What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-04-23 compared with 2025-10-30 · 122 added, 133 removed, 220 unchanged (54% of the section changed)

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We encourage investors to carefully consider our results under GAAP, as well as our supplemental non-GAAP results, to more fully understand our business.

ServiceNow was founded on a simple premise:

to make work flow better.

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, CRM and Industry, Core Business and Creator.

The Now Platform is the AI platform for digital transformation.

Transformations enabled by the Now Platform rapidly automate business processes across an entire enterprise by seamlessly connecting disparate departments, systems and silos to unlock productivity and improve experiences for both employees and customers.

We are closely monitoring the ongoing conflicts in Russia/Ukraine and the Middle East.

While these events are still evolving and the outcomes remain highly uncertain, we do not believe these conflicts will have a material impact on our business and results of operations.

However, if the conflicts continue or worsen, leading to greater global economic disruptions and uncertainty, our business and results of operations could be materially impacted.

Our customers in these regions represented an immaterial portion of our net assets as of September 30, 2025 and December 31, 2024, and of our total consolidated revenues for each of the three and nine months ended September 30, 2025 and 2024.

Additionally, other macroeconomic events, including interest rates, global inflation, the U.S.

government shutdown and tariffs, have led to economic uncertainty in the global economy.

ServiceNow delivers solutions that help public and private organizations govern, secure and manage artificial intelligence and digitalize and streamline workflows to drive collaboration, productivity and better experiences across the enterprise.

At the core of these solutions is the ServiceNow AI Platform (“Platform”), a robust, cloud-based Platform that facilitates comprehensive delivery of seamless workflows and drives digital transformation across all departments and personas within an organization.

Our Platform’s single data fabric and integrated data layer supports organizations’ operationalization of their AI strategy with speed, scale and security.

Our workflow applications built on the Platform are grouped into four areas:

Technology, CRM and Industry, Core Business, and Creator and Other.

We offer an innovative suite of products, including AI-powered applications, and services designed to automate workflows, integrate systems and empower employees, regardless of existing systems, cloud environments or collaboration tools.

Our one platform architecture provides the foundation for organizations to seamlessly integrate AI, data, and workflows and create intelligent processes across their enterprise.

We are closely monitoring ongoing global conflicts.

While those events are continuing to evolve and the outcomes remain highly uncertain, we do not believe they will have a material impact on our business and results of operations.

However, if the conflicts persist or worsen, leading to greater global economic disruptions and uncertainty, our business and results of operations could be materially impacted.

Additionally, other macroeconomic events, including interest rates, global inflation and tariffs, have led to economic uncertainty in the global economy.

To mitigate risk, our cash and cash equivalents are distributed across several large financial institutions and are not concentrated in one financial institution.

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See the “Risk Factors” section in Part I, Item 1A of our Annual Report on Form 10-K filed with the SEC on January 29, 2026 for further discussion of the possible impact of conflicts and macroeconomic events on our business and financial results.

On December 5, 2025, our board of directors approved and declared a 5-for-1 split of our common stock (“Stock Split”), with a proportionate increase in the number of shares of authorized common stock.

The Stock Split had a record date of December 16, 2025 and an effective date of December 17, 2025.

The par value per share of our common stock remains unchanged at $0.001 per share after the Stock Split.

Accordingly, an amount equal to the par value of the additional issued shares resulting from the Stock Split was reclassified from additional paid-in capital to common stock.

All references made to common share, equity award and per share amounts throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations have been retroactively adjusted to reflect the effects of the Stock Split.

Key Business Metrics

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Current remaining performance obligations (“cRPO”) represents RPO that will be recognized as revenue in the next 12 months.

As of September 30, 2025, our RPO was $24.3 billion, of which 47% represented cRPO.

RPO and cRPO increased by 24% and 21%, respectively, compared to September 30, 2024.

As of March 31, 2026, our RPO was $27.7 billion, of which 46% represented cRPO.

RPO and cRPO increased by 25% and 23%, respectively, compared to March 31, 2025.

Factors that may cause our RPO to vary from period to period include the following:

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For example, in cases where we are successful in selling additional products or services to an existing customer, a customer may decide to renew its existing contract early to ensure that all its contracts expire on the same date.

In other cases, prolonged negotiations or other factors may result in a contract not being renewed until after it has expired.

cases, prolonged negotiations or other factors may result in a contract not being renewed until after it has expired.

• Contract duration.

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We count the total number of customers with annual contract value (“ACV”) greater than $5 million as of the end of the period.

We had 553 and 469 customers with ACV greater than $5 million as of September 30, 2025 and 2024, respectively.

We had 630 and 516 customers with ACV greater than $5 million as of March 31, 2026 and 2025, respectively.

For purposes of customer count, a customer is defined as an entity that has a unique Dunn & Bradstreet Global Ultimate (“GULT”) Data Universal Numbering System (“DUNS”) number and an active subscription contract as of the measurement date.

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Foreign exchange rate fluctuations could cause some variability in the number of customers with ACV greater than $5 million.

We believe information regarding the total number of customers with ACV greater than $5 million provides useful information to investors because it is an indicator of our growing customer base and demonstrates the value customers are receiving from the Now Platform.

Free cash flow.

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However, our calculation of free cash flow may not be comparable to similar measures used by other companies.

A calculation of free cash flow is provided below:

Nine Months Ended September 30, % Change

Our calculation of free cash flow is provided below:

Three Months Ended March 31, % Change

(dollars in millions)

GAAP net cash provided by operating activities $ 1,670 $ 1,677 — %

$ 3,206 $ 2,632 22%

Purchases of property and equipment (141) (205) (31 %)

Business combination and other related costs 28 22 27%

Business combination and other related costs 136 5 NM

Non-GAAP free cash flow $ 1,665 $ 1,477 13 %

$ 2,604 $ 2,055 27%

NM - not meaningful

We have historically seen higher collections in the quarter ended March 31 due to seasonality in timing of entering into customer contracts, which is significantly higher in the quarter ended December 31.

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This non-GAAP measure is used by the chief operating decision maker to allocate resources and assess performance.

We define non-GAAP consolidated income from operations as income from operations excluding certain non-cash or non-recurring items, including stock-based compensation expense, amortization of purchased intangibles, legal settlements, business combination and other related costs including compensation expense, impairment of assets and severance costs.

We define non-GAAP consolidated income from operations as

income from operations excluding certain non-cash or non-recurring items, including stock-based compensation expense, amortization of purchased intangibles, legal settlements, impairment of assets, severance costs, contract termination costs and business combination and other related costs including compensation expense.

We believe these adjustments provide useful supplemental information to investors and facilitate the analysis of our operating results and comparison of those results across reporting periods.

The following table shows the reconciliation of our reported consolidated income from operations to non-GAAP consolidated income from operations.

Three Months Ended September 30, % Change Nine Months Ended September 30, % Change

2025 2024 2025 2024

(dollars in millions)

Three Months Ended March 31, % Change

(dollars in millions)

GAAP income from operations $ 503 $ 451 12 %

$ 572 $ 418 37% $ 1,381 $ 990 39%

Stock-based compensation 558 470 19 %

492 426 15% 1,461 1,292 13%

Amortization of purchased intangibles 77 21 267 %

33 23 43% 79 71 11%

Business combination and other related costs 43 11 291 %

19 5 280% 44 30 47%

Impairment of assets

— — —% 30 — 100%

Severance costs 18 — 100 %

24 — 100% 53 — 100%

Non-GAAP income from operations $ 1,199 $ 953 26 %

$ 1,140 $ 872 31% $ 3,048 $ 2,383 28%

Renewal rate .

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We adjust our renewal rate for acquisitions, consolidations and other customer events that cause the merging of two or more accounts occurring at the time of renewal.

Our renewal rate was 97% for the three months ended September 30, 2025 and 98% for the nine months ended September 30, 2025 and each of the three and nine months ended September 30, 2024.

Our renewal rate was 97% and 98% for the three months ended March 31, 2026 and 2025, respectively.

As our renewal rate is impacted by the timing of renewals, which could occur in advance of, or subsequent to the original contract end date, period-to-period comparison of renewal rates may not be meaningful.

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We also generate revenues from certain professional services and from training of customers and partner personnel, through both our direct team and indirect sales channel.

Revenues from our direct sales organization represented 78% of our total revenues for each of the three and nine months ended September 30, 2025 and 2024.

Revenues from our direct sales organization represented 77% of our total revenues for each of the three months ended March 31, 2026 and 2025.

For purposes of calculating revenues from our direct sales organization, revenues from systems integrators and managed services providers are included as part of the direct sales organization.

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Cost of subscription revenues consists primarily of expenses related to hosting our services and providing support to our customers.

These expenses are comprised of data center capacity costs, which include colocation costs associated with our data centers as well as interconnectivity between data centers, depreciation related to our infrastructure hardware equipment dedicated for customer use, amortization of intangible assets, expenses associated with software, public cloud service costs, IT services and dedicated customer support, personnel-related costs directly associated with data center operations and customer support, including salaries, benefits, bonuses and stock-based compensation and allocated overhead.

Cost of professional services and other revenues.

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Fees paid by us to third-party partners are primarily recognized as cost of revenues as the professional services are delivered.

Cost of revenues associated with our professional services engagements contracted with third-party partners as a percentage of professional services and other revenues was 33% for each of the three and nine months ended September 30, 2025 and 27% and 21% for the three and nine months ended September 30, 2024, respectively.

Cost of revenues associated with our professional services engagements contracted with third-party partners as a percentage of professional services and other revenues was 37% and 34% for the three months ended March 31, 2026 and 2025, respectively.

Sales and Marketing

Sales and marketing expenses consist primarily of personnel-related expenses directly associated with our sales and marketing staff, including salaries, benefits, bonuses and stock-based compensation.

Sales and marketing expenses also include the amortization of commissions paid to our sales employees, including related payroll taxes and fringe benefits.

Sales and marketing expenses also include the amortization of commissions paid to our sales employees, including related payroll taxes and fringe benefits, and amortization of intangible assets.

In addition, sales and marketing expenses include branding expenses, marketing program expenses, which include events such as Knowledge, and costs associated with purchasing advertising and marketing data, software and subscription services dedicated for sales and marketing use and allocated overhead.

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Provision for income taxes consists of federal, state and foreign income taxes.

Our income tax provision for the three and nine months ended September 30, 2025 is 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.

Our income tax provision for the three months ended March 31, 2026 is primarily attributable to the mix of earnings and losses in countries with differing statutory tax rates and stock-based compensation shortfalls.

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.

Comparison of the Three and Nine Months Ended September 30, 2025 and 2024

Three Months Ended September 30, % Change Nine Months Ended September 30, % Change

2025 2024 2025 2024

(dollars in millions) (dollars in millions)

Comparison of the Three Months Ended March 31, 2026 and 2025

Three Months Ended March 31, % Change

(dollars in millions)

Subscription $ 3,671 $ 3,005 22 %

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Total 100% 100%

Subscription revenues increased by $584 million and $1,637 million for the three and nine months ended September 30, 2025, respectively, compared to the three and nine months ended September 30, 2024, primarily driven by increased purchases by new and existing customers.

Included in subscription revenues is $104 million and $81 million of revenues recognized upfront from the delivery of software associated with self-hosted offerings during the three months ended September 30, 2025 and 2024, respectively, and $370 million and $275 million during the nine months ended September 30, 2025 and 2024, respectively.

Subscription revenues increased by $666 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily driven by increased purchases by new and existing customers.

Included in subscription revenues is $138 million and $157 million of revenues recognized upfront from the delivery of software associated with self-hosted offerings during the three months ended March 31, 2026 and 2025.

We expect subscription revenues for the year ending December 31, 2026 to increase in absolute dollars and remain relatively flat as a percentage of revenue as we continue to add new customers and existing customers increase their usage of our products compared to the year ended December 31, 2025.

Our expectations for revenues, cost of revenues and operating expenses for the remainder of 2025 are based on the 30-day average of foreign exchange rates for September 30, 2025.

Professional services and other revenues increased by $26 million and $46 million during the three and nine months ended September 30, 2025, respectively, compared to the three and nine months ended September 30, 2024, primarily due to an increase in services and trainings provided to new and existing customers.

We expect professional services and other revenues for the year ending December 31, 2025 to increase in absolute dollars and to remain relatively flat as a percentage of revenue compared to the year ended December 31, 2024.

Our expectations for revenues, cost of revenues and operating expenses for the remainder of 2026 are based on the 31-day average of foreign exchange rates for March 31, 2026.

Professional services and other revenues increased by $16 million during the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily due to an increase in services and trainings provided to new and existing customers.

We expect professional services and other revenues for the year ending December 31, 2026 to increase in absolute dollars and remain relatively flat as a percentage of revenue compared to the year ended December 31, 2025.

Cost of Revenues and Gross Profit Percentage

Three Months Ended September 30, % Change Nine Months Ended September 30, % Change

2025 2024 2025 2024

(dollars in millions) (dollars in millions)

Three Months Ended March 31, % Change

(dollars in millions)

Cost of revenues:

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Gross profit $ 2,830 $ 2,437

Cost of subscription revenues increased by $170 million and $446 million for the three and nine months ended September 30, 2025, respectively, compared to the three and nine months ended September 30, 2024, primarily due to increased headcount and increased costs to support the growth of our subscription offerings including costs to support customers in regulated markets.

Personnel-related costs, including stock-based compensation and overhead expenses, increased by $77 million and $221 million for the three and nine months ended September 30, 2025, respectively, compared to the three and nine months ended September 30, 2024.

Depreciation expense related to infrastructure hardware equipment and expenses associated with software, maintenance, third-party cloud services and other costs, which together support the expansion of data center capacity, increased by $75 million and $201 million, respectively, for the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024.

We expect our cost of subscription revenues for the year ending December 31, 2025 to increase in absolute dollars as we provide subscription services to more customers and increase usage within our customer instances and increase slightly as a percentage of revenue compared to the year ended December 31, 2024.

Cost of subscription revenues increased by $259 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily due to increased headcount and increased costs to support the growth of our subscription offerings including costs to support customers in regulated markets.

Personnel-related costs, including stock-based compensation and overhead expenses, increased by $114 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025.

Depreciation expense related to infrastructure hardware equipment and expenses associated with software, maintenance and other costs, which together support the expansion of data center capacity, increased by $60 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025.

Expenses associated with our contractual commitments with third-party cloud service providers increased by $41 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025.

In addition, amortization of intangible assets increased by $41 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 as a result of acquisitions.

We expect our cost of subscription revenues for the year ending December 31, 2026 to increase in absolute dollars as we provide subscription services to more customers and increase usage within our customer instances and increase as a percentage of revenue compared to the year ended December 31, 2025.

We will continue to incur incremental costs to attract customers in regulated markets by adopting public cloud offerings as well as increased support for customers impacted by new and evolving data residency requirements.

To the extent future acquisitions are consummated, our cost of subscription revenues may increase due to additional non-cash charges associated with the amortization of intangible assets acquired.

Our subscription gross profit percentage was 80% for each of the three and nine months ended September 30, 2025 and 82% for each of the three and nine months ended September 30, 2024.

We expect our subscription gross profit percentage to decrease slightly for the year ending December 31, 2025 compared to the year ended December 31, 2024.

Cost of professional services and other revenues increased by $20 million and $47 million for the three and nine months ended September 30, 2025, respectively, compared to the three and nine months ended September 30, 2024, primarily driven by an increase in partner ecosystem spend to further help accelerate customer value realization.

Our professional services and other gross loss percentage improved to break-even for the three months ended September 30, 2025 compared to 7% for the three months ended September 30, 2024, primarily driven by timing of professional services engagements, resulting in increased partner and internal utilization.

Our professional services and other gross loss percentage was 1% for each of the nine months ended September 30, 2025 and 2024.

We expect our professional services and other gross loss percentage to increase for the year ending December 31, 2025 compared to the year ended December 31, 2024.

Our subscription gross profit percentage was 78% for the three months ended March 31, 2026 and 81% for the three months ended March 31, 2025.

We expect our subscription gross profit percentage to decrease for the year ending December 31, 2026 compared to the year ended December 31, 2025, primarily due to the ongoing growth of our third-party cloud services usage and incremental amortization of intangible assets acquired.

Cost of professional services and other revenues increased by $30 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily driven by increased personnel-related costs and an increase in partner ecosystem spend to further help accelerate customer value realization.

Our professional services and other gross loss percentage was 21% for the three months ended March 31, 2026 compared to 8% for the three months ended March 31, 2025, and was primarily driven by personnel-related costs and partner ecosystem spend to further help accelerate customer value realization increasing at a faster rate than revenue.

We expect our professional services and other gross loss percentage to increase for the year ending December 31, 2026 compared to the year ended December 31, 2025 as we continue to accelerate customer value realization and support our customers in gaining the maximum value of our latest offerings.

Sales and Marketing

Three Months Ended September 30, % Change Nine Months Ended September 30, % Change

2025 2024 2025 2024

(dollars in millions) (dollars in millions)

Three Months Ended March 31, % Change

(dollars in millions)

Sales and marketing $ 1,216 $ 1,054 15 %

Percentage of revenues 32% 34%

Sales and marketing expenses increased by $112 million and $411 million for the three and nine months ended September 30, 2025, respectively, compared to the three and nine months ended September 30, 2024, primarily due to increased headcount resulting in an increase in personnel-related costs including stock-based compensation and overhead expenses of $71 million and $274 million for the three and nine months ended September 30, 2025, respectively, compared to the three and nine months ended September 30, 2024.

Amortization expenses associated with deferred commissions increased by $21 million and $49 million for the three and nine months ended September 30, 2025, respectively, compared to the three and nine months ended September 30, 2024, primarily due to an increase in contracts with new customers, expansion and renewal contracts.

Other sales and marketing program expenses, which include branding, costs associated with purchasing advertising, marketing events and market data, increased by $7 million and $50 million for the three and nine months ended September 30, 2025, respectively, compared to the three and nine months ended September 30, 2024, primarily due to increased program costs and travel costs for our annual Knowledge user conference.

We expect sales and marketing expenses for the year ending December 31, 2025 to increase in absolute dollars and to decrease as a percentage of revenue compared to the year ended December 31, 2024, as we continue to see leverage from increased sales productivity and marketing efficiencies.

Sales and marketing expenses increased by $162 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily due to increased headcount resulting in an increase in personnel-related costs including stock-based compensation and overhead expenses of $73 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025.

Amortization expenses associated with deferred commissions increased by $23 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily due to an increase in contracts with new customers, expansion and renewal contracts.

Other sales and marketing program expenses, which include branding, costs associated with purchasing advertising, marketing events and market data, increased by $33

million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025.

In addition, amortization of intangible assets increased by $15 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 as a result of acquisitions.

We expect sales and marketing expenses for the year ending December 31, 2026 to increase in absolute dollars and to decrease slightly as a percentage of revenue compared to the year ended December 31, 2025, as we continue to see leverage from increased sales productivity and marketing efficiencies.

Research and Development

Three Months Ended September 30, % Change Nine Months Ended September 30, % Change

2025 2024 2025 2024

(dollars in millions) (dollars in millions)

Three Months Ended March 31, % Change

(dollars in millions)

Research and development $ 823 $ 703 17 %

Percentage of revenues 22% 23%

Research and development (“R&D”) expenses increased by $124 million and $312 million for the three and nine months ended September 30, 2025, respectively, compared to the three and nine months ended September 30, 2024, primarily due to increased headcount, resulting in an increase in personnel-related costs including stock-based compensation and overhead expenses of $112 million and $280 million for the three and nine months ended September 30, 2025, respectively, compared to the three and nine months ended September 30, 2024.

Research and development expenses (“R&D”) increased by $120 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily due to increased headcount, resulting in an increase in personnel-related costs including stock-based compensation and overhead expenses of $116 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025.

We expect R&D expenses for the year ending December 31, 2026 to increase in absolute dollars but remain relatively flat as a percentage of revenue compared to the year ended December 31, 2025, as we continue to improve the existing functionality of our services, develop new applications to fill market needs and enhance our core platform.

General and Administrative

Three Months Ended September 30, % Change Nine Months Ended September 30, % Change

2025 2024 2025 2024

(dollars in millions) (dollars in millions)

Three Months Ended March 31, % Change

(dollars in millions)

General and administrative $ 288 $ 229 26 %

Percentage of revenues 8% 7%

General and administrative (“G&A”) expenses increased by $30 million and $76 million for the three and nine months ended September 30, 2025, respectively, compared to the three and nine months ended September 30, 2024, primarily due to increased headcount, resulting in an increase in personnel-related costs, including stock-based compensation and an increase in outside services.

The remaining increase for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 was due to impairment of assets of $30 million.

We expect G&A expenses for the year ending December 31, 2025 to increase in absolute dollars and to remain relatively flat as a percentage of revenue compared to the year ended December 31, 2024, as we continue to see leverage from continued G&A productivity.

General and administrative expenses (“G&A”) increased by $59 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily due to an increase in outside services of $35 million, largely related to acquisitions, and an increase in personnel-related costs.

We expect G&A expenses for the year ending December 31, 2026 to increase in absolute dollars but remain relatively flat as a percentage of revenue compared to the year ended December 31, 2025, as we continue to see leverage from continued G&A productivity.

Stock-based Compensation

Three Months Ended September 30, % Change Nine Months Ended September 30, % Change

2025 2024 2025 2024

(dollars in millions) (dollars in millions)

Three Months Ended March 31, % Change

(dollars in millions)

Cost of revenues:

7 unchanged sentences

Percentage of revenues 15% 15%

Stock-based compensation increased by $66 million and $169 million for the three and nine months ended September 30, 2025, respectively, compared to the three and nine months ended September 30, 2024, primarily due to additional grants to current and new employees.

Stock-based compensation increased by $88 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily due to additional grants to current and new employees and stock-based awards granted in connection with acquisitions.

Stock-based compensation is inherently difficult to forecast due to fluctuations in our stock price.

Based upon our stock price as of September 30, 2025, we expect stock-based compensation to continue to increase in absolute dollars for the year ending December 31, 2025 as we continue to issue stock-based awards to our employees, but decrease slightly as a percentage of revenue compared to the year ended December 31, 2024.

Based upon our stock price as of March 31, 2026, we expect stock-based compensation to continue to increase in absolute dollars for the year ending December 31, 2026 as we continue to issue stock-based awards to our employees but remain relatively flat as a percentage of revenue compared to the year ended December 31, 2025.

We expect stock-based compensation as a percentage of revenue to decline over time as we continue to grow.

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Our international operations have provided and will continue to provide a significant portion of our total revenues.

Revenues outside North America represented 37% of total revenues for each of the three and nine months ended September 30, 2025 and 36% and 37% for the three and nine months ended September 30, 2024, respectively.

We primarily transact in certain foreign currencies for sales outside of the United States.

The movement of the U.S.

Dollar had an immaterial impact on our revenues for the three and nine months ended September 30, 2025.

Revenues outside North America represented 37% and 36% for the three months ended March 31, 2026 and 2025, respectively.

Because we primarily transact in certain foreign currencies for sales outside of the United States, the general weakening of the U.S.

Dollar relative to other major foreign currencies had a favorable impact on our revenues for the three months ended March 31, 2026.

For entities reporting in currencies other than the U.S.

Dollar, if we had translated our results for the three months ended March 31, 2026 at the exchange rates in effect for the three months ended March 31, 2025 rather than the actual exchange rates in effect during the period, our reported subscription revenues would have been $108 million lower, excluding the impact of our cash flow hedging program.

The impact from foreign currency movements for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was not material for professional services and other revenues.

In addition, we primarily transact in several foreign currencies for cost of revenues and operating expenses outside of the United States.

The movement of the U.S.

Dollar had an immaterial impact on our expenses for the three and nine months ended September 30, 2025.

Dollar had an immaterial impact on our expenses for the three months ended March 31, 2026.

Interest Income

Three Months Ended September 30, % Change Nine Months Ended September 30, % Change

2025 2024 2025 2024

(dollars in millions) (dollars in millions)

Three Months Ended March 31, % Change

(dollars in millions)

Interest income $ 88 $ 115 (23 %)

Percentage of revenues 2% 4%

Interest income increased by $7 million and $33 million for the three and nine months ended September 30, 2025, respectively, compared to the three and nine months ended September 30, 2024, primarily driven by an increase in investment income from our managed portfolio resulting from higher portfolio balances.

Interest income decreased by $27 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily driven by a decrease in investment income from our managed portfolio resulting from lower average portfolio balances and lower interest rates.

Other Income (Expense), net

Three Months Ended September 30, % Change Nine Months Ended September 30, % Change

2025 2024 2025 2024

(dollars in millions) (dollars in millions)

Three Months Ended March 31, % Change

(dollars in millions)

Interest expense $ (6) $ (6) — %

Other 13 (4) (425%) 11 (10) (210%)

Other income (expense), net $ 7 $ (10) (170%) $ (7) $ (28) (75%)

Other 88 (5) NM

Other income (expense), net $ 82 $ (11) NM

Percentage of revenues 2% —%

Other income increased by $17 million for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 and other expense decreased by $21 million for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024, primarily driven by unrealized gains on strategic investments.

NM - Not meaningful

Other income (expense), net increased by $93 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily driven by unrealized gains on strategic investments.

To mitigate our risks associated with fluctuations in foreign currency exchange rates, we enter into foreign currency forward contracts with maturities of 12 months or less to hedge a portion of our net outstanding monetary assets and liabilities.

These hedging contracts may reduce, but cannot entirely eliminate, the impact of adverse currency exchange rate movements.

The gains recognized for foreign currency forward contracts from derivatives not designated as hedging instruments in other income (expense), net of $100 million, primarily offset the remeasurement losses of the related foreign currency denominated assets and liabilities of $114 million for the nine months ended September 30, 2025.

The gains (losses) recognized for foreign currency forward contracts from derivatives not designated as hedging instruments were immaterial for the three months ended September 30, 2025 and each of the three and nine months ended September 30, 2024.

The gains (losses) recognized for these foreign currency forward contracts in other income (expense), net were immaterial for each of the three months ended March 31, 2026 and 2025.

Provision for Income Taxes

Three Months Ended September 30, % Change Nine Months Ended September 30, % Change

2025 2024 2025 2024

(dollars in millions) (dollars in millions)

Three Months Ended March 31, % Change

(dollars in millions)

Income before income taxes $ 673 $ 555 21 %

Provision for income taxes $ 204 $ 95 115 %

$ 192 $ 84 129% $ 373 $ 234 59%

Effective tax rate 30% 17%

Our income tax provision was $192 million and $373 million for the three and nine months ended September 30, 2025, respectively, and $84 million and $234 million for the three and nine months ended September 30, 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.

Our income tax provision was $204 million for the three months ended March 31, 2026 and was primarily attributable to the mix of earnings and losses in countries with differing statutory tax rates and stock-based compensation shortfalls.

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

On July 4, 2025, H.R.

1, the "One Big Beautiful Bill Act," was enacted into law, bringing significant amendments to the U.S.

This legislation extends and modifies provisions from the 2017 Tax Cuts and Jobs Act and introduces new tax

measures affecting both businesses and individuals.

The enacted legislation had an immaterial impact on the Company’s effective tax rate for the three months ended September 30, 2025.

This legislation extends and modifies provisions from the 2017 Tax Cuts and Jobs Act and introduces new tax measures affecting both businesses and individuals.

The enacted legislation had an immaterial impact on the Company’s effective tax rate for the three months ended March 31, 2026.

The Company will continue to monitor any future changes in its business or interpretations of the new tax law that could affect its tax position in subsequent periods.

Liquidity and Capital Resources

We generate cash inflows from operations primarily from selling subscription services which are generally paid in advance of provisioning services, and expend cash outflows to develop new services and core technologies that further enhance the Now Platform, engage our customers and enhance their experience, and enable and transform our business operations.

Subscription services arrangements typically have a three-year duration, and we have experienced an average renewal rate of 98% over the last three years.

Cash outflows from operations are principally comprised of salaries, bonuses, commissions, and benefits for our workforce, licenses and services arrangements, including cloud services that are integral to our business operations and data centers and operating lease arrangements that underlie our facilities.

We generate cash inflows from operations primarily from selling subscription services which are generally paid in advance of provisioning services, and expend cash outflows to develop new services and core technologies that further enhance the Platform, engage our customers and enhance their experience, and enable and transform our business operations.

Subscription services arrangements typically have a three-year duration, and we have experienced a renewal rate of 98% over the last three years.

Cash outflows from operations are principally comprised of the salaries, bonuses, commissions, and benefits for our workforce, licenses and services arrangements, including cloud services, that are integral to our business operations and data centers and operating lease arrangements that underlie our facilities.

We have generated positive operating cash flows for more than ten years as we continue to grow our business in pursuit of our business strategy, and we expect to grow our business and generate positive cash flows from operations during 2026.

When assessing sources of liquidity, we also include cash and cash equivalents, marketable securities and long-term marketable securities totaling $9.7 billion as of September 30, 2025.

When assessing sources of liquidity, we also include cash and cash equivalents, marketable securities and long-term marketable securities totaling $7.9 billion as of March 31, 2026.

Our capital requirements are principally comprised of capital expenditures to support data center capacity expansion, non-contract workforce salaries, bonuses, commissions, and benefits and, to a lesser extent, cancellable and non-cancellable licenses, operating leases and services arrangements that are integral to our business operations.

We also acquire technology and businesses to expand our service offerings and functionality.

Operating lease obligations totaling $1,072 million are principally associated with leased facilities and have varying maturities with $672 million due over the next five years.

Operating lease obligations totaling $1.1 billion are principally associated with leased facilities and have varying maturities with $716 million due over the next five years.

Our supply chain finance (“SCF”) program provides suppliers with the opportunity to sell their receivables due from us to a global financial institution.

A supplier’s election to receive early payment at a discounted amount from the financial institution does not change the amount that we must remit to the financial institution on our payment date, which is generally 90 days from the invoice date.

As of September 30, 2025, our outstanding payment obligations to suppliers participating in the SCF program totaled $32 million.

As of March 31, 2026, our outstanding payment obligations to suppliers participating in the SCF program totaled $29 million.

These obligations are included in accounts payable in our condensed consolidated balance sheets, and all activity related to these obligations is presented within operating activities in the condensed consolidated statements of cash flows.

We may repurchase our shares of common stock in the open market, in privately negotiated transactions or by other means, with the objective to return value to our stockholders and manage the dilution from future employee equity grants and employee stock purchase programs.

In May 2023, our board of directors authorized a program to repurchase up to $1.5 billion of our common stock and authorized an additional $3.0 billion in repurchases under the program in January 2025.

During the three and nine months ended September 30, 2025, the Company repurchased 0.6 million and 1.3 million shares of our common stock for $584 million and $1,243 million, respectively.

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, 2025, approximately $2.0 billion of the authorized amount under the share repurchase program remained available for future repurchases.

We may repurchase our shares of common stock through open market purchases, accelerated share repurchase ("ASR") transactions, privately negotiated transactions or by other means, with the objective to return value to our stockholders and manage the dilution from future employee equity grants and employee stock purchase programs.

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”).

In January 2025 and January 2026, our board of directors authorized an additional $3.0 billion and $5.0 billion, respectively, in repurchases under the Share Repurchase Program.

On January 30, 2026, we entered into an ASR agreement with a financial institution to repurchase an aggregate of $2.0 billion of our common stock as part of the Share Repurchase Program.

During the three months ended March 31, 2026, the Company completed the ASR transaction with 18.5 million shares of common stock repurchased at an average price of $107.97 per share, which was determined based on the volume weighted average price over the term of the ASR, less an agreed upon discount.

Repurchased shares are recognized as treasury stock and held for future issuance.

During the three months ended March 31, 2026, the Company repurchased an additional 1.6 million shares of our common stock for $225 million in open market transactions.

As of March 31, 2026, approximately $4.2 billion of the authorized amount under the Share Repurchase Program remained available for future repurchases.

We have also issued long-term debt to finance our business.

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Our operating cash flows, together with our other sources of liquidity, are available to service our liabilities as well as our cancellable and non-cancellable arrangements.

We anticipate cash flows generated from operations, cash, cash equivalents, marketable securities and long-term marketable securities will be sufficient to meet our liquidity needs for at least the next 12 months.

We anticipate cash flows generated from operations, cash, cash equivalents, marketable securities and long-term marketable securities, together with our available financing facilities, will be sufficient to meet our liquidity needs for at least the next 12 months.

See Note 19 “Subsequent Events” for debt financing associated with the acquisition of Armis Security Ltd.

As we look beyond the next 12 months, we seek to continue to grow cash flows necessary to fund our operations and grow our business.

If we require additional capital resources, we may seek to finance our operations from the current funds available or additional equity or debt financing.

Nine Months Ended September 30,

Three Months Ended March 31,

(dollars in millions)

2 unchanged sentences

Net cash used in financing activities $ (2,236) $ (398)

Net increase (decrease) in cash, cash equivalents and restricted cash

Net (decrease) increase in cash, cash equivalents and restricted cash

$ (1,022) $ 1,067

Operating Activities

Net cash provided by operating activities was $3,206 million for the nine months ended September 30, 2025 compared to $2,632 million for the nine months ended September 30, 2024.

The net increase in operating cash flows was primarily due to higher collections driven by revenue growth.

Net cash provided by operating activities was $1,670 million for the three months ended March 31, 2026, which was relatively flat compared to $1,677 million for the three months ended March 31, 2025.

Investing Activities

Net cash used in investing activities was $1,191 million for the nine months ended September 30, 2025 compared to $1,763 million for the nine months ended September 30, 2024.

The net decrease in cash used in investing activities was primarily due to a $1,619 million decrease in net purchases of marketable securities, partially offset by a $871 million increase in purchases of strategic investments, a $133 million increase in business combinations and a $31 million increase in purchases of property and equipment.

Net cash used in investing activities was $451 million for the three months ended March 31, 2026 compared to $217 million for the three months ended March 31, 2025.

The net increase in cash used in investing activities was primarily due to a $1,307 million increase in cash used in business combinations and a $117 million increase in purchases of strategic investments partially offset by a $1,109 million decrease in purchases of marketable securities and a $64 million decrease in purchases of property and equipment.

Financing Activities

Net cash used in financing activities was $1,601 million for the nine months ended September 30, 2025 compared to $872 million for the nine months ended September 30, 2024.

The net increase in cash used in financing activities is due to an increase in repurchases of common stock of $843 million and a $103 million increase in taxes paid related to net share settlement of equity awards, offset by a $184 million decrease in business combination related to the second installment payment in the acquisition of G2K Group GmbH and a $33 million increase in proceeds from employee stock plans.

Net cash used in financing activities was $2,236 million for the three months ended March 31, 2026 compared to $398 million for the three months ended March 31, 2025.

The net increase in cash used in financing activities is due to an increase in repurchases of common stock of $1,927 million, offset by a decrease in taxes paid related to net share settlement of equity awards of $89 million.

Critical Accounting Policies and Significant Judgments and Estimates

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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 2. Management’s Discussion and Analysis