Earnings Call Transcript - NOW Q3 2025

Operator, Operator

Thank you for standing by. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q3 2025 ServiceNow Earnings Conference Call. Please go ahead.

Darren Yip, Senior Vice President of Investor Relations and Market Insights

Thank you. Good afternoon, and thank you for joining ServiceNow's Third Quarter 2025 Earnings Conference Call. Joining me are Bill McDermott, our Chairman and Chief Executive Officer; Gina Mastantuono, our President and Chief Financial Officer; and Amit Zavery, President, Chief Product Officer and Chief Operating Officer. During today's call, we will review our third quarter 2025 results and discuss our guidance for the fourth quarter and full year 2025. Before we get started, we want to emphasize that the information discussed on this call, including our guidance, is based on information as of today and contains forward-looking statements that involve risks, uncertainties and assumptions. We undertake no duty or obligation to update such statements as a result of new information or future events. Please refer to today's earnings press release and our SEC filings, including our most recent 10-Q and 10-K for factors that may cause actual results to differ materially from our forward-looking statements. We'd also like to point out that we present non-GAAP measures in addition to as a substitute for financial measures calculated in accordance with GAAP. Unless otherwise noted, all financial measures and related growth rates we discuss today are non-GAAP except for revenues; remaining performance obligations, or RPO; current RPO and cash and investments. To see the reconciliation between these non-GAAP and GAAP measures, please refer to today's earnings press release and investor presentation, which are both posted on our website at investors.servicenow.com. A replay of today's call will also be posted on our website. With that, I'll turn the call over to Bill.

William McDermott, Chairman and Chief Executive Officer

Thank you, Darren, and welcome, everyone, to today's call. ServiceNow delivered another set of stunning quarterly results that absolutely shattered expectations. Subscription revenue growth was 20.5% year-over-year in constant currency, 1 full point above the high end of guidance. cRPO growth was 20.5% year-over-year in constant currency, 2.5 points above our guidance. Operating margin was 33.5%, 3 full points above our guidance. Free cash flow margin was 17.5%. We had 103 deals greater than $1 million in net new ACV, 6 of which were greater than $10 million in net new ACV. Technology workflows had 50 deals over $1 million, including 6 over $5 million. ITSM, ITOM and ITAM were all in 15 of our top 20 deals with double-digit deals over $1 million. Together, security and risk combined for 12 of the top 20 deals with 3 deals over $1 million. That risk and security business combined is now a $1 billion ACV business, our fifth business to cross the $1 billion threshold. CRM and industry workflows were in 14 of the top 20 with 15 deals over $1 million, and core business workflows were in 13 of the top 20 with 14 deals over $1 million. Here's the headline. ServiceNow is one of the most durable, consistent, overperforming growth companies in the enterprise software industry. When you think about brand shaping the future, you have GPU leaders like NVIDIA, hyperscalers, foundation models and one company integrated in all together, the AI workflow company, ServiceNow. It used to be the MAG 7. Now there's a new category, I'm calling this the Super 8. That's the MAG 7 plus ServiceNow, that's right, the Super 8. As you'll hear from Gina, our confidence in the future has never been stronger, so we're raising guidance again heading into the fourth quarter. This team knows how to focus, innovate for our customers, execute at global scale and most importantly, how to win. We've only scratched the surface of the market opportunity for this platform. This new enterprise AI neighborhood is a dynamic place to live. Our Now Assist net new ACV to date beat expectations once again in Q3. Our AI products are on pace to exceed $0.5 billion in ACV this year, excellent progress toward beating our $1 billion target next year, and we're totally focused on surpassing it. We saw 12 Now Assist deals over $1 million, including 1 over $10 million. Our AI Control Tower deal volume more than quadrupled quarter-over-quarter in Q3. And just since the end of May, AI Agent Assist consumption has increased over 55x, that's the foundation of a beautiful hockey stick that's coming to you. For our customers, it's all about AI business transformation. IDC forecasts AI IT spending will be $1.3 trillion through 2029. And here's why ServiceNow is winning. Our platform sits at the core of the enterprise technology estate. ServiceNow is championed by the very leaders who are designing AI reference architectures of the future. Beginning with autonomous IT, we're helping those leaders solve enterprise-grade AI challenges. Governance is one of those mission-critical areas. Machines simply can't govern themselves, AI is like any other enterprise asset; it needs to be cataloged, tracked, supervised and secured. ServiceNow's configuration management leadership gives us and our customers a clean single pane of glass to govern all artificial intelligence. How is it working, where it’s adding value and where it’s hallucinating? This is AI-enabled orchestration of all the other AI. Every single enterprise in every industry wants this real-time AI control tower. Another challenge is getting beyond the hype to fast business value. The root cause of nearly every failed deployment of enterprise technology in history is a lack of integration. Even the ones that worked took years to get to positive ROI. To change this paradigm, AI has to run east to west across the enterprise and north to south up and down the tech stack. ServiceNow's AI platform can do this like no other. For every process that transcends departments and systems, ServiceNow's workflow engine is creating the roadmap that AI agents follow to get work done. Without cross-enterprise workflows, so-called agentic AI is just another one-dimensional chatbot. Enterprises gravitate to ServiceNow because we have a system of intelligence and a system of action on one integrated AI platform. Legacy systems of record where enterprises want a modern alternative are being composed as AI-native workflows on the ServiceNow AI platform. We all have personal experiences with AI apps on our phones. Enterprise AI is different; it's much harder. To put AI to work for people takes more than a language model or a rebranded wrapper on legacy tech. It takes domain expertise, which ServiceNow has curated over 2 decades and trillions of automated workflows. It also takes empathy as every customer's AI journey is unique. You don't build trust in this industry by forcing customers to conform; you build it by meeting them where they are. That's where the operative word in ServiceNow's strategy is 'any,' any cloud, any model, any data source, any agent. It's why we were so early partnering with all three hyperscalers, the foundation model companies and the systems of record. We neutralize complexity for our customers, giving them a clear roadmap to cycle down old systems over time as their AI readiness matures. Our customers recognize the time is now to shape their future. AI is the new UI. The ServiceNow AI experience breaks the cycle of siloed systems and bolt-on agents with a unified AI interface for voice, images, data and text. Figma and ServiceNow are partnering to bridge the gap between design intent and enterprise execution. Through an MCP integration, teams can seamlessly transition from visual design and Figma to fully functional enterprise-grade applications on the ServiceNow platform. This integration empowers developers regardless of skill level to use Figma design as direct prompts in the Now Assist build agent. We see a bright future, intelligent agents working side-by-side with people to resolve issues, complete tasks and take action. In the context of value creation for customers, partners, employees and shareholders, enterprise AI keeps every ServiceNow stakeholder on the same side. This is a once-in-a-generation opportunity. It's like minting a new currency that underpins a limitless new economy. The more we keep getting this right, the more we'll reach our full potential as the AI-defining enterprise software company of the 21st century. To ground this in a special way, in a special and specific market, let's talk customer experience. Enterprises invested a lot into legacy CRM deployments. For all that investment, they got a sprawling mess of instances and silos. They want a better way with AI. This applies to many legacy vendors, some more than others. Here's why ServiceNow is reshaping the customer experience market. Our AI experience turns CRM into an AI-first system of action that drives growth and customer loyalty. In sales, a new AI-powered CPQ solution accelerates quote generation, and this is going to free businesses to focus on relationships. In service, AI agents flag at-risk cases, automate resolutions and empower teams to act before SLAs are breached. This spans the entire customer lifecycle from first contact to resolution. Customers like Thrive and Pure Storage are using ServiceNow CRM to personalize support, connect data, AI and workflows, and scale service excellence. With a global technology services company, we are streamlining service models and enhancing customer experiences through agentic workflows. A hardware manufacturer selected ServiceNow CPQ and manufacturing solution to scale sales and service without increasing costs. A leading global technology company tripled their CPQ commitment with ServiceNow. What began with one product and one channel turned into a breakout success. The customer saw the impact, and now they're scaling it across partners and a dozen more products. A European auto manufacturer selected ServiceNow CPQ for its configuration, and it's selling this globally. What's fascinating is that these conversations are actually coming to us; the appetite for change is everywhere. We're also meeting the moment with great partners like Genesys. Unified experience from Genesys and ServiceNow merges contact centers, CRM and service operations into a single agentic AI-powered platform. Through agent-to-agent orchestration between Genesys Cloud and ServiceNow, AI agents will collaborate autonomously on tasks to deliver fast resolutions, seamless customer experiences and stronger customer loyalty. ServiceNow always goes where the customer needs us to go. In this case, that's to the core of a better CRM because the status quo just isn't cutting it. Let's spend a moment on U.S. Federal, which had a great Q3, beating NNACV expectations handily. In the quarter, we saw Now Assist pilots quickly converting into deals as agencies realize fast time to value and compelling ROIs. Like other industries, our AI control tower is gaining attention as agencies look to enforce governance and manage risk within their AI estate. The GSA OneGov agreement opens the door for broader federal and government adoption of ServiceNow. This simplified model reduces complexity and makes it easier for agencies to adopt more of our AI platform over time. That positions us well for upgrading standard customers to Pro Plus. Through the agreement, the ServiceNow AI platform is estimated to boost efficiency by 30%, saving the federal government billions over the next 5 years, and it will accelerate Agentic AI transformation. In closing, ServiceNow's strategic relevance has never been higher and it's soaring right now. When you look at the Zurich release, every innovation from vibe coding to Agentic playbooks and enterprise-grade security is purpose-built to unlock the full value of Agentic AI, helping teams act faster, work smarter and build trust as they scale. Gartner just published the first-ever 2025 Magic Quadrant for business orchestration and automation technologies, affectionately called BOAT. So get on board because ServiceNow is the leader, the furthest for its completeness of vision placement of all companies. We have a rock-solid core business with the biggest opportunity in our history to provide the AI control tower. We have a next-generation CRM business at the doorstep of substantial legacy disruption. We have AI, data and workflows integrated into a single AI architecture. The world's leading brands like the great NVIDIA, the world's first $5 trillion company. Congratulations, Jensen, our great friend and your wonderful company. Also AstraZeneca, Volkswagen Group, Ulta Beauty, 7-Eleven Japan, FedEx Dataworks and countless other companies are working with ServiceNow and excited to do so. Periods of systemic change always reveal new pillars on which the future is being built. This is the one moment in time when everything will change. And we won't do it with AI alone. We need AI that works for people. We need a bias for exponential thinking for renaissance-level creativity to finally solve some of the world's biggest challenges. Our customers, our partners and our team are all in to build that future on the ultimate platform, ServiceNow, the AI platform for business transformation. Thank you for your time and interest. I look forward to your questions. I'll hand things over to our President and Chief Financial Officer, Gina Mastantuono. Gina, over to you.

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.

Operator, Operator

Your first question comes from the line of Kash Rangan with Goldman Sachs.

Kasthuri Rangan, Analyst

Congratulations, Bill and team. Bill, I like the Super 8, but I still like the category of one even better than Super 8. But I want to ask you a question with Agentic technology, it's becoming abundantly clear, as you outlined, that there is a process of integration, implementation. We're back to, in some sense, making software companies like yours successful with the help of the outside world like the Accentures and whatnot. Some integration expertise, implementation expertise could go a long way, maybe even the talk of forward-deployed engineers to get this technology primed for real time. What are your thoughts on that, Bill, going forward as you really try to institutionalize the adoption of Agentic technology in your ecosystem? That's it for me. And all the best for the future.

William McDermott, Chairman and Chief Executive Officer

Yes, Kash, let me begin, first of all, by saying it's been an honor to know you all these years. You're one of the greatest of all time. And I never forget being on a helicopter with you many years ago on a rough ride, and you were a champion then and you're a champion now. I wish you and your family the best in your next endeavors. I was with 150 CEOs a couple of Fridays ago, and we were talking about the whole AI scenario, and they were telling me that their proofs of concept, these toy sidecars are getting crushed. They don't want to do them anymore. And they were also telling me that they have so much complexity in their business processes that they're having trouble making AI work. I explained that was the same dilemma, as you pointed out, Kash, with digital transformation. You have a platform here with AI platform for business transformation that resides above the systems of record and gives you that clean pane of glass to integrate the business processes into workflows. Workflow has become the new buzzword. Everybody likes workflow now, but we're the workflow company. What's unique about our workflows is we're doing 75 billion of them today, and we're doing more than 1 trillion transactions on them today. So the fact that we can connect to any cloud, we have all of the 3 hyperscalers; they're all great companies, by the way. We have the language models that are large ones, and we integrate with all of them. We've built on NVIDIA Nemotron the next generation of our platform, which enables customers to do extraordinary things with big language model power at a fraction of the big model cost, zero latency, total security, no hallucination and a cost-effective ROI that's amazing. Kash, we're getting customers live with autonomous implementations in a few weeks, not years and years. So the game has changed, and I believe we're at the epicenter of the enterprise to make every company a best-run business. And the word is getting out there. I'm glad you asked that question. It was a perfect question. Thanks a lot, Kash.

Kasthuri Rangan, Analyst

Bill, the world should know that as that helicopter swiveled 45 degrees from its forward path of progress that you diligently, on a Blackberry, were tapping away emails with, I think, perfect spelling, so and I was nearly throwing up and you were so kind to me. So that memory will go down forever.

Amit Zavery, President and Chief Product Officer and Chief Operating Officer

Kash, I would like to add one thing. Congratulations on your future plans. As Bill mentioned, our approach to building out our Agentic processes and workflow within the ServiceNow platform includes over 100 prepackaged workflows that integrate Agentic. This means minimal handholding and implementation is needed to get started. However, co-innovation may be necessary, especially for specific customer needs. That’s why we are investing in forward-deployed engineers who are experts in AI and can closely collaborate with customers on the AI expertise they need for certain use cases. Many customers struggle with a lack of expertise in some areas, making it challenging for them to stay competitive. Additionally, when they try to manage parts and purchase various components, achieving the desired outcomes becomes difficult. We're focused on addressing these challenges by providing ready-to-use solutions, facilitating quick implementation, and ensuring that customers see immediate value from our products, which leads them to engage with us more. This is what sets us apart from others in the industry.

Operator, Operator

Your next question comes from the line of Samad Samana with Jefferies.

Samad Samana, Analyst

Great to see the strong results, Bill. I also want to ask an AI-related question. The $500 million plus ACV level for AI on its own is a great disclosure that you're tracking to that. But it stood out that the deal volume you mentioned for Now Assist also seems to be broadening out and that there's a greater breadth of deals driving the AI ACV strength. So what I was wondering is, are you seeing that the broader sales organization and the partner base that Kash just mentioned is getting better at selling the AI solutions and it's being less of a top-down driven sale? And how should we think about maybe that impact going forward?

William McDermott, Chairman and Chief Executive Officer

Yes, Samad, it's a great question. And you're right. It is progressing beautifully, and it is now a standard way of selling in our company. You see that in the Pro Plus upgrades and all the new business that's coming in Pro Plus. What’s really exciting to me from a shareholder value creation perspective is that the customers really want it. When you see a 55x growth since May in the number of assists that our customers are doing on our platform, you have to look into the future and say that we have billions of assists already out there in the marketplace that will be monetized in future quarters. Already, we have 1,700 customers that are live on this, and that’s growing every single day. One thing that will definitely get underreported on an earnings day is culture. We have every single person in our company with their own AI learning journey where they've been assessed and credentialed, and there’s an AI action plan because we're putting AI to work for our people. Internally, what's super cool with our ServiceNow on Now, meaning we run the product before we put it into the market is 90% of the IT, customer service and HR processes are now being done by agents, not at the exclusion of people, but to make people happier. The soul crushing stuff is done by the agent, and the people are doing more and serving more capability to our customers. This really is a virtuous cycle because we're proving that you can grow, put AI to work for people to hire and as Gina said, have tremendous operating leverage on the margin and free cash flow line to reinvest in our business and to create even greater shareholder value. So we get it. We know what that hockey stick is, and we're building a company for the ages here.

Samad Samana, Analyst

And Gina, if I could squeeze one in for you, if possible. I know you can't predict when the federal government will reopen, although the way you've been nailing guidance, I'd say your prediction power is strong. But how should we think about the prudence that you factored in? Is it different from what you were thinking, let's call it, 90 days ago? Or is there incremental prudence just given that the government is still closed? Just help us understand that comment specifically around guidance. Great quarter.

Gina Mastantuono, President and Chief Financial Officer

Of course, of course, Samad. Yes. So first and foremost, I want to just extend huge congratulations to our incredible Fed team. We had an incredible Q3, which, as you know, is the biggest federal quarter always because it's the closing quarter of the fiscal year for the Fed. Over 30% year-over-year growth in net new ACV really demonstrates the incredible resilience and demand that federal agencies have for our platform. So first and foremost, demand is strong, and we are resonating so clearly with the federal agencies, which is fantastic. On specifically with the government shutdown, 90 days ago, the government was not shut down. I would say that we absolutely have factored in a bit more prudence into this guide because as much as I would like to say, I know how to forecast when the government is going to reopen, I just don't. Procurement processes do take a bit of time. Therefore, we did factor some timing-related prudence into the guide because demand is healthy, strong and the opportunity for us in the federal space, and by the way, more broadly, public sector, state and local as well, remains stronger than ever.

Operator, Operator

Your next question comes from the line of Alex Zukin with Wolfe Research.

Aleksandr Zukin, Analyst

Maybe just a quick 2-parter or Bill, for you. Maybe demand trends as you progress through the quarter, linearity of bookings and kind of maybe talk to us a little bit about how the consumption and utilization of some of the AI credits is trending. It sounds like it's going better than you expected. And then I have a quick follow-up for Gina.

William McDermott, Chairman and Chief Executive Officer

Yes. Thank you very much, Alex. I really appreciate it. The demand is amazing. Our demand right now is better than I've ever seen it. I just want to give you a little bit of anecdotal color on process going on across the world right now. I was getting text early this morning on our New York Forum, which is substantially oversubscribed. But I also got one along with my colleagues and the Board a couple of days ago, we did our Board meeting. In Japan, we had a capacity for around 6,000 people for our World Forum. We had 6,500 that could not be seated due to fire regulations, and we had to set up a workaround so everyone could see the speeches and get the content. The pipe is wild. What’s happening now is we’re breaking through. The brand is actually now breaking through, and this one platform for AI business transformation is coming across at the C-suite. The CEOs are getting the picture. Many of them have killed these proof-of-concept scenarios. One had 900 proof of concepts going on in the company and said it was uncontrollable and they killed them all, and they went with ServiceNow. I think we're really breaking through. As it relates to the linearity. I would say the linearity is historically consistent. I think it's going to get even better when you think about the bookings and the step-ins and the hockey stick around the assist as the tokens are used, then they get reloaded, and that is the hockey stick that's built into the model. Yes, I see a 55x growth since May in the assist as clear indication that the customer is deriving unique value from the platform. Yes, I think that tsunami is going to increase and pick up even more.

Aleksandr Zukin, Analyst

Wonderful and amazing. Gina, maybe for you, the renewal cohort in Q4 that's been, I think, a headwind to cRPO growth. Anything that stands out positive from this large renewal cohort that wasn't initially expected this quarter, like whether it's a greater willingness to expand with Pro Plus? And anything to think through there as we incorporate the prudence in the guidance?

Gina Mastantuono, President and Chief Financial Officer

We had a 250 basis point increase in cRPO in Q3, with about half of that coming from the team's proactive efforts to pull some of the cohort renewals into Q3 from Q4. This not only improved our Q3 results but also gives us strong momentum heading into Q4, as we now have a head start on the large renewal cohort that will be due next quarter. We also saw improved Plus attach rates in Q3, which continue to strengthen. I'm very optimistic about the renewal cohort, and we are seeing strong renewal rates as well. Echoing Bill's comments, demand trends are looking very healthy, and our pipeline for Q4 is robust. We are confident in our guidance and optimistic about translating the full revenue beat in Q3 into the full year. Additionally, raising the bottom line guidance by 50 basis points on operating margin and 200 basis points on free cash flow showcases both the demand we're experiencing and the internal AI efficiencies that are aiding in our bottom line growth alongside impressive top line growth.

Operator, Operator

Your next question comes from the line of Tyler Radke with Citi.

Tyler Radke, Analyst

You talked about some pretty astounding consumption increases, 55x. Can you just talk to what you think is sort of driving that type of consumption? I mean, I imagine it's pretty broad-based, but if you're seeing that outsized in a particular vertical or use case. And then you talked about $500 million of Now Assist ACV by year-end. Just any sense on kind of how that tracks to your original expectations and what the upside could look like on the $1 billion target next year?

Amit Zavery, President and Chief Product Officer and Chief Operating Officer

Tyler, I'll take that. This is Amit here. So on the consumption, the way things have worked very well for us is that once our customers start using Agentic workflows. Once you're doing Agentic, you are starting to use a lot more of the Assist because you’re making a lot of calls back and forth to the different processes and automating those systems. So the volume you require for those Agentic use cases is like 10x, 5, 12x depending on each of the calls. That's where the growth has been. When we provided these prepackaged Agentic workflows to a customer, they’re going live faster. They’re starting to use those things quickly. This quarter already, we started seeing so many customers go live, and that's where the usage goes up much higher than we had before, where it was more of an idea of summarization and things like that. Agentic is really the game changer for our consumption business, and customers who have gotten on the Now Assist packages are starting to apply and reuse them more regularly. They’re unlocking new use cases as well, incident management, triaging, helping customers solve a lot of the requests around the customer issue. Those use cases are very complex and require a lot of work behind the scenes, but the automation happens, and that's where the hockey stick starts happening for our use cases as well.

William McDermott, Chairman and Chief Executive Officer

May I just give you a couple of examples, and we'll turn it over to Gina on the math. Think about it this way. Lenovo, a very well-known, fantastic brand. They're resolving cases 35% faster, and they achieved a 100% customer satisfaction score with the Now Assist deployment. Bell, a leading Canadian telecom company, you know them well. They're deflecting more than 3 million customer support calls annually and automating 90% of dispatch-related tasks now on Now Assist agents. Griffith University in Australia, they've adopted the enterprise service management approach to enable easy-to-use services for students and the staff that serve those students, deploying AI across ITSM and customer service management functions, leading to an 87% increase in overall self-service rate. Follow me, the CMDB competitive advantage that ServiceNow has in the marketplace has led us into with this Agentic AI cross-functional support on the platform to new use cases in all functions of corporations. That is only a ServiceNow-enabled skill. No other platform can do that. I think that's really reason to believe.

Gina Mastantuono, President and Chief Financial Officer

And then lastly, to your question on how the ACV for Now Assist is tracking. Yes, we're on pace to exceed $0.5 billion by the end of the year, which is tracking ahead of where we thought we'd be. You heard Bill and Amit talk about our Assist tracking faster and growing faster than we planned. So we are well on our way to that $1 billion. I'm not going to up the guide at this point, but you can expect that we will continue to track ahead of plan and continue to see pretty incredible traction for all of our AI products.

Operator, Operator

Your next question comes from the line of Michael Turrin with Wells Fargo.

Michael Turrin, Analyst

Gina, the 3Q results, as you're alluding to, are impressive, especially given the uncertainty the company has been navigating throughout the year. The one question we're getting is around the fourth-quarter subscription revenue guide for 18%. That number is a touch lower than where the cRPO growth rates overall seem to be settling. So just any context you can give us to help bridge those 2 metrics? Is that public sector comment you're making more specifically tied to the fourth-quarter guide? Or are there other assumptions just given renewal dynamics and a few months that we know are very important for the company to be mindful of as well?

Gina Mastantuono, President and Chief Financial Officer

So yes, public sector will be a factor in there. One thing I think is important, the full Q3 revenue beat we put into the full year. Remember that the full year is higher, and we raised not only in Q3, but we also raised in Q2. The other piece that I would say is on-prem is definitely a factor a bit in Q4, and so that's a piece that you need to understand, too.

Operator, Operator

Your next question comes from the line of Kirk Materne with Evercore ISI.

S. Kirk Materne, Analyst

I'll echo the congrats on the quarter. Bill, you mentioned that some of the bigger enterprises are starting to get rid of some of these pilot projects with AI, which would seem to lead to more consolidation to platforms like yours. I was just wondering when you're talking to CEOs about AI, how important is it to be able to talk about AI and workflow from an industry context, meaning you all obviously have specialization in areas like government, financial services. How important is the fact that you can bring solutions that address specific industry workflow pain points as well as just more horizontal? Just curious on your thoughts on that.

William McDermott, Chairman and Chief Executive Officer

It's a great question, Kirk. There's no question that customers expect not for you to know their industry; they want you to know their industry cold. They also want you to understand before you show up their mission-critical processes, the objectives of the company, and to be very specific and pointed on exactly how your technology is going to move their needle. We use our own AI platform to do that for every seller in the company. When we show up, we show up with that domain expertise, the deep list of logos, and we can get extraordinarily specific about what we're doing with the platform and what we could do for them. We've also thought about that in the coverage model and how we go to market. So where you have critical mass or you have large customers in a cohort like financial services, public sector, as an example, telco, high-tech manufacturing, and so forth, we try to structure the coverage model that way. All the things that we do in the command center behind the scenes are always industry-specific. Amit, you may want to build on that.

Amit Zavery, President and Chief Product Officer and Chief Operating Officer

Yes. So Kirk, other things we do is we have a team focused on industry solutions. They build out data models, which are very specific to a particular industry. For example, we do retail store operations with Ulta Beauty, where our Agentic flows are built specifically for managing a retail store, including maintenance, lifecycle, and cases the retail store operator requires help with because we built that into our Agentic platform and not just a generic offering but very specific to that use case. We can go live faster, as we’re doing for other industries as well, including manufacturing, industrial production, and healthcare. We partner with companies that have good domain expertise to build joint solutions we can take to market in that area, for example, we did things for financial services with Visa for dispute management, which is built together on our industry data model that every customer can take advantage of. There are a lot of activities; it’s not just a generic platform.

Operator, Operator

Your next question comes from the line of Keith Weiss from Morgan Stanley.

Unknown Analyst, Analyst

This is Ryan Lance on for Keith Weiss. I guess I'm just curious if there's any updates around MoveWorks and if there are any changes in how you're thinking about that process closing? And I guess just on that, I mean, the Now Assist performance has been really encouraging. So I'm just curious if you could provide some additional thoughts around what MoveWorks brings to the table to continue to strengthen that AI suite.

Gina Mastantuono, President and Chief Financial Officer

Thank you very much. Regarding MoveWorks, we anticipate closing that deal towards the end of Q4. We are very enthusiastic about the potential that MoveWorks will bring to us. However, it’s important to highlight that the impressive results we've achieved with Now Assist have been entirely due to our own efforts, independent of MoveWorks. As we look ahead to 2026, the combination of ServiceNow and MoveWorks will enhance the value we can offer to our customers. I will allow Amit to share more details about the contributions of MoveWorks.

Amit Zavery, President and Chief Product Officer and Chief Operating Officer

As Gina mentioned, our initial thesis around MoveWorks still remains the same. We're looking at a company that brings a lot of good AI expertise and talent to help us accelerate our roadmap. However, we've been doing a lot of work, as evidenced by our new capabilities with the Zurich release and the developments we're making around the AI lens and other projects we've launched today. Those advancements are all progressing well. Customers are appreciating them, and adoption has been great. As MoveWorks comes on board, we will, of course, accelerate more initiatives together, but nothing is currently dependent on it.

Operator, Operator

Your next question comes from the line of Peter Weed with Alliance Bernstein.

Peter Weed, Analyst

I think one of the really innovative and exciting opportunities you've been talking about is the AI control tower. I wanted to kind of pick your brain on how you see the demand from buyers. Is this a type of thing where people are investing in the control tower as they start on their AI journey? Or does the buyer really need to get to kind of a certain maturity level before they realize its need and then they kind of come back and invest in it? How does the commercial ramp and how material can this opportunity be for ServiceNow over time?

Amit Zavery, President and Chief Product Officer and Chief Operating Officer

Yes. So Peter, on the AI control tower, it's been one of the biggest interest from any customer we speak to because every customer, when they're thinking of AI adoption and Agentic, they're worried about control. They don't know how to manage the security. They don't know what to do with trust, safety, and regulatory requirements. The AI control tower solves that problem. As soon as we start talking to customers, it resonates instantly. That's why our business in this area and customer base grew 4x in this quarter itself; there's so much proliferation of different pieces of technologies out there in customer bases, and they need something that can control it and manage it for them. Just like we were doing that for various assets, we're doing it for AI. What we've done is integrated all the different systems out there to give full visibility and control. That resonates greatly, and that's where the growth is coming from. If you look at our risk business and security business, the AI control tower is pulling that into a lot more conversations than we would otherwise have because of our end-to-end capability around security, risk, compliance, giving you full lifecycle control and cost management around AI. We are very heterogeneous end-to-end, and that's where new use cases are emerging from, driving a lot of consumption. As you said, the business will continue to grow in this area because we’re probably the only provider like this in the industry today.

William McDermott, Chairman and Chief Executive Officer

To build on that, Peter, I recently went on a trip in Europe, and take great companies like AstraZeneca; they're using the control tower to manage and govern all their AI initiatives at scale. They have implemented ServiceNow's agentic AI across the organization to drive employee productivity. They want to free up time for innovation to double the medicines that they bring to market faster than any competitor. I think Amit nailed it, but I would also say especially when you get to Europe and Asia, ethical, compliant and secure is really radiating as important attributes of our platform. They see what's going on in the headlines with security challenges out there, and that's what this unified architecture does. It's AI, but it's ethical compliance, secure, and you can coordinate all your efforts across legal, security functions, internal audit, IT. These are really important matters. The AI control tower will give organizations that clean pane of glass, that simple control tower to drive AI strategy, governance, management, and performance across all their AI investments. This AI sprawl that's gone on right now, whether it’s built in-house proof of concepts or externally sourced dreams that haven't quite worked out are really getting cleaned up by the AI control tower in this platform. A single governance framework is absolutely a breakthrough for enterprises; they all appreciate it at the C-suite.

Operator, Operator

Your next question comes from the line of Bradley Sills with Bank of America Securities.

Bradley Sills, Analyst

I wanted to ask a question also on Now Assist, just given the momentum you're seeing here. I wanted to get your thoughts on the pricing change earlier this year. Do you feel like that has been well received? Has that been an unlock for you as you're starting to see some of the momentum here? Do you have the right pricing model in place? Do you feel that way? And then also some of the deal metrics you mentioned sound like you're getting to a place where you probably have some pretty decent lighthouse accounts for reference with Now Assist. Do you feel that that could be a catalyst for more Now Assist deals to come?

Amit Zavery, President and Chief Product Officer and Chief Operating Officer

Brad, so the pricing we introduced for Now Assist and this idea of combination of subscription and consumption, a hybrid model, has been very well received by our customers. They like this idea of having flexibility as well as predictability in this model where we can give them the capability to adopt as they need to and then pay based on usage over time. If they run out of tokens, they can re-up as well. So that structure has worked perfectly for our customers. We're seeing a lot of interest in terms of adopting this kind of structure by other vendors because they’re seeing what we have done works very well for everyone today. We're very happy with the structure. It's already been playing out with the way we expected regarding consumption and the idea of adoption and usage going up very fast while we, of course, get the subscription revenue upfront. The combination has played out, and I think it's the right structure. We continue to add more to it with other products as well. So expect continuous that kind of structure going forward. As for our lighthouse accounts, there are a lot of customer examples we shared with you earlier, Ulta Beauty, AstraZeneca, City of Raleigh, who are doing a lot of deflections using Now Assist and adopting AI control tower to automate business processes.

William McDermott, Chairman and Chief Executive Officer

As a point of pride, when the world’s most valuable company is one of those lighthouses, it really touches my heart. Everyone at ServiceNow feels proud to say that NVIDIA runs ServiceNow. It’s super exciting.

Operator, Operator

Your next question comes from the line of Arjun Bhatia with William Blair.

Arjun Bhatia, Analyst

I had 2 questions, hopefully quick ones. Bill, first, I'm curious, in terms of where you see interest in adoption, is there a particular workflow that sticks out or that customers are adopting first? Is it IT, and then you see them expand to customer and HR and other workflows for your analysis SKUs? And then the second question, just in terms of monetization. Gina, I'm curious if the $500 million you have planned is by the end of the year. How much of that is the subscription uplift piece versus token consumption? Or should we think of consumption layering in more in 2026?

William McDermott, Chairman and Chief Executive Officer

Thank you very much for the question, Arjun. I’ll start and then give it to Amit, but I’ll just focus on the category of CRM, if I might. It’s fascinating to see what’s happening and how quickly that dynamic is changing because of AI. I recently met a CEO of one of the largest companies in the world, one of the most prestigious companies in the world. They also retail very glamorous, wonderful products globally. The conversation revolved around social media and the idea of TikTok and the real-time understanding of what's going on in the market, but also having a tremendous ability to use AI as a secure portal for the customer to configure, price, and quote all their online interests and have that fulfilled correctly to service that account and ensure customer longevity. The net present value of the loyalty effect remains every business's greatest asset. I explained how we did it, what was unique in an end-to-end platform and our AI. It was a single customer experience, and you could meet the customer where they are. In fact, you could automate that supply chain on the fly if you found that TikTok ad hit a strike zone for you. He was like, 'Oh, wow, this is a whole different conversation because this is what I’m doing now, this is how my people are spending their time, and this is the fragmented nature of customer relationships across multiple clouds.' I said, I understand. He said, 'Please, can you bring your people in right away?' I said, 'You got me. You don’t need anyone else. Let’s just do it.'

Amit Zavery, President and Chief Product Officer and Chief Operating Officer

I will just add that the interest we're seeing in autonomous IT, where you handle zero cases is becoming prominent. Similarly, security is a major use case for us—incident management for any issue inside the company, whether it’s with VPNs or security-related matters. The concept of triaging and case resolution for those workflows is crucial and customers are adopting it very quickly. This reduces costs, automates systems, improves efficiency, and enhances predictability in departmental operations as well. We’re performing similarly across HR, finance, and supply chain.

Gina Mastantuono, President and Chief Financial Officer

Regarding the $500 million expected ACV for Now Assist, we continue to see price uplift exceeding 30%. For the $500 million, we still view that as being primarily subscription rather than consumption at this stage; consumption will layer in more significantly in 2026, building that flywheel opportunity.

Operator, Operator

Thank you, everyone, for your questions. That concludes the Q&A session. Ladies and gentlemen, that concludes today's call. You may now disconnect. Thank you, and have a great day.