20260130-招银国际-4Q25_results_solid_AI_business_and_margin_expansion_5页_663kb

ServiceNow (NOW US) Summary

Core Content

ServiceNow reported its 4Q25 financial results, highlighting strong performance in its AI business and margin expansion. The company exceeded expectations in several key metrics, including subscription revenue and cRPO growth, which were driven by AI-enhanced efficiencies and disciplined expense control. The firm also noted significant progress in its AI product line, particularly with Now Assist ACV surpassing US$600 million in the quarter, ahead of its previous target.

Main Points

Financial Performance in 4Q25

• Total Revenue: Increased by 21% YoY to US$3.57 billion, matching the Bloomberg consensus estimate.
• Non-GAAP Operating Income: Rose by 26% YoY to US$1.10 billion, surpassing the consensus estimate by 3%.
• Subscription Revenue: Grew by 21% YoY to US$3.47 billion.
• cRPO (constant revenue per order): Increased by 21% YoY in constant currency to US$12.85 billion, 200 basis points above company guidance.
• Vertical Growth: The transportation & logistics, business & consumer services, and financial services verticals saw net new ACV growth of over 80%, 70%, and 40% YoY, respectively.

AI Business Momentum

• Now Assist ACV: Surpassed US$600 million in 4Q25, with a target of US$1 billion by the end of FY26.
• AI Control Tower: Exceeded initial targets by over 4 times for FY25.
• Customer Engagement: Hybrid monetization model increased customer consumption and sales of Assist Packs.
• Renewal Upsell: Over 70% upsell expansion in Customer Service Now Assist deals.
• Product Adoption: The number of deals with 5 or more Now Assist products grew by over 10 times YoY.

Margin Expansion

• Non-GAAP Operating Margin (OPM): Expanded by 1.4 percentage points YoY to 30.9% in 4Q25.
• Non-GAAP OPM Forecast: Expected to expand to 32.0% in FY26E and further to 33.0% and 33.9% in FY27E and FY28E, respectively.

Share Repurchase

• Share Repurchase Plan: Announced an additional US$5 billion share repurchase plan, including an accelerated repurchase of US$2 billion (approximately 1% of current market cap).

M&A Strategy

• Recent Acquisitions: Acquired Armis and Veza to complement security and agentic AI solutions.
• TAM Expansion: Expanded total addressable market (TAM) to over US$600 billion.
• Future M&A: No large-scale M&A planned at the moment.

Key Financial Forecasts

FY26E Revenue Guidance

• Subscription Revenue: Expected to grow by 20.5%–21% YoY to US$15.53–15.57 billion.
• Non-GAAP OPM: Projected to expand to 32.0%.
• Non-GAAP Net Profit: Forecasted to reach US$4.5 billion.
• Non-GAAP EPS: Expected to be US$4.3.

FY27E and FY28E Projections

• Revenue: Projected to grow to US$19.1 billion and US$22.5 billion, respectively.
• Non-GAAP OPM: Projected to expand to 33.0% and 33.9%, respectively.
• Non-GAAP Net Profit: Projected to reach US$5.5 billion and US$6.6 billion, respectively.
• Non-GAAP EPS: Expected to be US$5.2 and US$6.3, respectively.

Valuation

• Target Price: Set at US$215.00 per share, based on a 40x EV/EBITDA multiple for FY26E.
• Previous Target Price: US$236.00 based on a 45x EV/EBITDA multiple.
• EV/EBITDA Valuation:
  • FY26E: Target EV is US$222.87 billion, with a valuation per share of US$215.00.
  • Adjusted EBITDA: US$5.57 billion.
• Sector Valuation: The target EV/EBITDA is a premium to the sector average (29x), justified by strong earnings growth outlook over 2026–2028E.

Performance Metrics

• P/S (Price-to-Sales): 11.1 (FY24A), 9.2 (FY25A), 7.7 (FY26E), 6.4 (FY27E), 5.4 (FY28E).
• P/E (Price-to-Earnings): 84.3 (FY24A), 69.2 (FY25A), 52.5 (FY26E), 40.1 (FY27E), 30.8 (FY28E).
• Growth Forecasts:
  • Revenue CAGR (2025–2027E): 20.3%–20.9%.
  • Operating Profit CAGR: 43.8%–36.0%.
  • Adj. Net Profit CAGR: 23.2%–21.1%.

Analyst Recommendations

• CMBIGM Rating: BUY.
• Target Price: US$215.00.
• Current Price: US$116.73.
• Upside/Downside: 84.2%.

Shareholding and Stock Data

• Market Cap (US$ million): 122,216.3.
• Average 3-Month Trading Value (US$ million): 946.0.
• 52-Week High/Low (US$): 782.39 / 116.73.
• Total Issued Shares (million): 1,047.0.

Shareholding Structure

• BlackRock: 8.8%.
• The Vanguard Group: 8.7%.

Analyst Disclosures

• Analyst Certification: The research analyst certifies that the views expressed reflect personal opinions and that there are no conflicts of interest affecting the report's objectivity.
• CMBIGM Ratings:
  • BUY: Stock with potential return of over 15% over next 12 months.
  • HOLD: Stock with potential return of +15% to -10% over next 12 months.
  • SELL: Stock with potential loss of over 10% over next 12 months.
  • NOT RATED: Stock not rated by CMBIGM.
  • OUTPERFORM: Industry expected to outperform the relevant broad market benchmark.
  • MARKET-PERFORM: Industry expected to perform in-line with the relevant broad market benchmark.
  • UNDERPERFORM: Industry expected to underperform the relevant broad market benchmark.

Important Disclosures

• Investment Risks: There are risks involved in transacting in any securities. The information may not be suitable for all investors.
• No Investment Advice: CMBIGM does not provide individually tailored investment advice.
• Liability Disclaimer: CMBIGM and its affiliates are not liable for any loss, damage, or expense incurred in relying on the information.
• Use Restrictions: This report is for the use of intended recipients only and may not be reproduced or distributed without prior written consent.

Regulatory Information

• United Kingdom: The report is provided only to persons falling within specific legal categories.
• United States: Not a registered broker-dealer; report is for "major US institutional investors" only.
• Singapore: Distributed by CMBISG, an exempt financial adviser, with legal responsibility only to the extent required by law.