Revenue growth accelerated to 24.0% YoY in Q2 2026, but gross margin contracted to 70.7% from 77.5% a year earlier, and operating margin fell to 4.1%, reflecting AI-related cost pressures.
ServiceNow, Inc. (NOW) annual income statement — 16-year revenue, gross profit & net income history
| Metric | TTM | Dec'25 | Dec'24 | Dec'23 | Dec'22 | Dec'21 | Dec'20 | Dec'19 | Dec'18 | Dec'17 | Dec'16 | Dec'15 | Dec'14 | Dec'13 | Dec'12 | Jun'11 | Jun'10 |
|---|
| Sales/Revenue | 14.73B | 13.28B | 10.98B | 8.97B | 7.25B | 5.9B | 4.52B | 3.46B | 2.61B | 1.93B | 1.39B | 1.01B | 682.56M | 424.65M | 243.71M | 92.64M | 43.33M |
| Revenue Growth % | 22.19% | 20.88% | 22.44% | 23.82% | 22.88% | 30.46% | 30.6% | 32.64% | 34.96% | 39.02% | 38.29% | 47.31% | 60.74% | 74.24% | 163.07% | 113.81% | - |
| Cost of Goods Sold | 3.72B | 2.98B | 2.29B | 1.92B | 1.57B | 1.35B | 987.11M | 796.64M | 622.66M | 499.77M | 398.68M | 329.41M | 248.78M | 155.26M | 104.01M | 31.57M | 16.19M |
| COGS % of Revenue | - | 22.47% | 20.82% | 21.41% | 21.71% | 22.95% | 21.84% | 23.02% | 23.87% | 25.85% | 28.67% | 32.76% | 36.45% | 36.56% | 42.68% | 34.08% | 37.37% |
| Gross Profit | 11.02B | 10.29B | 8.7B | 7.05B | 5.67B | 4.54B | 3.53B | 2.66B | 1.99B | 1.43B | 991.83M | 676.07M | 433.79M | 269.39M | 139.7M | 61.07M | 27.14M |
| Gross Margin % | 74.77% | 77.53% | 79.18% | 78.59% | 78.29% | 77.05% | 78.16% | 76.98% | 76.13% | 74.15% | 71.33% | 67.24% | 63.55% | 63.44% | 57.32% | 65.92% | 62.63% |
| Gross Profit Growth % | - | 18.37% | 23.36% | 24.29% | 24.85% | 28.61% | 32.61% | 34.12% | 38.58% | 44.51% | 46.71% | 55.85% | 61.03% | 92.83% | 128.77% | 125.01% | - |
| Operating Expenses | 9.34B | 8.47B | 7.33B | 6.29B | 5.32B | 4.29B | 3.33B | 2.62B | 2.03B | 1.53B | 1.14B | 842.43M | 585.62M | 335.66M | 177.29M | 50.51M | 55.34M |
| OpEx % of Revenue | - | 63.8% | 66.76% | 70.09% | 73.39% | 72.69% | 73.76% | 75.76% | 77.76% | 79.39% | 82.32% | 83.78% | 85.8% | 79.04% | 72.74% | 54.52% | 127.72% |
| Selling, General & Admin | 6.07B | 5.51B | 4.79B | 4.16B | 3.55B | 2.89B | 2.31B | 1.87B | 1.5B | 1.16B | 859.4M | 625.04M | 437.36M | 256.98M | 137.95M | 43.5M | 48.14M |
| SG&A % of Revenue | - | 41.5% | 43.61% | 46.42% | 48.99% | 49% | 51.09% | 54.13% | 57.46% | 59.86% | 61.8% | 62.16% | 64.08% | 60.52% | 56.61% | 46.96% | 111.11% |
| Research & Development | 3.26B | 2.96B | 2.54B | 2.12B | 1.77B | 1.4B | 1.02B | 748.37M | 529.5M | 377.52M | 285.24M | 217.39M | 148.26M | 78.68M | 39.33M | 7M | 7.19M |
| R&D % of Revenue | - | 22.29% | 23.15% | 23.68% | 24.4% | 23.69% | 22.66% | 21.63% | 20.3% | 19.53% | 20.51% | 21.62% | 21.72% | 18.53% | 16.14% | 7.56% | 16.6% |
| Other Operating Expenses | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 3.53M | -341K | 244K | 251K | -350K | -100K | 0 | 0 | 0 | 0 |
| Operating Income | 1.68B | 1.82B | 1.36B | 762M | 355M | 257M | 198.86M | 42M | -42.43M | -101.41M | -422.81M | -166.37M | -151.84M | -66.27M | -37.58M | 10.56M | -28.2M |
| Operating Margin % | 11.4% | 13.74% | 12.42% | 8.49% | 4.9% | 4.36% | 4.4% | 1.21% | -1.63% | -5.25% | -30.41% | -16.55% | -22.24% | -15.61% | -15.42% | 11.4% | -65.08% |
| Operating Income Growth % | - | 33.72% | 79% | 114.65% | 38.13% | 29.23% | 373.48% | 199% | 58.17% | 76.01% | -154.14% | -9.57% | -129.13% | -76.32% | -455.91% | 137.45% | - |
| EBITDA | 2.75B | 2.56B | 1.83B | 1.32B | 697M | 729M | 469.86M | 244.5M | 105.77M | 11.49M | -339.73M | -106.01M | -109.78M | -42.12M | -24.08M | 12.03M | -27.83M |
| EBITDA Margin % | 18.67% | 19.3% | 16.65% | 14.76% | 9.62% | 12.36% | 10.4% | 7.07% | 4.05% | 0.59% | -24.43% | -10.54% | -16.08% | -9.92% | -9.88% | 12.99% | -64.23% |
| EBITDA Growth % | 24.71% | 40.08% | 38.14% | 89.96% | -4.39% | 55.15% | 92.17% | 131.15% | 820.89% | 103.38% | -220.47% | 3.43% | -160.66% | -74.91% | -300.12% | 143.23% | - |
| D&A (Non-Cash Add-back) | 1.07B | 738M | 465M | 562M | 342M | 472M | 271M | 202.5M | 148.2M | 112.9M | 83.08M | 60.36M | 42.06M | 24.15M | 13.51M | 1.47M | 369K |
| EBIT | 2.42B | 2.26B | 1.76B | 1.03B | 426M | 277M | 183M | 100.47M | 13.71M | -62.78M | -378.93M | -163.58M | -148.04M | -67.89M | -35.98M | 0 | 10.56M |
| Net Interest Income | 295M | 428M | 396M | 278M | 55M | -8M | 6.74M | 22.13M | -18.11M | -36.29M | -24.75M | -26.35M | -26.09M | 0 | 1.6M | 0 | 606K |
| Interest Income | 378M | 451M | 419M | 302M | 82M | 20M | 39M | 55.41M | 56.13M | 5.8M | 8.53M | 4.75M | 2.96M | 865K | 351K | 0 | 606K |
| Interest Expense | 83M | 23M | 23M | 24M | 27M | 28M | 33M | 33.28M | 52.73M | 53.39M | 33.28M | 31.1M | 29.06M | 4.93M | 0 | 0 | 0 |
| Other Income/Expense | 666M | 437M | 374M | 246M | 44M | -8M | -49M | 25M | 3.4M | -49.01M | -28.25M | -26.65M | -23.7M | -4.93M | 1.6M | 606K | -1.23M |
| Pretax Income | 2.35B | 2.26B | 1.74B | 1.01B | 399M | 249M | 150M | 67.19M | -39.02M | -149M | -450.05M | -193.01M | -175.54M | -71.2M | -35.98M | 11.17M | -29.43M |
| Pretax Margin % | 15.92% | 17.03% | 15.82% | 11.24% | 5.51% | 4.22% | 3.32% | 1.94% | -1.5% | -7.71% | -32.37% | -19.2% | -25.72% | -16.77% | -14.76% | 12.05% | -67.91% |
| Income Tax | 676M | 513M | 313M | -723M | 74M | 19M | 31M | -559.51M | -12.32M | 126K | 1.75M | 5.41M | 3.85M | 2.51M | 1.37M | 1.34M | 280K |
| Effective Tax Rate % | 28.82% | 22.69% | 18.01% | -71.73% | 18.55% | 7.63% | 20.67% | -832.79% | 31.57% | -0.08% | -0.39% | -2.81% | -2.19% | -3.53% | -3.8% | 11.96% | -0.95% |
| Net Income | 1.67B | 1.75B | 1.43B | 1.73B | 325M | 230M | 119M | 626.7M | -26.7M | -149.13M | -451.8M | -198.43M | -179.39M | -73.71M | -37.35M | 9.83M | -29.7M |
| Net Margin % | 11.34% | 13.16% | 12.97% | 19.3% | 4.49% | 3.9% | 2.63% | 18.11% | -1.02% | -7.71% | -32.49% | -19.73% | -26.28% | -17.36% | -15.32% | 10.61% | -68.56% |
| Net Income Growth % | 0.54% | 22.67% | -17.68% | 432.62% | 41.3% | 93.28% | -81.01% | 2446.83% | 82.09% | 66.99% | -127.69% | -10.61% | -143.38% | -97.35% | -479.94% | 133.09% | - |
| Net Income (Continuing) | 1.67B | 1.75B | 1.43B | 1.73B | 325M | 230M | 119M | 626.7M | -26.7M | -116.85M | -451.8M | -198.43M | -179.39M | -73.71M | -37.35M | 9.83M | 9.83M |
| Discontinued Operations | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Minority Interest | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| EPS (Diluted) | 1.61 | 1.67 | 1.37 | 1.68 | 0.32 | 0.23 | 0.12 | 0.64 | -0.03 | -0.17 | -0.55 | -0.25 | -0.25 | -0.11 | -0.06 | 0.02 | -0.05 |
| EPS Growth % | 0.63% | 21.9% | -18.45% | 425% | 39.13% | 91.67% | -81.13% | 2220% | 82.76% | 68.36% | -116.54% | -3.25% | -127.78% | -86.21% | -434.49% | 134.68% | - |
| EPS (Basic) | - | 1.69 | 1.38 | 1.70 | 0.32 | 0.23 | 0.12 | 0.67 | -0.03 | -0.17 | -0.55 | -0.25 | -0.25 | -0.11 | -0.06 | 0.02 | -0.05 |
| Diluted Shares Outstanding | 1.04B | 1.05B | 1.04B | 1.03B | 1.02B | 1.02B | 1.01B | 986.12M | 889.23M | 855.88M | 822.67M | 778.53M | 726.78M | 677.08M | 634.46M | 567.15M | 601.5M |
| Basic Shares Outstanding | 1.03B | 1.04B | 1.03B | 1.02B | 1.01B | 990.47M | 965.48M | 932.33M | 889.23M | 855.88M | 822.67M | 778.53M | 726.78M | 677.08M | 634.46M | 567.15M | 601.5M |
| Dividend Payout Ratio | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - |
Quick answers to the most common questions about buying NOW stock.
For fiscal year 2025, ServiceNow, Inc. (NOW) reported total revenue of $13.28B. This represents a 30544.6% increase compared to $43.3M in 2010.
ServiceNow, Inc. (NOW) is profitable, generating $1.75B in net income for the fiscal year ending 2025 with a net profit margin of 13.2%.
ServiceNow, Inc. (NOW) reported an operating income of $1.82B, resulting in an operating profit margin of 13.7%. This margin reflects the operational efficiency of the business before interest and taxes.
ServiceNow, Inc. (NOW) generated $10.29B in gross profit for the year, representing a gross profit margin of 77.5%. This demonstrates the company's core pricing power and production efficiency.
Key Metrics
Top Statement Risk
AI competition and margin pressure
Metrics are mathematically derived from official filings.
Revenue Growth Reaccelerates on AI Demand
ServiceNow's Q2 2026 revenue grew 24.0% year-over-year to $3.99B, accelerating from 22.1% in Q1, according to reported financials, signaling sustained enterprise demand for AI-driven workflow automation.
The sequential acceleration in revenue growth, from 22.1% to 24.0%, suggests that the company's AI-enhanced Pro Plus tiers are gaining traction, potentially expanding the total addressable market beyond traditional IT service management. This growth rate outpaces key peers like Salesforce (9.6%) and Workday (13.1%), indicating that ServiceNow is capturing disproportionate share of enterprise software spending. However, investors should monitor whether this acceleration is sustainable as the company laps tougher comparisons and faces increasing competition from Microsoft's bundled offerings.
Gross Margin Dip Signals AI Cost Pressures
Gross margin contracted to 70.7% in Q2 2026 from 77.5% a year earlier, as reported in the income statement, suggesting that AI-related compute costs and potential one-time items are pressuring the company's historically strong profitability.
The 680 basis point year-over-year decline in gross margin is a significant deviation from the stable 77-79% range observed over the prior eight quarters. This may indicate that the company is absorbing higher costs associated with AI infrastructure, such as GPU compute and data center expansion, which could persist if AI adoption scales. While management may view this as an investment in future growth, the margin compression warrants close monitoring, as it could signal a structural shift in the cost profile of delivering AI-powered services.
Operating Leverage Reverses as Costs Surge
Operating margin fell to 4.1% in Q2 2026 from 11.1% in Q2 2025, based on reported figures, as operating expenses grew faster than gross profit, indicating a temporary breakdown in the company's historical operating leverage.
The dramatic drop in operating margin, despite a 24% revenue increase, suggests that the company is aggressively investing in R&D and sales capacity to capture the AI opportunity. R&D expenses grew 24.7% year-over-year, while SG&A grew 21.4%, outpacing gross profit growth of 12.0% (calculated from the data). This implies that the company is prioritizing market share and product leadership over near-term profitability, a strategy that may pay off if AI-driven demand persists. However, the elevated cost base could pressure margins if growth decelerates, and investors should watch for a return to operating leverage in coming quarters.
Earnings Quality Clouded by SBC and Tax Anomalies
Net income of $298M in Q2 2026 was boosted by a tax benefit, while stock-based compensation of $652M exceeded net income, according to the income statement, highlighting the gap between GAAP earnings and cash generation.
The effective tax rate in Q2 2026 appears to be negative, as net income ($298M) exceeded operating income ($162M), likely due to a one-time tax benefit or discrete item. This inflates reported EPS and masks the underlying operating weakness. Additionally, SBC of $652M is more than double net income, suggesting that a significant portion of employee compensation is non-cash and dilutive to shareholders. Investors should focus on free cash flow and non-GAAP metrics to assess the company's true earnings power, as GAAP profitability is heavily influenced by non-operating items.
R&D and S&M Spending Accelerate to Fuel AI
R&D and SG&A expenses grew 24.7% and 21.4% year-over-year in Q2 2026, respectively, as reported in the income statement, reflecting management's decision to invest heavily in AI product development and go-to-market expansion.
The combined increase in operating expenses, which grew faster than revenue, indicates that ServiceNow is in an investment cycle to maintain its competitive edge in AI-driven workflow automation. R&D spending as a percentage of revenue rose to 22.9% from 22.7% a year ago, while SG&A remained elevated at 42.6% of revenue. This suggests that the company is not yet realizing economies of scale in its cost structure, and margin expansion may be delayed until these investments mature. The high SBC component within these expenses also raises questions about the true cash cost of this growth strategy.
AI Cost Pressures Could Undermine Growth Premium
The sharp decline in gross and operating margins in Q2 2026, as per the income statement, may indicate that AI integration is more costly than anticipated, potentially eroding the company's premium valuation if not transient.
Short-sellers could argue that the margin compression is not a one-time blip but a structural shift, as AI capabilities require ongoing compute and data infrastructure investments. If gross margins continue to trend downward, the company's ability to achieve the 'Rule of 60' (revenue growth + operating margin) may be compromised, leading to a de-rating. Additionally, competition from Microsoft's Power Platform, which can bundle AI features with Azure, could pressure pricing power. While ServiceNow's unified platform remains a differentiator, the market may begin to question whether the growth premium justifies the margin risk.