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Item 1. Financial Statements

2025-04-23 compared with 2024-10-24 · 136 added, 199 removed, 436 unchanged (43% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except number of shares which are reflected in thousands)

September 30, 2024 December 31, 2023

(in millions, except number of shares which are reflected in thousands and per share data)

March 31, 2025 December 31, 2024

Assets (unaudited)

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(in millions, except number of shares which are reflected in thousands and per share data)

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

Three Months Ended March 31,

Subscription $ 3,005 $ 2,523

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Income before income taxes 555 425

Provision for (benefit from) income taxes 84 57 234 ( 775 )

Provision for income taxes 95 78

Net income $ 460 $ 347

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Weighted-average shares used to compute net income per share - diluted 209,371 207,684

Other comprehensive income (loss):

Other comprehensive loss:

Foreign currency translation adjustments $ 36 $ ( 30 )

Unrealized gain (loss) on investments, net of tax

60 ( 2 ) 44 ( 4 )

Unrealized loss on derivative instruments, net of tax ( 52 ) — ( 30 ) —

Other comprehensive income (loss)

58 ( 66 ) 17 ( 55 )

Unrealized gains (losses) on investments, net of tax

Unrealized (losses) gains on derivative instruments, net of tax ( 52 ) 12

Other comprehensive loss

Comprehensive income

$ 490 $ 176 $ 1,058 $ 1,381

(1) Includes stock-based compensation as follows:

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

Three Months Ended March 31,

Cost of revenues:

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(in millions, except number of shares which are reflected in thousands)

Three Months Ended September 30, 2024 Three Months Ended September 30, 2023

Three Months Ended March 31, 2025

Common Stock Treasury Stock Additional

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Stockholders’

Equity Common Stock Treasury Stock Additional

Capital Retained Earnings Accumulated

Comprehensive Loss Total

Stockholders’

Shares Amount Shares Amount Shares Amount Shares Amount

Shares Amount Shares Amount

Balance at beginning of the period 208,151 $ — ( 1,664 ) $ ( 1,219 ) $ 7,402 $ 3,494 $ ( 68 ) $ 9,609

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Stock-based compensation — — — — 470 — — 470

Other comprehensive income (loss), net of tax — — — — — — 58 58 — — — — — — ( 66 ) ( 66 )

Other comprehensive loss, net of tax — — — — — — ( 2 ) ( 2 )

Net income — — — — — 460 — 460

Balance at end of the period 208,952 $ — ( 1,973 ) $ ( 1,513 ) $ 7,768 $ 3,954 $ ( 70 ) $ 10,139

Nine Months Ended September 30, 2024 Nine Months Ended September 30, 2023

Three Months Ended March 31, 2024

Common Stock Treasury Stock Additional

2 unchanged sentences

Stockholders’

Equity Common Stock Treasury Stock Additional

Capital Retained Earnings Accumulated

Comprehensive Loss Total

Stockholders’

Shares Amount Shares Amount Shares Amount Shares Amount

Shares Amount Shares Amount

Balance at beginning of the period 205,619 $ — ( 895 ) $ ( 535 ) $ 6,131 $ 2,069 $ ( 37 ) $ 7,628

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Stock-based compensation — — — — 422 — — 422

Other comprehensive income (loss), net of tax — — — — — — 17 17 — — — — — — ( 55 ) ( 55 )

Other comprehensive loss, net of tax — — — — — — ( 31 ) ( 31 )

Net income — — — — — 347 — 347

4 unchanged sentences

(in millions)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

21 unchanged sentences

Sales and maturities of investments 1,181 1,073

Other 25 ( 15 )

Net cash used in investing activities $ ( 217 ) $ ( 734 )

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to make work flow better.

Our intelligent platform, the Now Platform, is a cloud-based solution with embedded artificial intelligence and machine learning capabilities that helps global enterprises across industries, universities and governments unify and digitize their workflows.

Our intelligent platform, the Now Platform, is a cloud-based solution that helps enterprises and organizations across public and private sectors digitize workflows, in line with our purpose of making the world work better for everyone.

Our workflow applications built on the Now Platform are organized along four primary areas:

Technology, Customer and Industry, Employee and Creator.

Technology, CRM and Industry, Core Business and Creator.

The products under each of our workflows help customers connect, automate and empower work across systems and silos to enable great outcomes for businesses and great experiences for people.

The Now Platform orchestrates work across our customers’ cloud platforms and systems of choice, allowing our customers to get work done regardless of their current and future preferred systems of record and collaboration platforms.

The Now Platform is the AI platform for digital transformation.

As the foundation for how we deliver our cross-enterprise digital workflows, the Now Platform orchestrates work across our customers’ cloud platforms and systems of choice, allowing them to get work done regardless of their current and future preferred systems of record and collaboration platforms.

(2) Summary of Significant Accounting Policies

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As a result of displaying amounts in millions, rounding differences may exist in the condensed consolidated financial statements and footnote tables.

The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for other interim periods or future years.

The results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results to be expected for the year ending December 31, 2025 or for other interim periods or future years.

The condensed consolidated balance sheet as of December 31, 2024 is derived from audited consolidated financial statements;

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Actual results could differ from those estimates.

In January 2024, we completed an assessment of the useful life of our data center equipment and determined we should increase the estimated useful life of data center equipment from four years to five years .

This change in accounting estimate was effective beginning fiscal year 2024.

Based on the carrying amount of data center equipment included in property and equipment, net as of December 31, 2023, the effect of this change in estimate for the three and nine months ended September 30, 2024, was a reduction in depreciation expense of $ 24 million and $ 81 million, respectively, and an increase in net income of $ 21 million and $ 65 million, or $ 0.10 and $ 0.31 per share basic and $ 0.10 and $ 0.31 per share diluted, respectively.

Significant Accounting Policies

We have incorporated two updates to our significant accounting policies during the nine months ended September 30, 2024.

The first is the change in useful life of our data center equipment discussed above and the second is related to our cash flow hedging program initiated during the quarter ended March 31, 2024 to hedge a portion of our forecasted foreign currency denominated revenues as discussed below.

There were no other updates to our significant accounting policies disclosed in “Note 2 – Summary of Significant Accounting Policies” of our Annual Report on Form 10-K for the year ended December 31, 2023.

Derivative Financial Instruments

Cash flow hedging

We record derivatives at fair value as either assets or liabilities on our condensed consolidated balance sheets.

For derivative contracts entered into to hedge a portion of our forecasted foreign currency denominated revenues that are designated and qualify as cash flow hedges, the unrealized gain or loss on the derivative instrument is reported as a component of accumulated other comprehensive income (loss) and reclassified into earnings as subscription revenues when the hedged transaction affects earnings.

Derivatives not designated as hedging instruments are adjusted to fair value through earnings as other expense, net in the period during which changes in fair value occur.

The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions.

We also formally assess, both at the inception of the hedge, and on an ongoing basis, whether each derivative is highly effective in offsetting changes in cash flows of the hedged item.

Fluctuations in the value of the derivative instruments are generally offset by changes in the hedged item;

however, if it is determined that a derivative is not highly effective as a hedge or if a derivative ceases to be a highly effective hedge, the Company will discontinue hedge accounting prospectively for the affected derivative.

There were no significant changes to our significant accounting policies disclosed in “Note 2 – Summary of Significant Accounting Policies” of our Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on January 30, 2025.

Concentration of Credit Risk and Significant Customers

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We had one customer, a U.S.

federal channel partner and systems integrator, that represented 27 % of our accounts receivable balance as of September 30, 2024 and 11 % of our total revenues for each of the three and nine months ended September 30, 2024.

federal channel partner and systems integrator, that represented 14 % and 12 % of our accounts receivable balance as of March 31, 2025 and December 31, 2024, respectively, and 12 % and 11 % of our total revenues for the three months ended March 31, 2025 and 2024, respectively.

Based on our periodic credit evaluations, there have been no historical collection concerns with this customer.

There were no customers that individually exceeded 10% of our accounts receivable balance as of December 31, 2023 or our total revenues for each of the three and nine months ended September 30, 2023.

For purposes of assessing concentration of credit risk and significant customers, a group of customers under common control or customers that are affiliates of each other are regarded as a single customer.

Revision of Prior Period Financial Statement s

Revision of Prior Period Financial Statements

During the quarter ended June 30, 2024, the Company identified an immaterial error in the condensed consolidated statements of cash flows for the period ended March 31, 2024 relating to a misclassification between investing cash outflows and financing cash outflows.

The second installment payment for a business combination completed during the quarter ended September 30, 2023, totaling $ 184 million, was incorrectly classified as an investing cash outflow instead of a financing cash outflow.

The Company determined that the error was not material to any previously issued financial statements and will revise such error in its Quarterly Report on Form 10-Q for the three months ending March 31, 2025.

The Company determined that the error was not material to any previously issued financial statements and revised the error in this Quarterly Report on Form 10-Q for the three months ended March 31, 2025.

(3) Investments

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The following is a summary of our available-for-sale debt securities recorded within short-term and long-term investments on the condensed consolidated balance sheets (in millions):

September 30, 2024

March 31, 2025

Losses Estimated

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Total available-for-sale debt securities $ 7,576 $ 18 $ ( 25 ) $ 7,569

As of September 30, 2024, the contractual maturities of our available-for-sale debt securities, excluding those securities classified within cash and cash equivalents on the condensed consolidated balance sheet and mortgage-backed and asset-backed securities that do not have a single maturity, did not exceed 37 months.

As of March 31, 2025, the contractual maturities of our available-for-sale debt securities, excluding those securities classified within cash and cash equivalents on the condensed consolidated balance sheet and mortgage-backed and asset-backed securities that do not have a single maturity, did not exceed 37 months.

The fair values of available-for-sale debt securities, by remaining contractual maturity, are as follows (in millions):

September 30, 2024

March 31, 2025

Due within 1 year $ 3,228

2 unchanged sentences

Total $ 7,563

As of September 30, 2024, unrealized losses of $ 16 million from available-for-sale debt securities are from securities in a continuous unrealized loss position greater than 12 months.

As of September 30, 2024, the fair value of available-for-sale debt securities in a continuous unrealized loss position totaled $ 1,419 million, the majority of which has been in a continuous unrealized loss position for greater than 12 months.

As of December 31, 2023, the fair value of available-for-sale debt securities in a continuous unrealized loss position totaled $ 3,731 million.

As of March 31, 2025 and December 31, 2024, unrealized losses of $ 16 million and $ 18 million, respectively, are from available-for-sale debt securities in a continuous unrealized loss position greater than 12 months.

As of March 31, 2025 and December 31, 2024, the fair value of available-for-sale debt securities in a continuous unrealized loss position totaled $ 1,329 million and $ 2,419 million, respectively, the majority of which has been in a continuous unrealized loss position for less than 12 months.

For all available-for-sale debt securities that were in unrealized loss positions, we have determined that it is more likely than not we will hold the securities until maturity or a recovery of the cost basis.

Unrealized losses on available-for-sale debt securities were due primarily to changes in market interest rates, and credit-related impairment losses were immaterial as of September 30, 2024.

Unrealized losses on available-for-sale debt securities were due primarily to changes in market interest rates, and credit-related impairment losses were immaterial as of March 31, 2025.

Non-Marketable Equity Investments

As of September 30, 2024 and December 31, 2023, the total amount of non-marketable equity investments in privately held companies included in other assets on our condensed consolidated balance sheets was $ 396 million and $ 268 million, respectively.

As of March 31, 2025 and December 31, 2024, the total amount of non-marketable equity investments in privately held companies included in other assets on our condensed consolidated balance sheets was $ 473 million and $ 469 million, respectively.

Our non-marketable equity investments are primarily accounted for using the measurement alternative, which measures the investments at cost, minus impairment, if any, plus or minus changes resulting from qualifying observable price changes resulting from the issuance of similar or identical securities in an orderly transaction by the same issuer.

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Recording upward and downward adjustments to the carrying value of our non-marketable equity investments as a result of observable price changes requires quantitative assessments of the fair value of our non-marketable equity investments using various valuation methodologies and involves the use of estimates.

The adjustments made during the three and nine months ended September 30, 2024 and 2023 were immaterial.

The adjustments made during the three months ended March 31, 2025 and 2024 were immaterial.

We classify these fair value measurements as Level 3 within the fair value hierarchy.

(4) Fair Value Measurements

The following table presents our fair value hierarchy for our assets measured at fair value on a recurring basis as of September 30, 2024 (in millions):

The following table presents our fair value hierarchy for our assets measured at fair value on a recurring basis as of March 31, 2025 (in millions):

Level 1 Level 2 Total

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Our non-marketable equity investments are not included in the table above and are discussed in Note 3.

See Note 8 for the fair value measurement of our derivative contracts and Note 10 for the fair value measurement of our long-term debt, which are also not included in the table above.

Our marketable equity investments are classified within Level 1 and were immaterial as of September 30, 2024 and December 31, 2023.

Refer to Note 8 for the fair value measurement of our derivative contracts and Note 10 for the fair value measurement of our long-term debt, which are also not included in the table above.

(5) Business Combinations

During the nine months ended September 30, 2024, we completed certain acquisitions for total purchase consideration of $ 81 million primarily to enhance our products with the acquired technology and engineering workforce.

Pending Business Combination

In March 2025, we signed a definitive agreement to acquire Moveworks, a privately-held company that provides agentic AI assistants that connect enterprise systems, for approximately $ 2.9 billion.

The determination of the final value of purchase consideration, payable in a combination of equity and cash, will depend on the Company's stock price at the close of the transaction, subject to customary purchase price adjustments.

The acquisition is expected to close during the second half of 2025, subject to customary regulatory approvals and closing conditions.

2024 Business Combinations

During the year ended December 31, 2024, we completed certain acquisitions for total purchase consideration of $ 112 million, primarily to enhance our products with the acquired technology and engineering workforce.

The acquisitions were not material to our condensed consolidated financial statements, either individually or in the aggregate.

On July 17, 2023, we acquired all outstanding shares of G2K Group GmbH, an artificial intelligence powered platform, for $ 465 million in a cash transaction.

The consideration was paid in two installments, with the first payment made in July 2023 and the second payment made in February 2024.

The acquisition is intended to enhance our Now Platform with the acquired smart Internet of Things technology, enabling businesses to intelligently action digital and in-store data with enterprise-grade workflows.

The purchase price was allocated based on the estimated fair value of the developed technology intangible asset of $ 75 million ( six-year estimated useful life), net tangible liabilities of $ 1 million, deferred tax liabilities of $ 23 million and goodwill of $ 414 million, which is not deductible for income tax purposes.

Goodwill is primarily attributed to the value expected from synergies resulting from the business combination.

The fair values assigned to tangible and intangible assets acquired, liabilities assumed and income taxes payable and deferred taxes are based on management’s estimates and assumptions.

We have included the financial results of these business combinations in the condensed consolidated financial statements from the date of acquisition, which were immaterial.

(6) Goodwill and Intangible Assets

The changes in the carrying amounts of goodwill were as follows (in millions):

Carrying Amount

Balance as of December 31, 2023 $ 1,231

Goodwill acquired 58

Foreign currency translation adjustments 2

Balance as of September 30, 2024 $ 1,291

(6) Intangible Assets

Intangible assets, net consists of the following (in millions):

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

Developed technology $ 625 $ 581

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Intangible assets, net $ 230 $ 209

The weighted-average useful life of the acquired developed technology for the nine months ended September 30, 2024 and 2023 was approximately five years .

Amortization expense for intangible assets for the three months ended September 30, 2024 and 2023 was $ 23 million and $ 21 million, respectively, and for the nine months ended September 30, 2024 and 2023 was $ 71 million and $ 63 million, respectively.

The following table presents the estimated future amortization expense related to intangible assets held at September 30, 2024 (in millions):

The weighted-average useful life of the acquired developed technology for the three months ended March 31, 2025 and 2024 was approximately five years .

Amortization expense for intangible assets for the three months ended March 31, 2025 and 2024 was $ 21 million and $ 24 million, respectively.

The following table presents the estimated future amortization expense related to intangible assets held at March 31, 2025 (in millions):

Years Ending December 31,

Remainder of 2025

Thereafter 14

Total future amortization expense $ 230

1 unchanged sentence

Property and equipment, net consists of the following (in millions):

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

Computer equipment $ 2,797 $ 2,697

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Construction in progress consists of costs primarily related to leasehold and other improvements.

Depreciation expense for the three months ended September 30, 2024 and 2023 was $ 96 million and $ 98 million, respectively, and for the nine months ended September 30, 2024 and 2023 was $ 264 million and $ 267 million, respectively.

Depreciation expense for the three months ended March 31, 2025 and 2024 was $ 112 million and $ 80 million, respectively.

(8) Derivative Contracts

Derivatives Designated as Hedging Instruments

We entered into forward contracts to hedge a portion of our forecasted foreign currency denominated revenues during the three and nine months ended September 30, 2024.

We entered into forward contracts to hedge a portion of our forecasted foreign currency denominated revenues during the three months ended March 31, 2025.

These forward contracts are recorded at fair value and have maturities of up to 34 months.

As of September 30, 2024, we had outstanding cash flow hedges with total notional values of $ 1.6 billion.

We had outstanding cash flow hedges with total notional values of $ 1.8 billion and $ 1.7 billion as of March 31, 2025 and December 31, 2024, respectively.

We classify cash flows related to our cash flow hedges as operating activities in our condensed consolidated statements of cash flows.

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Condensed Consolidated Balance Sheets Location

September 30, 2024

March 31, 2025 December 31, 2024

Prepaid expenses and other current assets

Accrued expenses and other current liabilities

$ ( 11 ) $ ( 1 )

Other long-term liabilities

As of September 30, 2024, approximately $ 25 million of the pre-tax derivative loss from accumulated other comprehensive income (loss) is expected to be recognized in subscription revenues within the next 12 months.

To receive hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedge and the hedges must be highly effective in offsetting changes to future cash flows on hedged transactions.

As of March 31, 2025, approximately $ 4 million of the pre-tax derivative gains from accumulated other comprehensive income (loss) is expected to be recognized in subscription revenues within the next 12 months.

All hedging relationships are formally documented at the inception of the hedge and the hedges must be highly effective in offsetting changes to future cash flows on hedged transactions.

We evaluate hedge effectiveness at the inception of the hedge prospectively, and on an ongoing basis both retrospectively and prospectively.

We report changes in fair value of these cash flow hedges as a component of accumulated other comprehensive income (loss) and subsequently reclassify into earnings in the same period the forecasted transaction affects earnings.

Amounts reclassified to subscription revenues were a loss of $ 2 million for the three months ended September 30, 2024 and a gain of $ 3 million for the nine months ended September 30, 2024.

There was no ineffectiveness in the Company’s cash flow hedging program for each of the three and nine months ended September 30, 2024.

Amounts reclassified to subscription revenues were a gain of $ 9 million for the three months ended March 31, 2025.

For the three months ended March 31, 2024, there were no net gains or losses reclassified to subscription revenues.

There was no ineffectiveness in the Company’s cash flow hedging program for each of the three months ended March 31, 2025 and 2024.

Derivatives not Designated as Hedging Instruments

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These foreign currency forward contracts are recorded at fair value and have maturities of 12 months or less.

The changes in the fair value of these contracts are recorded in other expense, net on the condensed consolidated statements of comprehensive income.

As of September 30, 2024 and December 31, 2023, we had foreign currency forward contracts with total notional values of $ 2.3 billion and $ 1.7 billion, respectively, which were not designated as hedging instruments.

The gross fair value of these foreign currency forward contracts was immaterial as of September 30, 2024 and December 31, 2023.

The gains (losses) recognized for these foreign currency forward contracts from derivatives not designated as hedging instruments were immaterial for each of the three and nine months ended September 30, 2024 and 2023.

The changes in the fair value of these contracts are recorded in

other expense, net on the condensed consolidated statements of comprehensive income.

For each of the periods ended March 31, 2025 and December 31, 2024, we had foreign currency forward contracts with total notional values of $ 2.2 billion, which were not designated as hedging instruments.

The gross fair value of these foreign currency forward contracts was immaterial as of March 31, 2025 and December 31, 2024.

The gains (losses) recognized for foreign currency forward contracts from derivatives not designated as hedging instruments were immaterial for each of the three months ended March 31, 2025 and 2024.

Realized gains (losses) from settlement of the derivative assets and liabilities are classified as investing activities in the condensed consolidated statements of cash flows.

All foreign currency forward contracts, both designated and not designated as hedging instruments, are classified within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments in active markets, such as currency spot and forward rates.

(9) Deferred Revenue and Performance Obligations

Revenues recognized from beginning period deferred revenue during the three months ended September 30, 2024 and 2023 were $ 2.5 billion and $ 2.0 billion, respectively, and $ 5.1 billion and $ 4.1 billion for the nine months ended September 30, 2024 and 2023, respectively.

Revenues recognized from beginning period deferred revenue during the three months ended March 31, 2025 and 2024 were $ 2.6 billion and $ 2.2 billion, respectively.

Remaining Performance Obligations

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RPO excludes contracts that are billed in arrears, such as certain time and materials contracts, as we apply the “right to invoice” practical expedient under relevant accounting guidance.

As of September 30, 2024, the total non-cancellable RPO under our contracts with customers was $ 19.5 billion and we expect to recognize revenues on approximately 48 % of these RPO over the following 12 months.

As of March 31, 2025, the total non-cancellable RPO under our contracts with customers was $ 22.1 billion and we expect to recognize revenues on approximately 47 % of these RPO over the following 12 months.

The majority of the non-current RPO will be recognized over the next 13 to 36 months.

For the periods ended September 30, 2024 and December 31, 2023, the carrying value of our outstanding debt was $ 1,489 and $ 1,488 million, respectively, net of unamortized debt discount and issuance costs of $ 11 million and $ 12 million, respectively.

We consider the fair value of the 2030 Notes at September 30, 2024 and December 31, 2023 to be a Level 2 measurement.

The estimated fair value of the 2030 Notes based on the closing trading price per $ 100 , was $ 1,290 million and $ 1,236 million at September 30, 2024 and December 31, 2023, respectively.

For the periods ended March 31, 2025 and December 31, 2024, the carrying value of our outstanding debt was $ 1,490 million and $ 1,489 million, respectively, net of unamortized debt discount and issuance costs of $ 10 million and $ 11 million, respectively.

We consider the fair value of the 2030 Notes at March 31, 2025 and December 31, 2024 to be a Level 2 measurement.

The estimated fair value of the 2030 Notes based on the closing trading price per $ 100 , was $ 1,267 million and $ 1,247 million at March 31, 2025 and December 31, 2024, respectively.

In August 2020, we issued 1.40 % fixed rate ten-year notes with an aggregate principal amount of $ 1.5 billion due on September 1, 2030 (the “2030 Notes”).

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$ 50 $ ( 27 ) $ ( 91 ) $ ( 68 )

Other comprehensive (loss) income before reclassifications

( 27 ) 44 3 20

Other comprehensive income (loss) before reclassifications ( 43 ) 14 36 7

Amounts reclassified from accumulated other comprehensive loss

( 9 ) — — ( 9 )

Net current period other comprehensive (loss) income

Net current period other comprehensive income (loss)

( 52 ) 14 36 ( 2 )

Balance as of September 30, 2024

Balance as of March 31, 2025

$ ( 2 ) $ ( 13 ) $ ( 55 ) $ ( 70 )

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$ — $ ( 39 ) $ 2 $ ( 37 )

Other comprehensive loss before reclassifications

Other comprehensive income (loss) before reclassifications

12 ( 13 ) ( 30 ) ( 31 )

Amounts reclassified from accumulated other comprehensive loss

Net current period other comprehensive loss

Net current period other comprehensive income (loss)

12 ( 13 ) ( 30 ) ( 31 )

Balance as of September 30, 2023

Balance as of March 31, 2024

$ 12 $ ( 52 ) $ ( 28 ) $ ( 68 )

(12) Stockholders' Equity

We are authorized to issue a total of 600 million shares of common stock as of September 30, 2024.

We are authorized to issue a total of 600 million shares of common stock as of March 31, 2025.

Holders of our common stock are not entitled to receive dividends unless declared by our board of directors.

As of September 30, 2024, we had 206.3 million shares of common stock, net of treasury stock, outstanding and had reserved shares of common stock for future issuance as follows (in thousands):

September 30, 2024

As of March 31, 2025, we had 207 million shares of common stock, net of treasury stock, outstanding and had reserved shares of common stock for future issuance as follows (in thousands):

March 31, 2025

Options outstanding 946

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(2) Refer to Note 13 for a description of these plans.

We issued a total of 2.1 million and 2.2 million shares for the nine months ended September 30, 2024 and 2023, respectively, from stock option exercises, vesting of RSUs, net of employee payroll taxes, and purchases from the employee stock purchase plan (“ESPP”).

During the three months ended March 31, 2025 and 2024, we issued a total of 0.8 million and 0.9 million shares, respectively, from stock option exercises, vesting of RSUs, net of employee payroll taxes, and purchases from the employee stock purchase plan (“ESPP”).

Treasury Stock

In May 2023, our board of directors authorized a program to repurchase up to $ 1.5 billion of our common stock (the “Share Repurchase Program”).

Under this new program, we may repurchase our common stock from time to time through open market purchases, in privately negotiated transactions, or by other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, in accordance with applicable securities laws and other restrictions.

In January 2025, our board of directors authorized an additional $ 3.0 billion in repurchases under the Share Repurchase Program.

Under the program, we may repurchase our common stock from time to time through open market purchases, in privately negotiated transactions, or by other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, in accordance with applicable securities laws and other restrictions.

The Share Repurchase Program does not have a fixed expiration date, may be suspended or discontinued at any time, and does not obligate us to acquire any amount of common stock.

The timing, manner, price, and amount of any repurchases will be determined by us at our discretion and will depend on a variety of factors, including business, economic and market conditions, prevailing stock prices, corporate and regulatory requirements, and other considerations.

During the three and nine months ended September 30, 2024, the Company repurchased 0.3 million and 0.5 million shares of its common stock for $ 225 million and $ 400 million, respectively.

During the three and nine months ended September 30, 2023, the Company repurchased 0.5 million shares of its common stock for $ 282 million.

During the three months ended March 31, 2025, the Company repurchased 0.3 million shares of its common stock for $ 298 million.

During the three months ended March 31, 2024, the Company repurchased 0.2 million shares of its common stock for $ 175 million.

All repurchases were made in open market transactions.

Repurchases of common stock are recognized as treasury stock and held for future issuance.

As of September 30, 2024, approximately $ 562 million of the originally authorized amount under the Share Repurchase Program remained available for future repurchases.

As of March 31, 2025, approximately $ 3.0 billion of the authorized amount under the Share Repurchase Program remained available for future repurchases.

(13) Equity Awards

We currently have three equity incentive plans:

We have three equity incentive plans:

2012 Equity Incentive Plan (the “2012 Plan”), amended and restated 2021 Equity Incentive Plan (the “2021 Plan”) and 2022 New-Hire Equity Incentive Plan (the “2022 Plan”).

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Stock Options

A summary of stock option activity for the nine months ended September 30, 2024 was as follows:

A summary of stock option activity for the three months ended March 31, 2025 was as follows:

Shares Weighted-

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(in thousands) (in years) (in millions)

Outstanding at December 31, 2023 1,150 $ 603.30

Outstanding as of December 31, 2024 948 $ 619.43

Exercised ( 2 ) $ 84.81 $ 1

Forfeited ( 128 ) $ 645.02

Outstanding at September 30, 2024 948 $ 619.04 6.8 $ 261

Vested and expected to vest as of September 30, 2024 837 $ 610.33 6.8 $ 238

Vested and exercisable as of September 30, 2024 238 $ 433.25 5.9 $ 110

Outstanding as of March 31, 2025 946 $ 620.30 6.3 $ 166

Vested and expected to vest as of March 31, 2025 897 $ 616.77 6.3 $ 161

Vested and exercisable as of March 31, 2025 543 $ 572.52 6.1 $ 122

Aggregate intrinsic value represents the difference between the estimated fair value of our common stock and the exercise price of outstanding, in-the-money options.

The total fair value of stock options vested during the nine months ended September 30, 2024 was $ 41 million.

No stock options were granted during the nine months ended September 30, 2024.

The total fair value of stock options vested during the three months ended March 31, 2025 was $ 26 million.

No stock options were granted during the three months ended March 31, 2025.

During the year ended December 31, 2021, a one-time long-term performance-based option award was granted to the Chief Executive Officer (“2021 CEO Performance Award”) and to certain executives (collectively “2021 Performance Awards”) under the 2021 Plan at a total grant date fair value of $ 232 million.

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Shares acquired upon exercise of the options cannot be sold, transferred or disposed until after the end of the Performance Period and the 2021 Performance Awards will expire ten years from the respective date of grant.

During the nine months ended September 30, 2024, the first tranche was vested based on the achievement of both the performance and market conditions.

During the three months ended March 31, 2025, the fourth tranche was vested based on the achievement of both the performance and market conditions.

The fair value of the 2021 Performance Awards and the corresponding derived service periods were estimated using the Monte Carlo simulation.

Stock-based compensation expense is recognized on a graded vesting basis over the requisite service period for each respective tranche, but not shorter than the two -year minimum service period, and includes an assessment of when it is probable the performance condition will be achieved, which involves a subjective assessment of our future financial projections.

As of September 30, 2024, total unrecognized compensation cost, adjusted for estimated forfeitures, related to unvested stock options was $ 10 million.

The weighted-average remaining vesting period of unvested stock options at September 30, 2024 was approximately one year .

A summary of RSU activity for the nine months ended September 30, 2024 was as follows:

As of March 31, 2025, total unrecognized compensation cost, adjusted for estimated forfeitures, related to unvested stock options was $ 4 million.

The weighted-average remaining vesting period of unvested stock options at March 31, 2025 was approximately one year .

A summary of RSU activity for the three months ended March 31, 2025 was as follows:

Shares Weighted-Average Grant-Date Fair Value

(in thousands)

Outstanding at December 31, 2023 6,262 $ 506.77

Outstanding as of December 31, 2024 5,788 $ 630.10

Granted 2,014 $ 993.08

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Forfeited ( 139 ) $ 621.63

Outstanding at September 30, 2024 6,354 $ 614.27

Expected to vest as of September 30, 2024 5,698

RSUs outstanding as of September 30, 2024 were comprised of 5.9 million RSUs with only service conditions and 0.5 million RSUs with both service and performance conditions, including certain RSUs with additional market conditions.

The total intrinsic value of the RSUs vested was $ 1.8 billion for the nine months ended September 30, 2024.

As of September 30, 2024, the aggregate intrinsic value of RSUs outstanding was $ 5.7 billion and RSUs expected to vest was $ 5.1 billion.

PRSUs have service, performance and market vesting criteria.

Outstanding as of March 31, 2025 6,825 $ 740.94

Expected to vest as of March 31, 2025 6,079

RSUs outstanding as of March 31, 2025 were comprised of 6.3 million RSUs with only service conditions and 0.5 million RSUs with both service conditions and performance conditions, including certain RSUs with additional market conditions.

The total intrinsic value of the RSUs vested was $ 0.8 billion for the three months ended March 31, 2025.

As of March 31, 2025, the aggregate intrinsic value of RSUs outstanding was $ 5.4 billion and RSUs expected to vest was $ 4.8 billion.

PRSUs have service, performance and market vesting conditions.

The ultimate number of shares eligible to vest range from 0 % to 200 %, subject to our board of directors compensation committee’s approval of performance metrics achievement and, for certain PRSUs, total shareholder return relative to that of the S&P 500 index.

The eligible shares subject to PRSUs granted during the nine months ended September 30, 2024 will vest in one to three years contingent on each holder’s continuous status as an employee on the applicable vesting dates.

The eligible shares subject to PRSUs granted during the three months ended March 31, 2025 will vest in one to three years contingent on each holder’s continuous status as an employee on the applicable vesting dates.

The number of PRSUs granted included in the table above reflects the shares that could be eligible to vest at 100 % of target for PRSUs and includes adjustments for over or under achievement for PRSUs granted in the prior year.

We recognized $ 106 million and $ 111 million of stock-based compensation, net of actual and estimated forfeitures, associated with PRSUs on a graded vesting basis during the nine months ended September 30, 2024 and 2023, respectively.

As of September 30, 2024, total unrecognized compensation cost, adjusted for estimated forfeitures, related to unvested RSUs was $ 3.1 billion, and the weighted-average remaining vesting period was approximately three years .

We recognized $ 43 million and $ 39 million of stock-based compensation expense, net of actual and estimated forfeitures, associated with PRSUs on a graded vesting basis during the three months ended March 31, 2025 and 2024, respectively.

As of March 31, 2025, total unrecognized compensation cost, adjusted for estimated forfeitures, related to unvested RSUs was $ 4.1 billion, and the weighted-average remaining vesting period was approximately three years .

(14) Net Income Per Share

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The following table presents the calculation of basic and diluted net income per share attributable to common stockholders (in millions, except for number of shares reflected in thousands and per share data):

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

Three Months Ended March 31,

Net income $ 460 $ 347

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Weighted-average effect of potentially dilutive securities:

Common stock options 131 122 138 118

RSUs 2,258 1,674 2,218 1,113

ESPP obligations 5 17 9 2

Common stock options, RSUs and ESPP obligations

Weighted-average shares outstanding - diluted 209,371 207,684

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Common stock options, RSUs and ESPP obligations excluded from diluted net income per share because their effect would have been anti-dilutive

1,082 3,068 2,715 3,647

(15) Provision for (Benefit from) Income Taxes

(15) Provision for Income Taxes

We compute our provision for income taxes by applying the estimated annual effective tax rate to year-to-date income from recurring operations and adjust the provision for discrete tax items recorded in the period.

Our income tax provision was $ 84 million and $ 234 million for the three and nine months ended September 30, 2024, respectively.

Our income tax provision was $ 95 million and $ 78 million for the three months ended March 31, 2025 and 2024, respectively.

The income tax provision was primarily attributable to the mix of earnings and losses in countries with differing statutory tax rates, offset by excess tax benefits of stock-based compensation.

The income tax provision was $ 57 million for the three months ended September 30, 2023, and our income tax benefit was $ 775 million for the nine months ended September 30, 2023.

The income tax provision was primarily attributable to the mix of earnings and losses in countries with differing statutory tax rates, tax deductible research and development costs and the valuation allowance release through the effective tax rate.

The income tax benefit was primarily attributable to the release of the valuation allowance of certain U.S.

federal and state deferred tax assets.

We regularly assess the need for a valuation allowance against our deferred tax assets.

In making that assessment, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more likely than not that some or all of the deferred tax assets will not be realized.

As of June 30, 2023, we achieved cumulative U.S.

income during the prior twelve quarters when considering pre-tax income adjusted for permanent differences and other comprehensive losses.

Based on all available positive and negative evidence, having demonstrated sustained profitability which is objective and verifiable, and taking into account anticipated future earnings, we concluded it is more likely than not that our U.S.

federal and state deferred tax assets will be realizable, with the exception of California.

We released $ 985 million of our valuation allowance during the nine months ended September 30, 2023.

As of September 30, 2024, we continue to maintain a valuation allowance against our California deferred tax assets due to the uncertainty regarding realizability of these deferred tax assets as they have not met the “more likely than not” realization criteria, particularly as we expect research and development tax credit generation to exceed our ability to use the credits in future years.

We will continue to monitor the need for a valuation allowance against our deferred tax assets on a quarterly basis.

We are subject to taxation in the United States and foreign jurisdictions.

As of September 30, 2024, our tax years 2004 to 2023 remain subject to examination in most jurisdictions.

As of March 31, 2025, our tax years 2004 to 2024 remain subject to examination in most jurisdictions.

Due to differing interpretations of tax laws and regulations, tax authorities may dispute our tax filing positions.

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Certain lease agreements include options to renew or terminate the lease, which are not reasonably certain to be exercised and therefore are not factored into our determination of lease payments.

Total operating lease costs were $ 33 million and $ 98 million for the three and nine months ended September 30, 2024, respectively, and $ 33 million and $ 96 million for the three and nine months ended September 30, 2023, respectively.

For each of the nine months ended September 30, 2024 and 2023, total cash paid for amounts included in the measurement of operating lease liabilities was $ 61 million.

Operating lease liabilities arising from obtaining operating right-of-use assets totaled $ 21 million and $ 93 million for the nine months ended September 30, 2024 and 2023, respectively.

As of September 30, 2024, the weighted-average remaining lease term is approximately eight years , and the weighted-average discount rate is 4 %.

Maturities of operating lease liabilities as of September 30, 2024 are presented in the table below (in millions):

Total operating lease costs were $ 36 million and $ 33 million for the three months ended March 31, 2025 and 2024, respectively.

For the three months ended March 31, 2025 and 2024, total cash paid for amounts included in the measurement of operating lease liabilities was $ 24 million and $ 19 million, respectively.

Operating lease liabilities arising from obtaining operating right-of-use assets totaled $ 141 million and $ 11 million for the three months ended March 31, 2025 and 2024, respectively.

As of March 31, 2025, the weighted-average remaining lease term is approximately eight years , and the weighted-average discount rate is 4 %.

Maturities of operating lease liabilities as of March 31, 2025 are presented in the table below (in millions):

Remainder of 2025 $ 100

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Present value of operating lease liabilities $ 909

In addition to the amounts above, as of September 30, 2024, we have one operating lease for office space that has not yet commenced with undiscounted cash flows of $ 50 million.

This operating lease is expected to commence during 2025 with a lease term of ten years .

Other Commitments

Other contractual commitments primarily consist of data center and IT operations and sales and marketing activities related to our daily business operations.

There were no material contractual obligations that were entered into during the nine months ended September 30, 2024 that were outside the ordinary course of business.

We have entered into various non-cancellable agreements with cloud service providers, under which we have committed to spend an aggregate of $ 805 million through 2029 on cloud services.

Other contractual commitments primarily consist of data center and IT operations, cloud services and sales and marketing activities related to our daily business operations.

There were no material contractual obligations that were entered into during the three months ended March 31, 2025 that were outside the ordinary course of business.

We have entered into various non-cancellable agreements with cloud service providers, under which we have committed to spend an aggregate of approximately $ 840 million through 2029 on cloud services.

In addition, we have entered into a non-cancellable agreement with an information technology equipment provider, under which we have committed to spend $ 1.9 billion through 2028 on capital expenditures to expand our data centers.

In addition to the amounts above, the repayment of our 2030 Notes with an aggregate principal amount of $ 1.5 billion is due on September 1, 2030.

Refer to Note 10 for further information regarding our 2030 Notes.

Further, $ 60 million of unrecognized tax benefits have been recorded as liabilities as of September 30, 2024.

Further, $ 78 million of unrecognized tax benefits have been recorded as liabilities as of March 31, 2025.

Legal Proceedings

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We accrue for loss contingencies when it is both probable that we will incur the loss and when we can reasonably estimate the amount of the loss or range of loss.

On July 5, 2022, InQuisient Inc.

(“Plaintiff”) filed a complaint against ServiceNow, Inc.

District Court for the District of Delaware, alleging the Now Platform’s use of relational databases infringes three of Plaintiff’s patents.

Plaintiff is seeking injunctive relief and unspecified damages.

The Company filed an answer denying Plaintiff’s allegations and asserts Plaintiff’s patents are, among other things, invalid, not infringed and otherwise unenforceable.

A trial date has been set for January 27, 2025.

While the Company continues to vigorously defend this matter, we cannot predict the outcome with any degree of certainty.

We are unable to reasonably estimate the possible loss or range of loss, if any.

Any adverse determination related to intellectual property claims or other litigation could prevent us from offering our services and adversely affect our financial condition and results of operations.

For additional information regarding intellectual property litigation, see “Risk Factors—Lawsuits by third parties that allege we infringe their intellectual property rights could harm our business and operating results” and “Risk Factors—Our intellectual property protections may not provide us with a competitive advantage, and defending our intellectual property may result in substantial expenses that harm our operating results” included in our Annual Report on Form 10-K for the year ended December 31, 2023.

As previously disclosed, through its internal processes, the Company received a complaint that raised potential compliance issues related to one of its government contracts.

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We have not incurred any costs as a result of such indemnification obligations and have not recorded any liabilities related to such obligations in the condensed consolidated financial statements.

(17) Information about Geographic Areas and Products

(17) Segment and Geographic Information

Segment Information

Our chief operating decision maker (“CODM”), the Chief Executive Officer, manages the Company’s business activities as a single operating and reportable segment at the consolidated level.

Accordingly, our CODM uses consolidated net income to measure segment profit or loss, allocate resources and assess performance.

Further, the CODM reviews and utilizes functional expenses (cost of revenues, sales and marketing, research and development, and general and administrative) at the consolidated level to manage the Company’s operations.

Other segment items included in consolidated net income are interest income, other expense, net and the provision for income taxes, which are reflected in the condensed consolidated statements of comprehensive income.

Geographic Information

Revenues by geographic area, based on the location of our users, were as follows for the periods presented (in millions):

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

Three Months Ended March 31,

North America (1)

$ 1,963 $ 1,637

700 585 2,037 1,664

Asia Pacific and other 343 290

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Property and equipment, net by geographic area were as follows (in millions):

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

North America (3)

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Total property and equipment, net $ 1,885 $ 1,763

(1) Revenues attributed to the United States were 94 % of North America revenues for each of the three and nine months ended September 30, 2024 and 2023.

(1) Revenues attributed to the United States were 94 % of North America revenues for each of the three months ended March 31, 2025 and 2024.

(2) Europe, the Middle East and Africa (“EMEA”).

(3) Property and equipment, net attributed to the United States were 78 % and 79 % of property and equipment, net attributable to North America as of September 30, 2024 and December 31, 2023, respectively.

Subscription revenues consist of the following (in millions):

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

Digital workflow products $ 2,398 $ 1,961 $ 6,877 $ 5,587

ITOM products 317 255 903 728

Total subscription revenues $ 2,715 $ 2,216 $ 7,780 $ 6,315

Our digital workflow products include most of our product offerings and are generally priced on a per user basis.

Our remaining product offerings, primarily comprised of our IT Operations Management (“ITOM”) products, are predominantly priced on a subscription unit basis.

(3) Property and equipment, net attributed to the United States were 80 % and 79 % of property and equipment, net attributable to North America as of March 31, 2025 and December 31, 2024, respectively.

(18) Subsequent Event

In April 2025, we signed a definitive agreement to acquire Logik.ai, a provider of an AI‑powered, composable Configure, Price, Quote (“CPQ”) solution.

The determination of the final value of the purchase consideration, payable in a combination of equity and cash, will depend on the Company's stock price as of the close of the transaction, subject to customary purchase price adjustments.

The acquisition is subject to customary regulatory approvals and closing conditions.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements