ServiceNow (NOW) Q2 2024 earnings summary

Executive summary

• Q2 2024 delivered strong results, with subscription revenues reaching $2.542 billion, up 23% year-over-year, and total revenues at $2.63 billion, driven by robust customer expansion and GenAI adoption.

• Leadership changes followed an internal investigation, including the resignation of the President and COO and interim appointment of the Chief Product Officer.

• Free cash flow for Q2 was $359 million, with a margin of 14%, and cash and investments totaled $8.9 billion.

• The company is positioned as a leading AI platform for business transformation, with rapid adoption of GenAI solutions and a strong innovation pipeline.

• Renewal rate remained strong at 98%, reflecting high customer retention.

Financial highlights

• Q2 subscription revenues reached $2.542 billion, up 23% year-over-year, exceeding guidance; total revenues were $2.63 billion.

• Remaining Performance Obligations (RPO) ended at $18.6 billion, up 31% year-over-year; current RPO at $8.78 billion, up 22%.

• Non-GAAP operating margin was 27%, about 250 basis points above guidance; non-GAAP net income was $651 million, with diluted EPS of $3.13.

• Free cash flow margin was 14% for Q2; free cash flow for the first half of 2024 was $1.58 billion, up 33% year-over-year.

• 88 deals over $1 million in net new ACV, up 26% year-over-year; number of customers with ACV > $1 million reached 1,988.

Outlook and guidance

• 2024 subscription revenue guidance raised to $10.575–$10.585 billion, representing 22% year-over-year growth.

• Full-year operating margin target increased to 29.5%; subscription gross margin expected at 84.5%; free cash flow margin projected at 31%.

• Q3 subscription revenues expected between $2.660–$2.67 billion, with cRPO growth of 22–22.5%.