysis
ServiceNow delivered a quarter marked by accelerating platform adoption and AI-driven expansion, with subscription revenue and remaining performance obligations (RPO) both exceeding guidance. The company reported a record 244 deals above $1 million in net new annual contract value (NNACV), with seven surpassing $10 million, reflecting broad-based demand across verticals. Notably, AI-powered products such as NowAssist and Workflow Data Fabric contributed materially to top deals, with NowAssist annual contract value more than doubling year-over-year and surpassing $600 million.
Operational leverage was evident in margin expansion, as operating margin and free cash flow both exceeded prior targets, supported by strong collections, disciplined spend, and AI-enabled efficiencies. Industry outperformance was led by transportation, logistics, and business services, each posting outsized NNACV growth, while renewal rates held at 98%, underscoring customer reliance on the platform. The company’s hybrid pricing model and consumption-based AI assist packs are gaining traction, supplementing seat-based growth and driving recurring revenue visibility.
- AI-Driven Upsell Momentum: Over 70% upsell expansion at renewal for NowAssist deals, highlighting the value of agentic AI adoption.
- Workflow Volume Surge: Workflows and transactions processed grew over 33% year-over-year, from 60 to 80 billion and 4.8 to 6.4 trillion, respectively.
- Security and Risk Expansion: Security and risk solutions drove nearly 40% NNACV growth, with OT security achieving its largest quarter ever.
ServiceNow’s performance signals a business model transition from feature SaaS to a platform orchestrator, with AI, security, and workflow integration at the center of durable growth and customer lock-in.
Executive Commentary
"Enterprise AI will be the largest driver of return on the multi-trillion dollar super cycle of investment in AI infrastructure. The real payoff comes when trillions of tokens move beyond pilots to be embedded directly into the workflows where business decisions are made. ServiceNow is the gateway to this shift, serving as the semantic layer that makes AI ubiquitous in the enterprise."
Bill McDermott, President and Chief Executive Officer
"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."
Gina Mastantuono, President and Chief Financial Officer
Strategic Positioning
1. AI Control Tower as Platform Core
ServiceNow’s AI control tower, a unified governance and orchestration layer for enterprise AI, is now central to the company’s pitch and product roadmap. Its rapid adoption—deal volume nearly tripled quarter over quarter—reflects rising customer demand for real-time agent monitoring, kill switches, and security controls. The platform’s ability to integrate third-party AI agents and enforce governance at scale is a key differentiator as enterprises move from pilots to production AI.
2. Security and Risk as Expansion Vectors
The acquisitions of Armis and Vesa, both already technically integrated, extend ServiceNow’s platform into asset visibility and identity governance. This positions the company to address the expanding attack surface created by autonomous agents and IoT. The new stack enables real-time discovery, privilege mapping, and automated remediation, directly addressing CIO and CISO pain points and opening a $125 billion incremental TAM, according to management.
3. Hybrid Pricing and Consumption Model Evolution
ServiceNow’s hybrid pricing approach—combining seat-based and consumption-based AI assist packs— is resonating with customers seeking flexibility and predictability. While seat growth remains robust, the rapid adoption of assist packs and token reloads is driving incremental revenue and deepening usage. Management is cautious about moving to pure consumption, citing customer preference for budgeting certainty, but expects AI-driven consumption to become a larger revenue contributor over time.
4. Relentless Organic Growth Focus
Leadership repeatedly emphasized ServiceNow’s organic growth engine, underscoring that recent M&A was driven by technology and market adjacency, not revenue acquisition. The company has quadrupled revenue since 2019 without reliance on large-scale acquisitions, and management signaled that after Armis and Vesa, no further major M&A is planned. The focus remains on platform completeness, customer-driven expansion, and opportunistic tuck-ins for talent and technology.
5. Open Ecosystem and Strategic Partnerships
ServiceNow’s open approach to large language models (LLMs), including partnerships with Microsoft, OpenAI, and Anthropic, gives customers flexibility and secures ServiceNow’s role as the workflow orchestrator regardless of LLM provider. Strategic integrations, such as Microsoft 365 agent connectivity and Anthropic-powered build agents, are designed to deliver differentiated, context-aware AI solutions while allowing customers to choose the underlying model.
Key Considerations
This quarter’s results highlight ServiceNow’s transition from a SaaS workflow vendor to a full-stack enterprise platform orchestrator, with AI, security, and workflow integration underpinning new monetization and customer lock-in. The company’s ability to drive both top-line growth and margin expansion signals operational discipline and strong market fit for its evolving business model.
Key Considerations:
- AI Monetization Acceleration: Rapid growth in NowAssist and AI control tower attach rates is driving new upsell and consumption revenue streams.
- Security Platform Differentiation: Armis and Vesa integration creates a unique end-to-end security stack for agentic AI environments, addressing a critical enterprise need.
- Operational Leverage from AI: AI-driven efficiencies are yielding margin expansion, even as gross margin faces temporary headwinds from hyperscaler adoption.
- Customer Expansion Dynamics: Large deals increasingly span multiple ServiceNow products, elevating platform stickiness and cross-functional relevance.
- Disciplined Capital Allocation: Expanded $5 billion buyback and immediate $2 billion ASR reflect confidence in cash flow durability and valuation entry point.
Risks
Key risks include potential gross margin pressure from increased use of hyperscalers, which management views as temporary and offset by operating efficiencies. AI consumption pricing remains an evolving area, with customer predictability preferences possibly limiting pure consumption model upside in the near term. Integration of acquisitions, while technically advanced, must deliver on the promise of TAM expansion and security leadership to justify strategic bets. Macro uncertainty and public sector procurement cycles could introduce variability in large deal timing.
Forward Outlook
For Q1 2026, ServiceNow guided to:
- Subscription revenue growth of 18.5% to 19% constant currency, including one point from MoveWorks.
- CRPO growth of 20% constant currency.
For full-year 2026, management raised guidance to:
- Subscription revenue of $15.53 to $15.57 billion, up 19.5% to 20% constant currency.
- Operating margin of 32%, up 100 basis points year-over-year.
- Free cash flow margin of 36%, also up 100 basis points.
Management highlighted:
- Ongoing AI-driven margin leverage and operational efficiencies.
- Security and risk as a key growth vector, with Armis and Vesa closing expected in early H2 2026.
Takeaways
ServiceNow’s Q4 results and 2026 guidance reinforce the company’s strategic pivot from SaaS point solutions to a unified platform for enterprise AI orchestration, with security, workflow, and open ecosystem integration as core differentiators.
- Platform Integration Drives Durable Growth: The embedding of AI, workflow data fabric, and security in top deals is deepening customer reliance and expanding ServiceNow’s addressable market.
- AI Monetization and Operational Leverage: Rapid AI adoption is driving both top-line acceleration and margin expansion, with consumption models supplementing seat-based revenue.
- Watch for Security Execution and Consumption Shift: Success in integrating Armis and Vesa, and continued evolution of pricing models, will be key to sustaining growth and margin expansion in 2026 and beyond.
Conclusion
ServiceNow’s execution in Q4 2025 confirms its transition to an AI-first platform orchestrator, with robust demand, operational discipline, and strategic clarity. The company’s open ecosystem, security stack, and consumption model evolution position it for sustained growth, but delivery on security integration and AI monetization will be critical watchpoints for investors.
Industry Read-Through
ServiceNow’s results signal that enterprise demand is shifting toward integrated AI platforms capable of orchestrating workflows, security, and governance at scale, rather than fragmented point solutions. The rapid adoption of agentic AI, hybrid pricing models, and security stacks underscores the need for vendors to deliver both flexibility and control as AI moves into core business processes. Competitors in workflow automation, cybersecurity, and enterprise AI will need to respond with deeper integration, open ecosystems, and operational leverage to match ServiceNow’s platform trajectory. Public sector and regulated industries remain ripe for digital transformation, but will favor vendors that can address security, compliance, and rapid time-to-value.