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What changed in ServiceNow's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of ServiceNow's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+419 added−398 removedSource: 10-K (2025-01-30) vs 10-K (2024-01-25)

Top changes in ServiceNow's 2024 10-K

419 paragraphs added · 398 removed · 307 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeExamples of the types of workflows our customers have developed using App Engine include: • an application for a retailer to manage the workflow for loss prevention, fraud protection and asset protection in retail locations; • an application to manage licensing, contracting and compliance examinations and financial reviews, replacing a months-long, manual process with a 30-minute automated process; • an application to automate the manual processing of billable invoices, reducing processing time from days to minutes; and • an application to provide overnight loans in different currencies for central banks.
Biggest changeExamples of the types of workflows our customers have developed using App Engine include applications for: • a healthcare institution to streamline health research for providers and patients to share and track health data in a private and secure manner; • a retailer to manage the workflow for loss prevention, fraud protection and asset protection in retail locations; • the management of licensing, contracting and compliance examinations and financial reviews, replacing a months-long, manual process with a 30-minute automated process; and • providing overnight loans in different currencies for central banks. 7 Table of Contents App Engine can also be used in conjunction with Now Assist for Creator, our AI solution, to quickly create and scale apps on the Now Platform.
We also plan to increase our investment in our existing locations in order to achieve scale efficiencies in our sales and marketing efforts. Partner Ecosystem In addition to our global direct sales organization, we also have a strong and growing ecosystem of partners that helps accelerate our customers’ digital transformation initiatives and deliver customer value at scale.
We also plan to increase our investment in our existing locations in order to achieve scale efficiencies in our sales and marketing efforts. Partner Ecosystem In addition to our global direct sales organization, we have a strong and growing ecosystem of partners that helps accelerate our customers’ digital transformation initiatives and deliver customer value at scale.
Investors and others should note that we announce material financial information to our investors using our investor relations website (https://www.servicenow.com/company/investor-relations.html), SEC filings, press releases, public conference calls and webcasts. We use these channels, including our website and social media, to communicate with our investors and the public about our company, our products and solutions and other issues.
Investors and others should note that we announce material financial information to our investors using our investor relations website (https://www.servicenow.com/company/investor-relations.html), SEC filings, press releases, public conference calls, webcasts and social media. We use these channels, including our website and social media, to communicate with our investors and the public about our company, our products and solutions and other issues.
This requires faster, more agile execution with more automation delivered throughout an organization’s business processes. With Creator Workflows, citizen developers have access to pre-built templates, low-code tools and modular building blocks created by professional developers. We enable Creator Workflows through App Engine and Automation Engine, among other products.
This requires fast and agile execution with more automation delivered throughout an organization’s business processes. With Creator Workflows, citizen developers have access to pre-built templates, low-code tools and modular building blocks created by professional developers. We enable Creator Workflows through App Engine and Automation Engine, among other products.
It is possible that the information we post on social media could be deemed to be material information. Therefore, we encourage investors, the media and others interested in our company to review the information we make available on our website and the social media channels listed on our website. 12 Table of Contents
It is possible that the information we post on social media could be deemed to be material information. Therefore, we encourage investors, the media and others interested in our company to review the information we make available on our website and the social media channels listed on our website. 13 Table of Contents
Security Operations Our Security Operations product suite connects security with the rest of the enterprise, integrating internal and third-party security and vulnerability data to quickly respond to security incidents and vulnerabilities, prioritized according to their potential impact on a customer’s business.
Security Operations Our Security Operations product suite connects an organization’s security function with the rest of the enterprise, integrating internal and third-party security and vulnerability data to quickly respond to security incidents and vulnerabilities, prioritized according to their potential impact on a customer’s business.
Creator & Other Workflows Creator Workflows help customers build and manage cross-enterprise workflows fast with a low-code development experience that safely delivers agile services at scale and with features such as those that allow customers to manage security and storage. As organizations digitally transform, they need to adapt faster with new processes and business models.
Creator & Other Workflows Creator Workflows help customers quickly build and manage cross-enterprise workflows with a low-code development experience that safely delivers agile services at scale and with features that allow customers to manage security and storage. As organizations digitally transform, they need to adapt faster with new processes and business models.
Trained on code from ServiceNow engineering, results generated with Now Assist for Creator are generally higher quality and more scalable and secure than any other code generation technology. This solution includes the general availability of text-to-code, which converts natural language text into high-quality code suggestions, and in some cases into complete code, enabling faster development and increased productivity.
Trained on code from ServiceNow engineering, results generated with Now Assist for Creator are generally higher quality and more scalable and secure than other code generation technology. This solution includes text-to-code, which converts natural language text into high-quality code suggestions, and in some cases into complete code, enabling faster development and increased productivity.
Customer Support Customers receive standard and enhanced support from technical resources located around the globe. We offer customer support on a subscription-based model, and we offer self-service technical support through our support portal, which provides access to documentation, knowledge base articles, online training, online support forums and online case creation.
Customer Support, Professional Services and ServiceNow Impact Customer Support We offer our customers standard and enhanced support, from technical resources located around the globe, on a subscription-based model, as well as self-service technical support through our support portal, which provides access to documentation, knowledge-based articles, online training, online support forums and online case creation.
We enter into confidentiality and proprietary rights agreements with our employees, partners, vendors, consultants and other third parties and limit access to our IP and other proprietary information. We also purchase or license IP and technology that we incorporate into our products or services.
We enter into confidentiality and proprietary rights agreements with our employees, partners, vendors, consultants and other third parties and limit access to our IP and other proprietary information. We also purchase or license IP and technology that we incorporate into our products or services. We continue to grow our global patent portfolio and IP rights that relate to our business.
We have not experienced interruptions of operations or work stoppages due to labor disagreements. 11 Table of Contents Available Information You can obtain copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other filings with the SEC, and all amendments to these filings, free of charge from our website at www.servicenow.com/company/investor-relations/sec-filings.html as soon as reasonably practicable after we file or furnish them with the SEC.
Available Information You can obtain copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other filings with the SEC, and all amendments to these filings, free of charge from our website at www.servicenow.com/company/investor-relations/sec-filings.html as soon as reasonably practicable after we file or furnish them with the SEC.
We lead with empathy, which means listening and acting to make everyone feel they belong with ServiceNow. • Stay hungry and humble : We do not take success for granted. We are always ready to learn and evolve. We grow together, bringing fresh ideas and new perspectives.
We deliver results as a team and enjoy the journey. • Create belonging: We lead with empathy, which means listening and acting to make everyone feel they belong with ServiceNow. • Stay hungry and humble : We do not take success for granted. We are always ready to learn and evolve. We grow together, bringing fresh ideas and new perspectives.
We host our full software-as-a-service (“SaaS”) experience on our own private cloud and use public cloud service providers for customers that are primarily in highly regulated markets or at their request. Our data centers operate in paired configurations to enable replication for high-availability and redundancy.
We host our full software-as-a-service (“SaaS”) experience on our own private cloud or customers may elect to use public cloud service providers. Our data centers operate in paired configurations to enable replication for high-availability and redundancy.
In addition to base salary, all our employees are eligible to participate in our annual cash bonus plan or in our sales commission plan. We also have a broad-based discretionary equity incentive program and an employee stock purchase plan, which enable employees to participate in our success.
In support of this, all our employees are eligible to participate in our annual cash bonus plan or, for those in quota-carrying roles, our sales commission plan, in addition to their base pay. We also have a broad-based discretionary equity incentive program and an employee stock purchase plan, which enable employees to share in our success.
EVS insights are used to create action plans at all levels of the organization and inform the assessment of our human capital management approach and its alignment with our purpose and business strategy.
EVS insights are used to create action plans at all levels of the organization and inform the assessment of our human capital management approach and its alignment with our purpose and business strategy. “Create Belonging” is one of our four company values that guides our ambition.
As of December 31, 2023, we had over 2,000 U.S. and foreign patents, including patents acquired from third parties, and over 600 pen ding patent applications. We do not believe that our proprietary technology is dependent on any single patent or group of related patents.
Our success depends in part upon our ability to protect our core technology and IP. As of December 31, 2024, we had over 2,000 U.S. and foreign patents, including patents acquired from third parties, and over 600 pending patent applications. We do not believe that our proprietary technology is dependent on any single patent or group of related patents.
Our Technology products enable IT departments to serve their customers, manage their IT infrastructure, identify and remediate security vulnerabilities and threats, gain visibility across their IT resources and asset lifecycles, optimize IT costs and reduce time spent on administrative tasks. Our Technology products also drive enterprise-wide outcomes, as well as power our Customer and Industry, and Employee Workflows.
Technology Workflows Technology Workflows enable IT departments to serve their customers, manage their IT infrastructure, identify and remediate security vulnerabilities and threats, gain visibility across their IT resources and asset lifecycles, optimize IT costs and reduce time spent on administrative tasks.
Our architecture also gives us the added flexibility to allow customers the option of deploying our services internally in their own data centers or under contract with a third party to host the software in order to support unique regulatory or security requirements.
Our architecture also gives us the added flexibility to allow customers to deploy our services internally in their own data centers, with public cloud service providers, or with a third party to support unique regulatory or security requirements.
Using emerging technologies, we can anticipate customer demands and then bring new services and new versions of existing services to market quickly in order to remain competitive in the marketplace.
We focus on innovating and developing new services and core technologies and further enhancing the functionality, reliability and performance of our existing solutions. Using emerging technologies, we can anticipate customer demands and then bring new services and new versions of existing services to market quickly in order to remain competitive in the marketplace.
Together with our partners, we offer industry and domain-focused solutions at scale and are accelerating digital transformation as we help companies drive new approaches in engaging their end users and employees. We are seeing continued momentum across the partner ecosystem. We have established several foundational partnerships in 2023.
Together with our partners, we offer industry and domain-focused solutions at scale and are accelerating digital transformation as we help companies drive new approaches in engaging their end users and employees. We are seeing continued momentum across the partner ecosystem. For example, we have expanded our relationships with a number of technology companies to enhance enterprise AI capabilities.
Automation Engine Our Automation Engine product helps workflows integrate by connecting or automating systems, documents or tasks with minimal code. Manual work can be eliminated by leveraging robotic process automation and intelligent document processing capabilities.
Automation Engine Our Automation Engine product helps workflows integrate by connecting or automating systems, documents or tasks with minimal code. Integration to data in third-party systems is executed and secured using application programming interfaces (or “APIs”), while manual work can be eliminated by leveraging robotic process automation and intelligent document processing capabilities.
We strive to deliver the best customer experiences and innovations. • Win as a team: We share the same goals and have clear roles in achieving them. We deliver results as a team and enjoy the journey. • Create belonging: Diversity, equity and inclusion are fundamental. Belonging is the breakthrough.
We strive to deliver the best customer experiences and innovations. • Win as a team: We share the same goals and have clear roles in achieving them.
By prioritizing these values, we are able to gain our customers’ trust, execute on our overall business strategy and feel immensely proud that “The World Works with ServiceNow.” Our Products ServiceNow’s product portfolio—which spans our Technology, Customer and Industry, Employee, and Creator & Other Workflows—is delivered on the Now Platform.
As we gain our customers’ trust by delivering products that provide great experiences and value across our customers’ entire enterprise, we feel immensely proud that “The World Works with ServiceNow.” Our Products ServiceNow’s product portfolio—which spans our Technology, Customer and Industry, Employee, Creator and other Workflows—is delivered on the Now Platform.
Human Capital Management Our People Pact Our People Pact is pivotal to our goal of becoming the defining enterprise software company of the 21 st century. Our People Pact is a commitment to helping each other l ive our best lives, do our best work, and fulfill our purpose together.
Human Capital Management Our People Pact Our People Pact is pivotal to our ability to fulfill our corporate purpose and is a commitment to helping each other l ive our best lives, do our best work and fulfill our purpose together.
The portion of our revenues generated by sales to government customers has also increased over time. See “Risk Factors—Doing business with the public sector and heavily-regulated entities subjects us to risks related to the government procurement process, regulations, and contracting requirements” for additional information about our sales to government customers.
See “Risk Factors—Doing business with the public sector and heavily-regulated entities subjects us to risks related to the government procurement process, regulations, and contracting requirements” for additional information about our sales to government customers. Research and Development Our research and development organization is responsible for the design, development, testing and validation of our solutions.
The Now Platform automates workflows across an entire enterprise by connecting disparate departments, systems, and silos in a seamless way to unlock productivity and improve experiences for both employees and customers.
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.
None of our U.S. employees are represented by a labor union. Employees in certain countries are represented by workers’ councils or employee representatives or have the benefits of collective bargaining arrangements at the national and/or sector level.
Employees in certain countries are represented by workers’ councils or employee representatives or have the benefits of collective bargaining arrangements at the national and/or sector level. We have not experienced interruptions of operations or work stoppages due to labor disagreements.
While there are some limitations on agility and flexibility as compared to our cloud offering, a minority of our customers have elected the third-party alternative.
While there are some limitations on agility and flexibility as compared to our cloud offering, a minority of our customers have elected the third-party alternative. The standard and enhanced customer support we provide to customers that deploy our services outside of our data centers is similar to the support we provide to customers deployed in our managed data centers.
We sell our product offerings and services through subscription services primarily through our global direct sales organization. We also sell services through managed service providers and resale partners. Our marketing efforts and lead generation activities consist primarily of customer referrals, digital advertising (including via our website), trade shows, industry events, brand campaigns and press releases.
Our marketing efforts and lead generation activities consist primarily of customer referrals, digital advertising (including via our website), trade shows, industry events, brand campaigns and press releases.
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 our customers to get work done regardless of their current and future preferred systems of record and collaboration platforms.
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 systems of record and collaboration platforms, across any data and system. 2 Table of Contents Our one platform, one architecture and one data model approach can provide a “single pane of glass” that connects people, processes, data and devices.
Our ambition to become the defining enterprise software company of the 21 st century is the driving force behind our commitment to providing exceptional customer service and our overall business strategy and is guided by our values: • Wow our customers: Customers are the center of our world.
See “Risk Factors—We may not be able to protect or enforce our intellectual property rights.” Our Ambition, Values and Corporate Purpose Our ambition to become the defining enterprise software company of the 21 st century is the driving force behind our overall business strategy and is guided by our values: • Wow our customers: Customers are the center of our world.
Our global inclusion framework focuses on three key areas: Business Community Strategic Partnerships Enable each function to build the most innovative teams possible through a global and data driven approach that drives structural inclusion and improves equitable outcomes for all Strengthen and expand our inclusive culture through our Belonging Groups and extend our impact throughout the industry Engage strategic partners to provide a wide variety of professional development opportunities that meet the evolving needs of our employees 10 Table of Contents We support multiple Belonging Groups within our business and employee community, including for women, different racial and ethnic groups, families, military veterans, people with disabilities, people of different faiths, and people who identify as LGBTQI+.
Our global inclusion framework focuses on three key areas: Business Community Strategic Partnerships Enable each function to build the most innovative teams possible through a global and data-driven approach that drives structural inclusion and improves equitable outcomes for all Strengthen and expand our inclusive culture throughout the industry through RiseUp with ServiceNow Engage strategic partners to provide a wide variety of development opportunities that meet the evolving needs and skills of our employees and the communities we reach As a technology leader, we believe in broadening our reach to underserved communities, providing them with access to technology and training, helping them unlock new opportunities.
Our goal is to make our customers’ work lives as simple and as easy as their personal lives. Technology Workflows Technology Workflows help companies unite IT, technology, risk management and security operations on a single platform to deliver modern, resilient digital services aligned to our customers’ priorities.
Our Technology products help companies unite IT, technology, risk management and security operations on a single platform to deliver modern and resilient digital services aligned to our customers’ priorities. These products also drive enterprise-wide outcomes, as well as power our Customer and Industry and Employee Workflows.
Automation Engine includes process mining capabilities that can uncover trends and patterns in business processes and help eliminate redundancies, drive process optimization, along with cost and productivity efficiencies. 6 Table of Contents Platform Privacy and Security Our Platform Privacy and Security product provides premium security and privacy controls to help ServiceNow customers protect and control their sensitive data in the cloud.
Automation Engine includes process mining capabilities that can uncover trends and patterns in business processes and help eliminate redundancies and drive process optimization along with cost and productivity efficiencies.
Our partners play a critical role in helping companies digitally transform their businesses. Our industry and workflow capabilities paired with our partners’ industry and functional domain experience help customers of all sizes.
They play a critical role in helping companies digitally transform their businesses. We have reimagined our program to include more flexibility and choice and are empowering partners worldwide to help us reach new markets and industries while innovating faster and together. Our industry and workflow capabilities paired with our partners’ industry and functional domain expertise help customers of all sizes.
Impact customers also have access to a team of on-demand experts, training and other services. Professional Services Our Professional Services are offered by ServiceNow alone and in a co-delivery model with our network of partners to help customers maximize the value of their ServiceNow investment. Our Professional Services include process design, implementation, configuration, architecture and optimization services.
Professional Services Our Professional Services, offered by ServiceNow directly and through our network of partners, include process design, implementation, configuration, architecture and optimization services that help our customers maximize the value of their ServiceNow investment.
Customer service departments no longer need to rely on agents searching multiple systems to find a single resolution to customer requests.
Organizations can elevate their customer service with enhanced resolution efficiency and improved service quality made possible with workflows, automation, AI and task management. Customer service departments no longer need to rely on agents searching multiple systems to find a single resolution to customer requests.
Customers We primarily sell our services to large enterprise customers, and we host and support large, enterprise-wide deployments for our customers. As of December 31, 2023, we had over 8,100 customers. Our customers operate in a wide variety of industries, including government, financial services, healthcare, manufacturing, IT services, technology, oil and gas, telecommunications, education and consumer products.
Customers We primarily sell our services to large enterprise customers, and we host and support large, enterprise-wide deployments for our customers. As of December 31, 2024, we had approximately 8,400 customers. Our customers operate in a wide variety of industries. The portion of our revenues generated by sales to government customers has also increased over time.
Each year, two major platform upgrades are released, delivering new standard functionality and new standalone products to further simplify the way our customers work and enhance productivity. 2 Table of Contents The Now Platform The Now Platform is the intelligent platform for end-to-end digital transformation.
Each year, two major platform upgrades are released, delivering new standard functionality and standalone products to further simplify the way our customers work and enhance productivity. Since launching AI-powered versions of our products, we have continued to expand the Now Assist product portfolio and plan to continue to embed AI capabilities in our portfolio in the future.
The automation of workflows on our platform can be enhanced by additional functionality, including, depending on the product, AI (including generative AI), machine learning, robotic process automation, process mining, performance analytics, and low-code/no-code development tools. Further, the Now Platform is uniquely positioned to bring the full potential of generative AI to the enterprise.
This flexibility helps create more intuitive, efficient and seamless workflows aligned to our customers’ needs. In addition to AI, business process automation on the Now Platform can be further enhanced by other functionality, including machine learning, robotic process automation, process mining, analytics and low-code/no-code development tools.
Our Technology Workflows empower Information Technology (“IT”) departments to plan, build, operate and service the IT needs of the business enterprise. Our Customer and Industry Workflows help organizations reimagine the customer experience and increase customer loyalty. Our Employee Workflows help customers simplify how their employees access services they need, creating a consumer-like experience.
Our Customer and Industry Workflows help organizations reimagine their customer experience by empowering their customers with personalized self-service and providing organizations with greater ability to anticipate their customer needs by providing real-time insights. Our Employee Workflows help customers simplify how their employees access services they need, creating a consumer-like experience.
Intellectual Property We rely upon a combination of U.S. and international copyright, trade secret, patent and trademark laws and confidentiality procedures and contractual rights and restrictions to establish, protect and grow our intellectual property (“IP”) rights.
For additional information about competition, see “Risk Factors—A failure to innovate in response to rapidly evolving technological changes and in the midst of an intensely competitive market may harm our competitive position and business prospects.” 10 Table of Contents Intellectual Property We rely upon a combination of U.S. and international copyright, trade secret, patent and trademark laws and confidentiality procedures and contractual rights and restrictions to establish, protect and grow our intellectual property (“IP”) rights.
Integrating front-end customer service capabilities with operations, order fulfillment and field service resources, our Customer and Industry Workflows products help create a seamless customer experience from request to resolution through connected digital workflows that deliver fast support on a customer’s channel of choice.
Customer and Industry Workflows help customers create a seamless customer experience from request to resolution by connecting 4 Table of Contents digital workflows that deliver fast support on a customer’s channel of choice, reducing costs, and modernizing customer experiences.
With work order management, schedule optimization, dispatching, and preventative maintenance all in one, field service agents can be assigned, deployed and managed on the same underlying customer service management platform that created and managed the customer incident.
Field Service Management Our Field Service Management (“FSM”) product provides work planning, scheduling, resource management and job execution capabilities all in one, which allows field service agents to be assigned and dispatched on the same underlying customer service management platform that created and managed the customer incident.
ITEM 1. BUSINESS ServiceNow was founded on a simple premise: to make work flow better. Our purpose is to make the world work better for everyone. We are the end-to-end intelligent workflow automation platform for digital businesses.
ITEM 1. 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.
It identifies a customer’s IT infrastructure components (e.g., servers) and associated digital services (e.g., email), which are dependent upon that infrastructure. It also maintains a single data record for all IT configurable items, which allows our customers to exercise control over their on-premises or cloud-based infrastructures and orchestrate key processes and tasks.
It also maintains a single data record for all IT configurable items, allowing our customers to exercise control over their on-premises or cloud-based infrastructures, while orchestrating key processes and tasks. ITOM also includes Cloud Observability, which provides real-time visibility into cloud-native and monolithic environments that power our customers’ internal- and external-facing products and services.
Strategic Portfolio Management Our Strategic Portfolio Management (“SPM”) product enables customers to drive business outcomes by aligning their strategy with investments and execution. SPM helps customers plan, visualize and track value realization across their portfolio of projects, initiatives and digital products all on one platform.
It boosts security analysts’ productivity, accelerates issue resolution and equips chief information security officers and other security leaders with valuable insights for transforming their security operations. Strategic Portfolio Management Our Strategic Portfolio Management (“SPM”) product helps customers plan, visualize and track value realization across their portfolio of projects, initiatives and digital products, all on one platform.
Environmental, Social and Governance Our ESG strategy is aligned to our corporate purpose to “make the world work better for everyone.” We are committed to sustaining our planet (environmental), creating equitable opportunities (social), acting with integrity (governance) and enabling our customers to make progress and deliver on their ESG goals.
By prioritizing these values, we are able to gain the trust of our employees and customers and work towards fulfilling our corporate purpose to “make the world work better for everyone.” Environmental, Social and Governance Our ESG strategy is aligned to our corporate purpose.
To help customers in key business functions, we also enable Other Workflows through Platform Privacy and Security and Source-to-Pay Operations, among other products. With Now Assist for Creator, a generative AI solution, development teams can create and scale apps more quickly on the Now Platform.
This automation can significantly boost productivity by reducing development time and enabling both novice and experienced developers to build more reliable applications. To help customers in key business functions, we also enable other workflows through Platform Privacy and Security and Source-to-Pay Operations, among other products.
We believe that employees with diverse backgrounds and experiences who are comfortable expressing their points of view in the workplace will work together to create better products and services that will appeal to a wider customer base and ultimately result in more business for ServiceNow.
We aim to create a safe, seen, heard and connected workplace for our employees of all backgrounds and experiences so that they can work together to create better products and services that serve our equally diverse and global customer base and ultimately better business outcomes for ServiceNow.
This provides those employees flexibility to organize their schedules, which enables us to attract, recruit and retain the best talent. We believe such an environment will only serve to strengthen our company. Workforce Metrics As of December 31, 2023, we employed 22,668 people on a full-time basis, 11,797 in the United States and 10,871 internationally.
A substantial portion of our employees work partially or fully remote. We believe such an environment will only serve to strengthen our company. Workforce Metrics As of December 31, 2024, we employed 26,293 people on a full-time basis, 13,193 in the United States and 13,100 internationally. None of our U.S. employees are represented by a labor union.
With our recent software release, we have combined the power of the Now Platform with new generative AI features to provide AI-driven intelligence to every corner of the business. These features are offered through Now Assist, our generative AI solution available for certain products at an additional cost.
With our recent software releases, we have combined the power of the Now Platform with new GenAI and agentic AI features, offered through Now Assist, to provide intelligent workflows throughout our customers’ businesses.
The Now Platform offers a solution to these limitations by enabling rapid business process automation across enterprise technology systems that keeps pace with a rapidly changing environment. We believe a better service and end-user experience, and organizational agility are the ultimate desired outcomes of digital transformation.
We believe better service, end-user experience and organizational agility are the ultimate desired outcomes of digital transformation. The Now Platform is uniquely positioned to bring the full potential of GenAI and agentic AI to the enterprise.
Enterprise Asset Management inventories and automates processes across the lifecycle of a customer's physical business assets from planning, deployment, inventory management and maintenance through retirement. Cloud Observability Cloud Observability provides deep, real-time visibility into cloud-native and monolithic environments that power our customers’ internal- and external-facing products and services.
Enterprise Asset Management inventories and automates processes across the lifecycle of a customer’s physical business assets from planning, deployment, inventory management and maintenance through retirement. Integrated Risk Management Our Integrated Risk Management (“IRM”) product capabilities include policy and compliance management, regulatory change management, compliance case management, IT and operational risk management and audit management.
IT Service Management Our IT Service Management (“ITSM”) product, powered by AI, defines, structures, consolidates, manages and automates the digital services that an enterprise offers its employees, customers and partners. ITSM’s capabilities include, among others, predictive intelligence, Virtual Agent, incident management and response, routine task and request automation, performance analytics and process optimization capabilities.
IT Service Management Our IT Service Management (“ITSM”) product is capable of, among others, predictive intelligence, incident management and response, routine task and request automation, performance analytics and process optimization. It also provides a Virtual Agent feature, a chatbot that can answer common questions.
Additionally, with CSM, companies can route work to the right agent based on priority and category, decreasing errors by surfacing recommended solutions based on prior cases and interactions. Now Assist for CSM, a generative AI solution, rapidly generates summaries for cases and chats, reduces manual work, and allows agents to resolve customer issues faster.
Now Assist for CSM, our AI solution, rapidly generates summaries for cases and chats, reduces manual work and allows agents to resolve customer issues faster. This solution helps accelerate time to resolution, reduce case volume and personalize service, which reduces the effort required by customers.
To foster a sense of belonging among employees, we have implemented several initiatives focused on recruiting, learning and development, and culture that weave DEI throughout our talent processes and employee experience.
To build a strong culture, we have implemented initiatives that weave inclusion throughout the employee experience - from hiring, to learning and development and career advancement.
By connecting workflows across siloed organizational functions and systems, the Now Platform delivers business outcomes, including unlocking productivity, streamlining processes, and improving experiences for both employees and customers. Our workflow applications built on the Now Platform are organized in four primary areas: Technology, Customer and Industry, Employee, and Creator.
The workflow applications built on the Now Platform are organized in four primary areas: Technology, Customer and Industry, Employee and Creator. Our Technology Workflows empower Information Technology (“IT”) departments to plan, build, operate and service the IT needs of the business enterprise.
As we grow and the space where we operate develops and matures, we increasingly find ourselves in competition with solutions and alternative approaches to solving customer needs, including: • Enterprise application software vendors . The Now Platform quickly integrates with, and complements the performance of, enterprise application software from other well-established vendors, such as Oracle, SAP, Salesforce and Workday.
As our business expands and the industries in which we operate evolve, we increasingly find ourselves in competition with solutions and alternative approaches to solving customer needs, including, among others: • enterprise application software vendors (including cloud-based and traditional on-premises vendors) such as Oracle, SAP, Salesforce and Workday; • new technologies and entrants (including both point-solutions and platform solutions covering a wide range of functionalities); • custom development and in-house solutions; • technology consultants; • systems integrators; and • software resellers.
With Telecom Service Management, Order Management for Telecom, Network Inventory Management, and Telecom Service Operations Management, customers can streamline service experiences to maximize investments, scale their order management process, launch services quickly, enhance customer care, automate service assurance, gain real-time data visibility and optimize their network management on a single platform.
Workflows use Now Assist to help maximize technology investments, scale sales and order management processes, launch telecom services quickly, enhance customer care, automate service assurance and optimize network management on a single platform. Employee Workflows Employee Workflows help organizations transform the employee experience, improve productivity, increase employee satisfaction and fuel business growth.
Now Assist for ITSM, a generative AI solution, can help improve agent productivity and the employee experience with faster, more seamless resolutions. It provides summaries of Virtual Agent interactions and incident history so agents can efficiently resolve incidents. Upon incident closure, solution notes are generated to speed wrap times and adhere to incident management best practices.
For example, upon incident closure, solution notes or knowledge-based articles can be generated to speed wrap times and adhere to incident management best practices, thereby improving agent productivity and employee experience with faster, more seamless resolutions. Operational Technology Management Our Operational Technology (“OT”) Management product suite provides visibility and context into connected devices and technology assets deployed for operational purposes.
With Healthcare and Life Sciences Service Management and Clinical Device Management, customers can offer consumer-grade experiences, enhance patient care, unlock productivity, streamline operations and efficiently manage and service clinical devices.
Healthcare and Life Sciences Healthcare and Life Sciences Service Management uses Now Assist to allow organizations to enhance patient care, unlock productivity and streamline operations. Clinical Device Management provides a single dashboard from which healthcare providers may efficiently manage and service clinical devices, while also improving their ability to meet compliance requirements.
For example, many companies now have multi-year digital transformation plans that introduce the use of additional ServiceNow products and services. Our ability to help our customers solve their unique challenges, operate on their unique technologies and systems and change at their own unique pace, all on a single platform, has earned us their trust with their mission-critical operations.
Many of our customers recognize the advantages of the Now Platform and have developed multi-year digital transformation plans that expand over time the use of ServiceNow products and services for their business.
Organizations can streamline resource management and empower technicians with job details, customer information, and parts required to maximize effectiveness and deliver great customer experiences. Industry We offer industry solutions to better address the unique needs for specific industries, including banking, insurance, telecommunications, technology, healthcare, life sciences, manufacturing and the global public sector.
It accelerates productivity by simplifying work order task summarization and knowledge generation. 5 Table of Contents Industry We offer industry solutions to better address the unique needs for specific industries, including, for example, financial services, healthcare and life sciences, manufacturing, public sector, retail, technology and telecommunications.
Source-to-Pay Operations Our Source-to-Pay Operations (formerly, Procurement Operations Management) suite connects to customers’ existing enterprise resource planning (“ERP”) systems and provides a source-to-pay workflow automation solution that enables procurement departments to create a unified work experience across teams. It enables organizations to do more with their existing procurement teams and to further scale without dramatically increasing staff.
Source-to-Pay Operations Our Source-to-Pay Operations suite connects to customers’ existing enterprise resource planning and procurement systems, delivering a guided experience and highly automated processes that reduce cycle time and cuts costs across procurement, supplier management and accounts payable processes.
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Our intelligent platform, the Now Platform, is a cloud-based solution with embedded artificial intelligence (“AI”) and machine learning (“ML”) capabilities that helps global enterprises across industries, universities and governments unify and digitize their workflows.
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Organizations are increasingly turning to digital investments to streamline business-critical processes, drive deeper collaboration, increase employee productivity and power better customer experiences. The Now Platform helps business leaders realize value from these investments by incorporating advanced technology into the flow of work, end-to-end across the enterprise, for every department and persona.
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Our Creator Workflows enable customers to quickly create, test, and deploy their own low-code applications on the Now Platform. We continue to evolve these workflows to meet the needs of our customers’ expanding digital requirements by modernizing technology operations, employee experiences, customer experiences, industry-specific challenges, and application development and integration.
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Our Creator Workflows enable customers to automate processes by quickly creating their own custom workflows on the Now Platform. Artificial Intelligence (“AI”), particularly Generative AI (“GenAI”) and agentic AI, is driving a new wave of technology transformation.
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For example, we embedded into each of these workflows AI and ML capabilities, such as text-to-code, intent understanding, knowledge synthesis, issue summarization, and virtual agent to drive employee, customer, agent and developer productivity for our customers.
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We are an early leader in applying AI to enterprise workflows and are working to remain at the forefront of AI as we continue to execute our product roadmap.
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Traditionally, business processes have been embedded in separate enterprise technology systems, such as finance, human resources (“HR”), sales and customer support, which have become disconnected, siloed and complex, offering limited flexibility and adaptability. They also fail to provide the intuitive and empowering experience that users now expect from consumer-grade applications.
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As an AI platform for business transformation, the Now Platform has embedded Now Assist, our AI solution available for certain products at an additional cost, to help enhance user productivity and efficiency, thereby accelerating our customers’ return on investment in the Now Platform.
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The Now Platform enables our customers’ digital transformation from non-integrated enterprise technology solutions with manual and disconnected processes and activities, to integrated enterprise technology solutions with automation and connected processes and activities.
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For example, with Now Assist, customer service agents can solve customers’ problems quickly with AI-produced case summaries and next step suggestions; employees can obtain faster and more accurate answers using AI-powered self-service, increasing their productivity and engagement; customers can receive enhanced self-service options and improved experiences from live support agents; and developers can generate code and create apps, saving time to focus on more complex matters.
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The transformation to digital operations, enabled by the Now Platform, increases our customers’ resiliency and security and delivers great experiences and additional value to their C-suite, employees and consumers. The Now Platform’s single data model and architecture allows work to be done across the enterprise with a unified, consumer-grade user experience.
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We believe that with Now Assist, even customers with limited technical background can leverage AI to meaningfully contribute to their businesses’ digital transformation. Our customers have given us feedback that these enhanced products significantly improve the efficiency and fidelity of their workflows.
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For example, a new employee can use ServiceNow to complete onboarding tasks seamlessly. Through an integrated ServiceNow workflow, our consumer-grade mobile application guides the employee through onboarding tasks originating from ServiceNow or other systems, automating tasks across multiple functions such 1 Table of Contents as HR, IT, facilities and more.
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Agentic AI, the next evolution of GenAI, involves AI agents that act and interact in smart and autonomous ways with humans providing oversight and guardrails. With agentic AI, humans can be supported by multiple AI agents trained to perform specific tasks, rather than, for example, a single AI assistant or chatbot relying on a human’s specific prompts or queries.
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Similarly, the Now Platform enables customer service to be executed in a way that reduces customer effort, provides proactive service, empowers agents and streamlines communication and automation across departments. Because of these advantages, our customers frequently expand their use of the Now Platform.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisk Factors Summary This summary provides an overview of the risks we face and should not be considered a substitute for the more fulsome risk factors discussed immediately following this summary. • Risks Related to Our Ability to Grow Our Business • Laws, regulations and customer expectations regarding the use, storage and movement of data may restrict our ability to continue to optimize our platform and adversely affect our business. • We participate in intensely competitive markets, and if we do not compete effectively, our business and operating results will be harmed. • If we fail to innovate in response to rapidly evolving technological and market developments and customer needs, our competitive position and business prospects may be harmed. • If we are unsuccessful in increasing our penetration of international markets or managing the risks associated with foreign markets, our business and operating results will be adversely affected. • We rely on our network of partners for an increasing portion of our revenues, and if these partners fail to perform, our ability to sell and distribute our products may be impacted, and our operating results and growth rate may be harmed. • Doing business with the public sector and heavily-regulated entities subjects us to risks related to government procurement processes, regulations and contracting requirements. • If we fail to comply with applicable anti-corruption and anti-bribery laws, export control laws, economic and trade sanctions laws, or other global trade laws, we could be subject to penalties and civil and/or criminal sanctions and our business could be materially adversely affected. • Targeting larger enterprise customers may result in longer and more expensive sales cycles, increased pricing pressure and implementation and configuration challenges. • As we acquire or invest in companies and technologies, we may not realize the expected business or financial benefits and the acquisitions and investments may divert our management’s attention and result in additional shareholder dilution. • Risks Related to the Operation of Our Business • Actual or perceived cybersecurity events experienced by us or our third-party service providers may create the perception that our platform is not secure, and we may lose customers or incur significant liabilities, which would harm our business, financial condition and operating results. • If we lose key members of our management team or qualified employees or are unable to attract and retain the employees we need, our costs may increase and our business and operating results may be adversely affected. • Delays in the release of, or actual or perceived defects in, our products may slow the adoption of our latest technologies, reduce our ability to efficiently provide services, decrease customer satisfaction, and adversely impact future product sales. • Disruptions or defects in our services could damage our customers’ businesses, subject us to substantial liability and harm our reputation and financial results. • Delays in improving our information systems and processes could interfere with our ability to support our existing and growing customer and employee base and could adversely impact our business. • Lawsuits by third parties that allege we infringe their intellectual property rights could harm our business and operating results. • 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. • Our use of open-source software could harm our ability to sell our products and services and subject us to possible litigation. • Various factors, including our customers’ business, integration, migration, compliance and security requirements, or errors by us, our partners, or our customers, may cause implementations of our products to be delayed, inefficient or otherwise unsuccessful. 13 Table of Contents • Our failure or perceived failure to achieve our ESG goals or maintain ESG practices that meet evolving stakeholder expectations could adversely affect us. • Natural disasters, including climate change, and other events beyond our control could harm our business. • Risks Related to the Financial Performance or Financial Position of Our Business • Because we generally recognize revenues from our subscription service over the subscription term, a decrease in new subscriptions or renewals may not be immediately reflected in our operating results. • As our business grows, we expect our revenue growth rate to decline over the long term. • Changes in our effective tax rate or disallowance of our tax positions may adversely affect our financial position and results. • Our debt service obligations may adversely affect our financial condition. • Risks Related to General Economic Conditions • Global economic conditions may harm our industry, business and results of operations. • Foreign currency exchange rate fluctuations could harm our financial results. • Risks Related to Ownership of Our Common Stock • Our stock price is likely to continue to be volatile and could subject us to litigation. • Provisions in our governing documents, Delaware law or 2030 Notes might discourage, delay or prevent a change of control or changes in our management and, therefore, depress our stock price.
Biggest changeRisk Factors Summary This summary provides an overview of the risks we face and should not be considered a substitute for the more fulsome risk factors discussed immediately following this summary. • Risks Related to Our Ability to Grow Our Business • Laws, regulations and customer expectations regarding the use, storage and movement of data may restrict our ability to continue to optimize our platform. • A failure to innovate in response to rapidly evolving technological changes and in the midst of an intensely competitive market may harm our competitive position and business prospects. • We may not successfully increase our penetration of international markets or manage risks associated with foreign markets. • Incorporating AI technology into our offerings may result in operational, legal, regulatory, ethical and other challenges. • We rely on our network of partners for an increasing portion of our revenues, and if these partners fail to perform, our business may be harmed. • Doing business with the public sector and heavily-regulated entities subjects us to risks related to government procurement processes, regulations and contracting requirements. • If we fail to comply with applicable anti-corruption and anti-bribery laws, export control laws, economic and trade sanctions laws, or other global trade laws, we could be subject to penalties and civil and/or criminal sanctions and our business could be materially adversely affected. • Our customer deals are becoming more complex, which tend to involve longer and more expensive sales cycles, increased pricing pressure and implementation and configuration challenges. • As we acquire or invest in companies and technologies, we may not realize the expected business or financial benefits and the acquisitions and investments may divert our management’s attention and result in additional shareholder dilution or costs. • Risks Related to the Operation of Our Business • Actual or perceived cybersecurity events experienced by us or our third-party service providers may create the perception that our platform is not secure, and we may lose customers or incur significant liabilities. • We may lose key members of our management team or qualified employees or may not be able to attract and retain employees we need. • Delays in the release of, or actual or perceived defects in, our products may slow the adoption of our latest technologies, reduce our ability to efficiently provide services, decrease customer satisfaction, and adversely impact future product sales. • Disruptions or defects in our services could damage our customers’ businesses, subject us to substantial liability and harm our business. • Delays in improving our information systems and processes could interfere with our ability to support our existing and growing customer and employee base as we scale. • We may not be able to protect or enforce our intellectual property rights. • Our use of open-source software could harm our ability to sell our products and services and subject us to possible litigation. • Various factors, including our customers’ business, integration, migration, compliance and security requirements, or errors by us, our partners, or our customers, may cause implementations of our products to be delayed, inefficient or otherwise unsuccessful. • Our failure or perceived failure to achieve our ESG goals or maintain ESG practices that meet evolving stakeholder expectations could adversely affect us. • We may face natural disasters, including climate change, and other events beyond our control. 14 Table of Contents • Risks Related to the Financial Performance or Financial Position of Our Business • Because we generally recognize revenues from our subscription service over the subscription term, a decrease in new subscriptions or renewals may not be immediately reflected in our operating results. • As our business grows, we expect our revenue growth rate to decline over the long term. • Changes in our effective tax rate or disallowance of our tax positions may adversely affect our business. • We may be adversely affected by our debt service obligations. • Risks Related to General Economic Conditions • Our industry and business may be harmed by global economic conditions. • We may be harmed by foreign currency exchange rate fluctuations. • Risks Related to Ownership of Our Common Stock • Our stock price is likely to continue to be volatile. • Provisions in our governing documents or Delaware law might discourage, delay or prevent a change of control or changes in our management and, therefore, depress our stock price.
Further, during times of war and other major conflicts, we and our third-party providers may be vulnerable to a heightened risk of geopolitically motivated attacks, including cyberattacks, that could materially disrupt our systems and operations, supply chain and ability to provide our services. The cybersecurity threats are not limited to actors operating in the systems we control directly.
Further, during times of war and other major conflicts, we and our third-party providers may be vulnerable to a heightened risk of geopolitically motivated attacks, including cyberattacks, that could materially disrupt our systems and operations, supply chain and ability to provide our services. Cybersecurity threats are not limited to actors operating in the systems we control directly.
As our business grows, we expect our revenue growth rate to decline over the long term. You should not rely on our prior revenue growth as an indication of our future revenue growth.
As our business grows, we expect our revenue growth rate to decline over the long term. You should not rely on our prior revenue growth rate as an indication of our future revenue growth rate.
We have an established compliance program, but there is a risk that our employees, partners, customers and agents, as well as those companies to which we outsource certain of our business operations, could violate our policies and applicable law, exposing us to additional scrutiny and potential liability.
We have an established compliance program, but there is a risk that our employees, partners, vendors, customers and agents, as well as those companies to which we outsource certain of our business operations, could violate our policies and applicable law, exposing us to additional scrutiny and potential liability.
Strategic transactions involve numerous risks, including: • difficulties assimilating or integrating the businesses, technologies, products, personnel or operations of the acquired companies; • failing to achieve the expected benefits of the acquisition or investment; • potential loss of employees of the acquired company; • inability to maintain relationships with customers, suppliers and partners of the acquired business; • potential adverse tax consequences; • disruption to our business and diversion of management attention and other resources; • potential financial, credit or regulatory risks associated with acquired customers, suppliers and partners of the acquired business; • dependence on acquired technologies or licenses for which alternatives may not be available to us or which may involve significant cost or complexity; • in the case of foreign acquisitions, the challenges associated with integrating operations across different cultures, languages, and legal regimes and any currency and regulatory risks associated with specific countries; • introducing increased complexity and burden to maintain the technology platform; • introducing vulnerabilities or threats by integrating acquired technologies or businesses; • data security or privacy risks, compliance requirements, or integration costs from the acquired technology or company; • impairment of our investments or the possibility our investees will be unable to obtain future funding on favorable terms or at all; and • potential unknown liabilities or disputes associated with the acquired businesses.
Strategic transactions involve numerous risks, including: • difficulties assimilating or integrating the businesses, technologies, products, personnel or operations of the acquired companies; • failing to achieve the expected benefits of the acquisition or investment; • potential loss of employees of the acquired company; • inability to maintain relationships with customers, suppliers and partners of the acquired business; 19 Table of Contents • introducing vulnerabilities or threats by integrating acquired technologies or businesses; • introducing increased complexity and burden to maintain the technology platform; • potential adverse tax consequences; • disruption to our business and diversion of management attention and other resources; • potential financial, credit or regulatory risks associated with acquired customers, suppliers and partners of the acquired business; • dependence on acquired technologies or licenses for which alternatives may not be available to us or which may involve significant cost or complexity; • in the case of foreign acquisitions, the challenges associated with integrating operations across different cultures, languages, and legal regimes and any currency and regulatory risks associated with specific countries; • data security or privacy risks, compliance requirements, or integration costs from the acquired technology or company; • impairment of our investments or the possibility our investees will be unable to obtain future funding on favorable terms or at all; and • potential unknown liabilities or disputes associated with the acquired businesses.
While we have experienced significant revenue growth in prior periods, we expect it to decline over the long term due to increasing competition, a decrease in the growth rate of our overall market or other reasons.
While we have experienced significant revenue growth in prior periods, we expect the growth rate to decline over the long term due to increasing competition, a decrease in the growth rate of our overall market or other reasons.
Factors affecting our stock price, some of which are beyond our control, include, among other factors: • changes in the estimates of our operating results, revenue growth, or changes in recommendations by securities analysts; • changes in the average contract term of our customer agreements, timing of renewals and renewal rates; • our ability to meet our financial guidance or financial performance expectations of the securities analysts or investors; • announcements of new products, services or technologies, new applications or enhancements to services, strategic alliances, acquisitions, or other significant events by us or by our competitors; • fluctuations in company valuations, such as high-growth or cloud companies, perceived to be comparable to us; 25 Table of Contents • changes to our management team; • trading activity by directors, executive officers and significant shareholders, or the market’s perception that large shareholders intend to sell their shares; • the inclusion, exclusion, or removal of our stock from any major trading indices; • the size of our market float; • the trading volume of our common stock, including sales following the exercise of outstanding options or vesting of equity awards; • changes in laws or regulations impacting the delivery of our services; • significant litigation or regulatory actions; • the amount and timing of customer payments, payment defaults, operating costs and capital expenditures • the amount and timing of equity awards and the related financial statement expenses; • the impact of new accounting pronouncements; • the inability to conclude that our internal controls over financial reporting are effective; • our ability to accurately estimate the total addressable market for our products and services; and • overall performance of the equity markets.
Factors affecting our stock price, some of which are beyond our control, include, among other factors: • changes in the estimates of our operating results, revenue growth, or changes in recommendations by securities analysts; • changes in the average contract term of our customer agreements, timing of renewals and renewal rates; • our ability to meet our financial guidance or financial performance expectations of the securities analysts or investors; • announcements of new products, services or technologies, new applications or enhancements to services, strategic alliances, acquisitions, or other significant events by us or by our competitors; • fluctuations in company valuations, such as high-growth or cloud companies, perceived to be comparable to us; • changes to our management team; • trading activity by directors, executive officers and significant shareholders, or the market’s perception that large shareholders intend to sell their shares; • the inclusion, exclusion, or removal of our stock from any major trading indices; • the size of our market float; • the trading volume of our common stock, including sales following the exercise of outstanding options or vesting of equity awards; • our issuance or repurchase of shares of our common stock; • changes in laws or regulations impacting the delivery of our services; • significant litigation or regulatory actions; • the amount and timing of customer payments, payment defaults, operating costs and capital expenditures • the amount and timing of equity awards and the related financial statement expenses; • the impact of new accounting pronouncements; • the inability to conclude that our internal controls over financial reporting are effective; • our ability to accurately estimate the total addressable market for our products and services; and • overall performance of the equity markets.
The mere existence of any lawsuit, or any interim or final outcomes, and the public statements related to it (or absence of such statements) by the press, analysts and litigants could be unsettling to our customers and prospective customers.
Further, the mere existence of any lawsuit, or any interim or final outcomes, and the public statements related to it (or absence of such statements) by the press, analysts and litigants could be unsettling to our customers and prospective customers.
In addition, the assessment and response to security incidents, as well as implementation of appropriate safeguards to protect against future incidents, can lead to material economic and operational consequences. These consequences can result regardless of whether the incident is suffered by us, affects our third-party service providers or stems from customers action or inaction.
In addition, the assessment and response to security incidents, as well as implementation of appropriate safeguards to protect against future incidents, can lead to material economic and operational consequences. These consequences can result regardless of whether the incident is suffered by us, affects our third-party service providers or stems from customers’ action or inaction.
Our competitors, other third parties, including practicing entities and non-practicing entities, own large numbers of patents, copyrights, trademarks and trade secrets, which they may use and have used to assert claims of infringement, misappropriation or other violations of IP rights against us. Moreover, the patent portfolios of many of our competitors and other third parties are larger than ours.
Our competitors, other third parties, including practicing entities and non-practicing entities, own large numbers of patents, copyrights, trademarks and trade secrets, which they may use and have used to assert claims of infringement, misappropriation or other violations of IP rights against us. Moreover, the patent portfolios of many of our competitors and other third parties may be larger than ours.
In addition, public sector customers may have contractual, statutory or regulatory rights to terminate current contracts with us or our third-party distributors or resellers for convenience or due to a default, though such risk may be assumed by such third-party distributor or reseller.
Our public sector customers may have contractual, statutory or regulatory rights to terminate current contracts with us or our third-party distributors or resellers for convenience or due to a default, though such risk may be assumed by such third-party distributor or reseller.
An actual or perceived security breach can have a material effect on ServiceNow’s operations, finances and reputation.
An actual or perceived security breach or compromise can have a material effect on ServiceNow’s operations, finances and reputation.
We operate globally and as a result, our business, revenues and profitability are impacted by global macroeconomic conditions.
We operate globally and as a result, our business, revenues and profitability are impacted by global macroeconomic and political conditions.
Our products incorporate software licensed to us by third-party authors under open-source licenses, and we expect to continue to incorporate open-source software into our products and services in the future. We monitor our use of open-source software in an effort to avoid subjecting our products and services to adverse licensing conditions.
Our products incorporate software licensed to us by third-party authors under open-source licenses, and we expect to continue to incorporate open-source software into our products and services in the future. We monitor our use of open-source software to avoid subjecting our products and services to adverse licensing conditions.
The adverse consequences can include accidental or unlawful destruction, loss, alteration, unauthorized disclosure of or access to data; disruptions to our services; diversion of funds; litigation; indemnification and other contractual obligations; regulatory investigations; government fines and penalties; reputational damage; negative publicity; loss of sales, customers, and partners; mitigation and remediation expenses; and other material costs and liabilities.
The adverse consequences can include accidental or unlawful destruction, loss, alteration, unauthorized disclosure of or access to data; disruptions to our services; diversion of funds; litigation; indemnification and other contractual obligations; regulatory investigations; government fines and penalties; reputational damage; negative publicity; business and operational interruptions; loss of sales, customers, and partners; mitigation and remediation expenses; and other material costs and liabilities.
Risks associated with making our products and services available in international markets include, for example: • compliance with multiple, conflicting and changing governmental laws and regulations; • requirements to have local partner(s), local entity ownership limitations or technology transfer or sharing requirements, or to comply with data residency and transfer laws and regulations, privacy and data protection laws and regulations, which may increase operational costs and restrictions; • the possibility that illegal or unethical activities of our local employees or business partners will be attributed to us or cause us harm; • longer and potentially more complex sales and accounts receivable payment cycles and other collection difficulties; • different pricing and distribution environments; • potential changes in international trade policies, tariffs, agreements and practices, including the adoption and expansion of formal or informal trade restrictions or regulatory frameworks that may favor local competitors; • governmental direction, business practices and/or cultural norms that may favor local competitors; • more prevalent cybersecurity and intellectual property risks; and • localization of our services, including translation into foreign languages and associated expenses.
Risks associated with making our products and services available in international markets include, for example: • compliance with multiple, conflicting and changing governmental laws and regulations; • requirements to have local partner(s), local entity ownership limitations or technology transfer or sharing requirements, or to comply with data residency and transfer laws and regulations, privacy and data protection laws and regulations, which may increase operational costs and restrictions; • the possibility that illegal or unethical activities of our local employees or business partners will be attributed to us or cause us harm; • longer and potentially more complex sales and payment receipt cycles and other collection difficulties; • different pricing and distribution environments; • potential changes in international trade policies, tariffs, agreements and practices, including the adoption and expansion of formal or informal trade restrictions or regulatory frameworks that may favor local competitors; 16 Table of Contents • governmental direction, business practices and/or cultural norms that may favor local competitors; • more prevalent cybersecurity, intellectual property and AI risks; and • localization of our services, including translation into foreign languages and associated expenses.
Any of our primary locations may be vulnerable to the adverse effects of climate change. For example, our California headquarters have experienced, and may continue to experience, climate-related events at an increasing frequency and severity, including drought, water scarcity, heat waves, wildfires and air quality impacts and power shutoffs associated with wildfires.
Any of our primary locations may be vulnerable to the adverse effects of climate change. For example, our California headquarters have experienced, and may continue to experience, climate-related events at an 24 Table of Contents increasing frequency and severity, including drought, water scarcity, heat waves, wildfires and air quality impacts and power shutoffs associated with wildfires.
Our failure or perceived failure to achieve some or all of our ESG goals or maintain ESG practices that meet evolving stakeholder expectations or regulatory requirements could harm our reputation, adversely impact our ability to attract and retain employees or customers and expose us to increased scrutiny from the investment community, regulatory authorities and others or subject us to liability.
Our failure or perceived failure to achieve our ESG goals or maintain ESG practices that meet evolving stakeholder expectations or regulatory requirements could harm our reputation, adversely impact our ability to attract and retain employees or customers and expose us to increased scrutiny from the investment community, regulatory authorities and others or subject us to liability.
While our work model, where a substantial portion of our employees work partially or fully remote, increased our access to talent, we may not be able to take advantage of a broader talent pool if our competitors offer the same work model or if we continue to lean heavily on our primary operating locations for talent.
While our work model, where a substantial portion of our employees work partially or fully remote, increased our access to talent, we may not be able to take advantage of a broader talent pool if our competitors offer the same work model or if we continue to rely on our primary operating locations for talent.
Our failure or perceived failure to achieve our ESG goals or maintain ESG practices that meet evolving stakeholder expectations could adversely affect us. We have published environmental, social, and governance (“ESG”) initiatives, goals and commitments. Our ability to achieve our objectives is subject to numerous factors both within and outside of our control.
Our failure or perceived failure to achieve our ESG goals or maintain ESG practices that meet evolving stakeholder expectations could adversely affect us. Our ability to achieve published environmental, social, and governance (“ESG”) initiatives, goals and commitments is subject to numerous factors both within and outside of our control.
Risks Related to Our Ability to Grow Our Business Laws, regulations and customer expectations regarding the use, storage and movement of data may restrict our ability to continue to optimize our platform and adversely affect our business.
Risks Related to Our Ability to Grow Our Business Laws, regulations and customer expectations regarding the use, storage and movement of data may restrict our ability to continue to optimize our platform.
Further, if we or our partners are successful in receiving a contract award, that award could be challenged during a bid protest process. 16 Table of Contents Bid protests may result in an increase in expenses related to obtaining contract awards or an unfavorable modification or loss of an award.
Further, if we or our partners are successful in receiving a contract award, that award could be challenged during a bid protest process. Bid protests may result in an increase in expenses related to obtaining contract awards or an unfavorable modification or loss of an award.
Provisions in our governing documents, Delaware law or 2030 Notes might discourage, delay or prevent a change of control or changes in our management and, therefore, depress our stock price.
Provisions in our governing documents or Delaware law might discourage, delay or prevent a change of control or changes in our management and, therefore, depress our stock price.
The occurrence of any of the following risks, or additional risks and uncertainties not presently known to us or that we currently believe to be immaterial, could materially and adversely affect our business, financial condition or results of operations or cause our stock price to decline.
The occurrence of any of the following risks, or additional risks and uncertainties not presently known to us or that we currently believe to be immaterial, could materially and adversely affect our business, financial condition, results of operations, stock price or reputation.
Further, Section 203 of the Delaware General Corporation Law may discourage, delay or prevent a change in control of our company. Section 203 imposes certain restrictions on merger, business combinations and other transactions between us and certain shareholders.
Further, Section 203 of the Delaware General Corporation Law may discourage, delay or prevent a change in control of our company. Section 203 imposes certain restrictions on merger, business combinations and other transactions between us and certain shareholders. 28 Table of Contents
If this conflict continues or if conflict arises in other jurisdictions, the U.S. and other jurisdictions could impose wider economic and trade sanctions as well as export restrictions, which could impact our business opportunities and operations. Any violation of the U.S.
If this conflict continues or if serious conflict arises elsewhere, the U.S. and other jurisdictions could impose wider economic and trade sanctions as well as export restrictions, which could impact our business opportunities and operations. Any violation of the U.S.
In most instances, our customers are responsible for administering access to the data held in their particular instance for their employees and service providers. While our software is delivered with certain preset configurations, we understand that our customers require flexibility to configure the Now Platform to their specific business needs.
In most instances, our customers are responsible for administering access to the data held in their particular instance for their employees and service providers. While our software is delivered with certain preset configurations, we 20 Table of Contents understand that our customers require flexibility to configure the Now Platform to their specific business needs.
Our business operations are subject to interruption by natural disasters, flooding, fire, extreme heat, power shortages, pandemics such as COVID-19, terrorism, political unrest, telecommunications failure, vandalism, cyberattacks, geopolitical instability, war, the effects of climate change and other events beyond our control.
Our business operations are subject to interruption by natural disasters, flooding, fire, extreme heat, power shortages, pandemics, terrorism, political unrest, telecommunications failure, vandalism, cyberattacks, geopolitical instability, war, the effects of climate change and other events beyond our control.
The growth of our business and future prospects depend on our ability to increase our sales outside of the U.S. as a percentage of our total revenues. Additionally, operating in international markets requires significant investment and management attention and subjects us to varying regulatory, political and economic risks.
The growth of our business depends on our ability to increase our sales outside of the U.S. as a percentage of our total revenues. Additionally, operating in international markets requires significant investment and management attention and subjects us to varying regulatory, political and economic risks.
Our insurance may not be sufficient to cover losses or additional expenses we may sustain. Although we have backup systems in place, in the event of major natural disasters or catastrophic events, customer data could be lost, and resumption of operations could require significant time.
Our insurance may not be sufficient to cover losses or additional expenses we may sustain. In the event of major natural disasters or catastrophic events, our backup systems could fail, customer data could be lost, and resumption of operations could require significant time.
In addition, from time to time, the U.S. and other key international economies have been impacted and may continue to be impacted by geopolitical and economic instability, high levels of credit defaults, international trade disputes, changes in demand for various goods and services, high levels of persistent unemployment, wage and income stagnation, restricted credit, poor liquidity, reduced corporate profitability, volatility in credit, equity and foreign exchange markets, inflation, bankruptcies, international trade agreements, export controls, economic and trade sanctions, health crisis such as the COVID-19 pandemic and overall economic uncertainty.
In addition, from time to time, the U.S. and other key international economies have been impacted and may continue to be impacted by geopolitical and economic instability, high levels of credit defaults, international trade disputes, changes in demand for various goods and services, high levels of persistent unemployment, wage and income stagnation, restricted credit, poor liquidity, reduced corporate profitability, volatility in credit, equity and foreign exchange markets, inflation, bankruptcies, international trade agreements, export controls, economic and trade sanctions, health crises and overall economic uncertainty.
While we have a vendor security review process, we cannot guarantee that our third-party service providers or our supply chain infrastructure have not been compromised or that they do not contain exploitable defects or bugs that could result in a breach of or disruption to our platform, systems and network or the systems and networks of third parties that support us and our business.
We cannot guarantee that our third-party service providers or our supply chain infrastructure have not been compromised or that they do not contain exploitable defects or bugs that could result in a breach of or disruption to our platform, systems and network or the systems and networks of third parties that support us and our business.
Foreign Corrupt Practices Act of 1977, as amended, the UK Bribery Act, other applicable anti-corruption and anti-bribery laws, or applicable export control or economic and trade sanctions laws by our employees or third-party intermediaries could 17 Table of Contents subject us to significant risks such as adverse media coverage and/or severe criminal or civil sanctions, which could materially adversely affect our reputation, business, operating results, and prospects.
Foreign Corrupt Practices Act of 1977, as amended, the UK Bribery Act, other applicable anti-corruption and anti-bribery laws, or applicable export control or economic and trade sanctions laws by our employees or third-party intermediaries could subject us to significant risks such as adverse media coverage and/or severe criminal or civil sanctions, which could materially adversely affect our reputation and business.
These key individual contributors are critical to our success and can command very significant compensation in the market. Our ability to achieve significant revenue growth may depend on our success in recruiting, training and retaining sufficient qualified personnel to support our growth.
These key individual contributors are critical to our success, can command very significant compensation in the market and are actively recruited by our key competitors. Our ability to achieve significant revenue growth may depend on our success in recruiting, training and retaining sufficient qualified personnel to support our growth.
We are continually evaluating and, as appropriate, enhancing the attractiveness of our compensation packages. As a result, we have experienced and may continue to experience increased costs that may not be offset by either improved productivity or higher sales, potentially resulting in a reduction in our profitability.
We are continually evaluating and, as appropriate, enhancing the attractiveness of our compensation packages and benefit programs. As a result, we have experienced and may continue to 21 Table of Contents experience increased costs that may not be offset by either improved productivity or higher sales, potentially resulting in a reduction in our profitability.
We 15 Table of Contents have made, and will continue to make, substantial investments in data centers, geographic-specific service delivery models, advisory councils, cloud computing infrastructure, sales, marketing, partnership arrangements, personnel and facilities in new geographic markets.
We have made, and will continue to make, substantial investments in data centers, geographic-specific service delivery models, advisory councils, cloud computing infrastructure, sales, marketing, partnership arrangements, personnel and facilities in new geographic markets.
We may not have insurance sufficient to compensate us for potentially significant losses that may result from claims arising from disruptions to our services. Delays in improving our information systems and processes could interfere with our ability to support our existing and growing customer and employee base and could adversely impact our business.
We may not have insurance sufficient to compensate us for potentially significant losses that may result from claims arising from disruptions to our services. Delays in improving our information systems and processes could interfere with our ability to support our existing and growing customer and employee base as we scale.
In addition, while we maintain insurance coverage, we cannot be certain that such coverage will continue to be available on acceptable terms or 19 Table of Contents in sufficient amounts to cover potential losses from a security incident or that an insurer will not deny coverage as to any future claim.
In addition, while we maintain insurance coverage to cover potential financial losses, we cannot be certain that such coverage will continue to be available on acceptable terms or in sufficient amounts to cover potential financial losses from a security incident or that an insurer will not deny coverage as to any future claim.
In addition, our partners may use our platform to develop products and services that compete with our products and services, which could raise IP ownership concerns and strain these partnerships.
Our partners may also use our platform to develop products and services that compete with our products and services, which could raise IP ownership concerns and strain these partnerships.
As a result, these sales opportunities may require us to devote significant sales support and professional services to a smaller number of larger transactions, diverting those resources from other sales opportunities. If we fail to effectively manage these risks, our business, financial condition, and results of operations may be negatively affected.
As a result, these sales opportunities may require us to devote significant sales support and professional services to a smaller number of transactions, diverting those resources from other sales opportunities. If we fail to effectively manage these risks, our business may be negatively affected.
These obligations may apply to us and/or our third-party resellers or distributors whose practices we may not control. Such parties’ non-compliance could create contractual and customer satisfaction issues. In addition, governments routinely investigate and audit contractors for compliance with contractual and regulatory requirements.
These obligations may apply to us and/or our third-party resellers or distributors whose practices we may not control. Such parties’ non-compliance could create legal, contractual and customer satisfaction issues. We and governments routinely investigate and audit compliance with contractual and regulatory requirements.
We currently serve our customers primarily using equipment managed by us and co-located in third-party data centers operated by several different providers located around the world, and we serve certain of our customers that are primarily in highly regulated markets, using data center facilities operated by public cloud service providers.
We currently serve our customers primarily using equipment managed by us and co-located in third-party data centers operated by several different providers located around the world, and we serve certain of our customers using data center facilities operated by public cloud service providers.
We have observed attempts by third parties to induce or deceive our employees, contractors or users to fraudulently obtain access to our or our customers’ data or assets. Further, our employees have fallen victim to phishing attacks in the past and may again in the future.
We have observed attempts by third parties to induce or deceive our employees, contractors or users to fraudulently obtain access to our or our customers’ data or assets. In addition, our employees have fallen victim to phishing attacks in the past and are likely to again in the future.
In any IP litigation, regardless of the scope or merit, we may incur substantial costs and attorney’s fees and, if the claims are successfully asserted against us and we are found to be infringing upon, misappropriating or otherwise violating the IP rights of others, we could be required to pay substantial damages and/or make substantial ongoing royalty payments; comply with an injunction and cease offering or modify our products and services; comply with other unfavorable terms, including settlement terms; and indemnify our customers and business partners, obtain costly licenses on their behalf, and/or refund fees or other payments previously paid to us.
If claims are successfully asserted against us and we are found to be infringing upon, misappropriating or otherwise violating the IP rights of others, we could be required to pay substantial damages and/or make substantial ongoing royalty payments; comply with an injunction and cease offering or modify our products and services; comply with other unfavorable terms, including settlement terms; and indemnify our customers and business partners, obtain costly licenses on their behalf, and/or refund fees or other payments previously paid to us.
If we fail to effectively manage and grow our network of partners, our ability to sell our products and efficiently provide our services may be impacted, and our operating results and growth rate may be harmed. Doing business with the public sector and heavily-regulated entities subjects us to risks related to government procurement processes, regulations and contracting requirements.
If we fail to effectively manage and grow our network of partners, our ability to sell our products and efficiently provide our services may be impacted and our business may be harmed. 17 Table of Contents Doing business with the public sector and heavily-regulated entities subjects us to risks related to government procurement processes, regulations and contracting requirements.
Additionally, the IP ownership and license rights of new technologies such as AI have not been fully addressed by U.S. courts interpreting current and new laws or regulations, and the use or adoption of such technologies in our products and services may expose us to potential intellectual property claims; breach of a data license, software license, or website terms of service allegations; claimed violations of privacy rights; and other tort claims.
Additionally, the IP ownership and license rights of new technologies and the use of outputs therefrom, such as AI, which we are increasingly building into our product offerings, have not been fully addressed by U.S. courts interpreting current and new laws or regulations, and the use or adoption of such technologies in our products and services may expose us to potential intellectual property claims; breach of a data license, software license, or website terms of service allegations; claimed violations of privacy rights; and other tort claims.
Disruptions may result from errors we make in developing, delivering, configuring or hosting our services, or designing, installing, expanding or maintaining our cloud infrastructure. Disruptions in service can also result from incidents that are outside of our control, including denial of service or ransomware attacks.
Disruptions may result from errors we make in developing, delivering, configuring or hosting our services, or designing, installing, expanding or maintaining our cloud infrastructure. Disruptions in service can also result from incidents outside of our control, including third-party incidents or denial of service or ransomware attacks, among others.
Risks Related to the Operation of Our Business Actual or perceived cybersecurity events experienced by us or our third-party service providers may create the perception that our platform is not secure, and we may lose customers or incur significant liabilities, which would harm our business, financial condition and operating results.
Risks Related to the Operation of Our Business Actual or perceived cybersecurity events experienced by us or our third-party service providers may create the perception that our platform is not secure, and we may lose customers or incur significant liabilities.
Disruptions or defects in our services could damage our customers’ businesses, subject us to substantial liability and harm our reputation and financial results. Our business depends on our platform to be available without disruption. From time to time, we experience defects, disruptions, outages and other performance and quality problems with our platform.
Disruptions or defects in our services could damage our customers’ businesses, subject us to substantial liability and harm our business. Our business depends on our platform to be available without disruption. From time to time, we have experienced and expect to continue to experience defects, disruptions, outages and other performance and quality problems with our platform.
These provisions, among other things: • permit our board to establish the number of directors; • provide that directors may only be removed “for cause” and only with the approval of 66 2/3% of our shareholders; • require super-majority voting to amend certain provisions in our certificate of incorporation and bylaws; • authorize issuance of “blank check” preferred stock that our board could use to implement a shareholder rights plan; • prohibit shareholder action by written consent, which requires all shareholder actions to be taken at a meeting; • permit our board to make, alter or repeal our bylaws; and • require advance notice for shareholders to submit director nominations or other business at annual shareholders meetings (although our bylaws permit shareholders proxy access).
These provisions, among other things: • permit our board to establish the number of directors; • require super-majority voting to amend certain provisions in our certificate of incorporation and bylaws; • authorize issuance of “blank check” preferred stock that our board could use to implement a shareholder rights plan; • prohibit shareholder action by written consent, which requires all shareholder actions to be taken at a meeting; • permit our board to make, alter or repeal our bylaws; and 27 Table of Contents • require advance notice for shareholders to submit director nominations or other business at annual shareholders meetings (although our bylaws permit shareholders proxy access).
As digital transformation accelerates across a customer’s enterprise, cutting-edge capabilities such as AI, machine learning, hyper automation, low-code/no-code application development, system observability and predictive insights become increasingly relevant to the customer’s evolving needs.
Cutting-edge capabilities such as AI, machine learning, hyper automation, low-code/no-code application development, system observability and predictive insights become increasingly relevant to the customer’s evolving needs.
Our growing business operations increase our exposure to cyberattacks by a range of actors, who have used and will continue to use assorted tactics, techniques, and 18 Table of Contents procedures, including malicious code, ransomware, social engineering, business email compromises, supply chain attacks, denial of service attacks and similar internet-enabled, fraudulent activity.
Our growing business operations increase our exposure to cyberattacks by a range of actors, who have used and will continue to use assorted tactics, techniques, and procedures, including malicious code, ransomware, social engineering, business email compromises, supply chain attacks, denial of service attacks and similar internet-enabled, fraudulent activity, and the frequency of those attacks have become more common.
Accordingly, to compete effectively, we must: • identify and innovate in the right technologies; • keep pace with rapidly changing technological developments, such as AI, which may disrupt talent needs and the enterprise software marketplace; • accurately predict our customers’ changing digital transformation needs, priorities and adoption practices, including their technology infrastructures and buying and budgetary practices; • invest in and continually optimize our own technology platform so that we continue to meet the very high-performance expectations of our customers; • successfully deliver new, scalable technologies and products to meet customer needs and priorities; • efficiently integrate with technologies within our customers’ digital environments; • expand our offerings into industries and to buyers who are not familiar with our offerings; • profitably and efficiently market and sell products in markets where our sales and marketing teams have less experience; • successfully adapt new pricing models; • effectively secure our platform, data and customers’ data; and • effectively deliver, directly or through our partner ecosystem, the digital transformation process planning, IT systems architecture planning, and product implementation services that our customers require to be successful.
Accordingly, to compete effectively, we must: • identify and innovate in the right technologies; • keep pace with rapidly changing technological developments, such as AI, which may disrupt resource and talent needs and the enterprise software marketplace; • accurately predict and meet our customers’ changing digital transformation needs, priorities and adoption practices, including their technology infrastructures and buying and budgetary practices; • invest in and continually optimize our own technology platform so that we continue to meet the very high-performance expectations of our customers; • successfully deliver and promote new, scalable technologies and products to meet customer needs and priorities; • efficiently integrate with technologies within our customers’ digital environments; • expand our offerings into new and adjacent industries and comply with regulations in such industries; • successfully sell to buyers who are not familiar with our offerings; • profitably and efficiently market and sell our new and existing products; • effectively scale our business processes and operations as we grow; • successfully adapt new pricing models; • promote ongoing customer relationships and customer value realization; • effectively secure our platform, data and customers’ data; and • effectively deliver, directly or through our partner ecosystem, the digital transformation process planning, IT systems architecture planning, and product implementation services that our customers require to be successful.
Increases in our effective tax rate would reduce our profitability or in some cases increase our losses. Additionally, our future effective tax rate could be impacted by changes in accounting principles or changes in federal, state or international tax laws or tax rulings. The U.S.
Increases in our effective tax rate would reduce our profitability or in some cases increase our losses. Additionally, our future effective tax rate could be impacted by changes in accounting principles or changes in federal, state or international tax laws or tax rulings and these changes may have a retroactive effect. The U.S.
We are aware that, on occasion, our customers and ServiceNow have configured certain settings on our platform, or retained preset configurations, in a manner not aligned with their preferred security levels, which can result in, and has resulted in, information being made more widely accessible than intended.
We are aware that, on occasion, both our customers and ServiceNow have configured certain settings on our platform, or retained preset configurations, in ways that may not align with preferred or recommended security levels, which can result in, and has resulted in, information being made more widely accessible than intended.
Natural disasters, including climate change, and other events beyond our control could harm our business. Natural disasters or other catastrophic events may damage or disrupt our operations, international commerce and the global economy, and thus could have a negative effect on our business.
Natural disasters or other catastrophic events may damage or disrupt our operations, international commerce and the global economy, and thus could have a negative effect on our business.
Following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. Securities litigation could result in substantial costs and divert management’s attention and resources from our business. This could materially adversely affect our business, operating results, and financial condition.
Following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. Securities litigation could result in substantial costs and divert management’s attention and resources from our business.
Larger enterprise customers tend to require considerable time evaluating and testing our platform prior to making a purchasing decision, require multiple levels of review and approval, and demand more configuration, integration services and features, particularly when switching from legacy on-premises solutions.
These customers tend to require considerable time evaluating our portfolio of products and testing our platform prior to making a purchasing decision, require multiple levels of review and approval from a broader set of buyers and stakeholders, and demand more configuration, integration services and features, particularly when switching from legacy on-premises solutions.
In addition, technology companies in general have highly volatile stock prices, and the volatility in stock price and trading volume of securities is often unrelated or disproportionate to the financial performance of the companies issuing the securities.
Our stock price is likely to continue to be volatile and subject to wide fluctuations. In addition, technology companies in general have highly volatile stock prices, and the volatility in stock price and trading volume of securities is often unrelated or disproportionate to the financial performance of the companies issuing the securities.
While we have security measures and a data governance framework in place designed to protect our and our customers’ information and prevent data loss, these measures may not be effective at preventing material breaches caused by intentional or unintentional actions or inactions by employees, contractors or third parties.
Our data security system and data governance framework, designed to protect our and our customers’ information and prevent data loss, may not be effective at preventing material breaches caused by intentional or unintentional actions or inactions by employees, contractors or third parties.
Moreover, the incorporation of third-party or open-source software code into our or our customers’ systems increases the risk of exploitation of vulnerabilities, such as the vulnerability in the Java logging library known as “log4j” that affected our industry. We also have inherited and may in the future inherit additional security risks from acquiring or partnering with other companies.
Moreover, the incorporation of third-party or open-source software code into our or our customers’ systems increases the risk of exploitation of vulnerabilities. We also have inherited and may in the future inherit additional security risks from acquiring or partnering with other companies.
For example, the EU Data Act is a proposed law with potential significant requirements regarding data portability, interoperability and accessibility and unclear data transfer restrictions, any of which could impact our operations.
For example, the EU Data Act has significant requirements regarding data portability, interoperability and accessibility and unclear data transfer restrictions, any of which could impact our operations.
We also expect our costs to increase in 23 Table of Contents future periods as we continue to invest in our strategic priorities, which may not result in increased revenues or growth in our business. Changes in our effective tax rate or disallowance of our tax positions may adversely affect our financial position and results.
We also expect our costs to increase in future periods as we continue to invest in our strategic priorities, which may not result in a corresponding increase in revenues or growth in our business. Changes in our effective tax rate or disallowance of our tax positions may adversely affect our business.
Effective patent, trademark, copyright and trade secret protection may not be available in every country in which we offer services. The laws of some foreign countries may not offer effective protection for, or be as protective of, IP rights as those in the U.S., and mechanisms for enforcement of IP rights or available remedies may be inadequate, ineffective or scarce.
The laws of some foreign countries may not offer effective protection for, or be as protective of, IP rights as those in the U.S., and mechanisms for enforcement of IP rights or available remedies may be inadequate, ineffective or scarce.
Downgrades in our credit ratings could restrict our ability to obtain additional financing in the future and could affect the terms of any such financing. 24 Table of Contents Risks Related to General Economic Conditions Global economic conditions may harm our industry, business and results of operations.
Downgrades in our credit ratings could restrict our ability to obtain additional financing in the future and could affect the terms of any such financing. Risks Related to General Economic and Political Conditions Our industry and business may be harmed by global economic and political conditions.
As a result of the Russia-Ukraine conflict, for example, the U.S. and other countries have imposed economic and trade sanctions and export control restrictions against Russia and Belarus.
As a result of the Russia-Ukraine conflict, for example, the U.S. and other jurisdictions have imposed economic and trade sanctions and export control restrictions against Russia and Belarus, as well as certain persons, assets and interests associated with those countries.
Global tax developments applicable to multinational businesses and increased scrutiny under tax examinations could have a material impact on our business and negatively affect our financial results. Any changes in federal, state or international tax laws or tax rulings may increase our worldwide effective tax rate and harm our financial position and results of operations.
Global tax developments applicable to multinational businesses and increased scrutiny under tax examinations, as well as changes in federal, state or international tax laws or rulings that may increase our worldwide effective tax rate, could have a material impact on our business.
Our increasing reliance on third-party providers and public cloud infrastructure introduces new cybersecurity risks to our business operations. We rely on third-party service providers and technologies to operate business systems in a variety of contexts, and supply chain attacks have increased in frequency and severity.
Our increasing reliance on third-party providers and public cloud infrastructure introduces new cybersecurity risks to our business operations. Third-party security incidents have occurred in the past and are likely to continue, as we rely on third-party service providers and technologies to operate business systems in a variety of contexts. S upply chain attacks have also increased in frequency and severity.
Foreign currency exchange rate fluctuations could harm our financial results. We conduct significant transactions, including revenue transactions and intercompany transactions, in currencies other than the U.S. Dollar or the functional operating currency of the transactional entities. In addition, our international subsidiaries maintain significant net assets that are denominated in the functional operating currencies of these entities.
We conduct significant transactions, including revenue transactions and intercompany transactions, in currencies other than the U.S. Dollar or the functional operating currency of the transactional entities. In addition, our international subsidiaries maintain significant net assets that are denominated in the functional operating currencies of these entities. Accordingly, changes in the value of currencies relative to the U.S.
We will also need to continually adapt to customer privacy and security requirements as they change over time. For example, as customers increasingly adopt a hybrid (on-premises and off-premises/hyperscale cloud) approach for their IT workloads, our cloud services may fail to address evolving customer requirements, including data localization.
For example, as customers increasingly adopt a hybrid (on-premises and off-premises/hyperscale cloud) approach for their IT workloads, our cloud services may fail to address evolving customer requirements, including data localization.
If it is determined that we have failed to comply with these requirements, we may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, cost associated with the triggering of price reduction clauses, fines, and suspensions or debarment from future government business, all of which may cause us to suffer reputational harm and adversely affect our business and operating results.
If it is determined that we or our third-party distributors, resellers or service providers have failed to comply with applicable contractual or regulatory requirements, we may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, cost associated with the triggering of price reduction clauses, fines, and suspensions or debarment from future government business, among others, all of which may adversely affect our business.
Our customers also include non-U.S. governments, to which government procurement risks similar to those present in U.S. government contracting and regulatory compliance also apply, particularly in certain emerging markets where our customer base is less established. We have seen challenges to successful awards through bid protest procedures in jurisdictions outside the U.S.
Our customers also include non-U.S. governments, to which government procurement risks similar to those present in U.S. government contracting and regulatory compliance also apply, particularly in certain emerging markets where our customer base is less established.
While we believe that our position is appropriate and well founded, if our position were successfully challenged by taxing authorities in other jurisdictions, we may become subject to significant tax liabilities, which could harm our financial position and financial results. Our debt service obligations may adversely affect our financial condition.
While we believe that our position is appropriate 25 Table of Contents and well founded, if our position were successfully challenged by taxing authorities in other jurisdictions, we may become subject to significant tax liabilities. We may be adversely affected by our debt service obligations.
These conditions can arise suddenly and affect the rate of digital transformation spending and could adversely affect our customers’ or prospective customers’ ability or willingness to purchase our services, delay purchasing decisions, reduce the value or duration of their subscriptions, or affect renewal rates, all of which could harm our operating results.
These conditions can arise suddenly and affect the rate of digital transformation spending and could adversely affect our customers’ or prospective customers’ ability or willingness to purchase our services, delay purchasing decisions, reduce the value or duration of their subscriptions, or affect renewal rates. We may be harmed by foreign currency exchange rate fluctuations.
If we lose key members of our management team or qualified employees or are unable to attract and retain the employees we need, our costs may increase and our business and operating results may be adversely affected. There is increasingly intense competition for talent in the technology industry.
We may lose key members of our management team or qualified employees or may not be able to attract and retain the employees we need. There is increasingly intense competition for talent in the technology industry.
Further, upon expiration of the term of any agreements that allow us to use third-party IP, we may be unable to renew such agreements on favorable terms, if at all, in which case we may face IP litigation.
Further, upon expiration of any agreements that allow us to use third-party IP, we may be unable to renew such agreements on favorable terms, if at all, in which case we may face IP litigation or may need to cease offering or to modify our products and services to remove such components.
These data centers are vulnerable to damage or interruption from earthquakes, hurricanes, floods, fires, energy grid constraints resulting in power loss and similar events. They may also be subject to break-ins, sabotage, intentional acts of vandalism and similar misconduct, equipment failure and adverse events caused by operator error or negligence.
These data centers are vulnerable to damage or interruption from earthquakes, hurricanes, floods, fires, power failures and similar events. They may also be subject to break-ins, sabotage, intentional acts of vandalism and similar misconduct, equipment failure and adverse events caused by operator error or negligence. In addition, an increased use of the public cloud increases our vulnerability to cyberattacks.
Further, we are increasingly doing business in heavily regulated industries, such as financial services, telecommunication, media and television, and health care. Current and prospective customers in those industries may be required to comply with more stringent regulations to subscribe to and/or implement our services. In addition, regulatory agencies may impose requirements on third-party vendors that we may not meet.
Current and prospective customers in those industries may be required to comply with more stringent regulations to subscribe to and/or implement our services. In addition, regulatory agencies may impose requirements on third-party vendors that we may not meet.
If there is a compromise to data, supply chain issue or other incident with our critical service providers, it may impact our ability to provide our services and reduce our productivity.
In addition to data center providers, we also have a large ecosystem of vendors and service providers that we use for our products. If there is a compromise to data, supply chain issue or other incident with our critical service providers, it may impact our ability to provide our services and reduce our productivity.
Actual or perceived non-compliance with those laws and regulations could result in proceedings or investigations against us by regulatory authorities or others, lead to significant fines, damages, orders, litigation or reputational harm and may otherwise adversely impact our business, financial condition and operating results.
Actual or perceived non-compliance with those laws and regulations could result in proceedings or investigations against us by regulatory authorities or others, lead to significant fines, damages, orders, litigation or reputational harm and may otherwise adversely impact our business. We will also need to continually adapt to customer privacy and security requirements as they change over time.

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Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed0 unchanged
Biggest changeSee Note 17 in the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for more information about our lease commitments.
Biggest changeRefer to Note 17 in the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for more information about our lease commitments.
ITEM 2. PROPERTIES Our principal office is located in Santa Clara, California, where we lease approximately 1,120,000 square feet of space under lease agreements for our business operations and product development. We also maintain offices globally. All of our properties are currently leased. We believe our existing facilities are adequate to meet our current requirements.
ITEM 2. PROPERTIES Our principal office is located in Santa Clara, California, where we lease approximately 972,000 square feet of space under lease agreements for our business operations and product development. We also maintain offices globally. All of our properties are currently leased. We believe our existing facilities are adequate to meet our current requirements.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed2 unchanged
Biggest changeFor additional information regarding legal proceedings, see Note 17 in the notes to our consolidated financial statements in this Annual Report on Form 10-K.
Biggest changeFor additional information regarding legal proceedings, refer to Note 17 in the notes to our consolidated financial statements in this Annual Report on Form 10-K.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+2 added−0 removed4 unchanged
Biggest changeThe comparisons in the graph below are based upon historical data and are not indicative of, nor intended to forecast, future performance of our common stock. 31 Table of Contents Base Period Dec 31, 2018 Dec 31, 2019 Dec 31, 2020 Dec 31, 2021 Dec 31, 2022 Dec 31, 2023 ServiceNow, Inc. 100.00 158.56 309.14 364.57 218.07 396.79 NYSE Composite 100.00 125.51 134.28 162.04 146.89 167.12 S&P 500 100.00 131.49 155.68 200.37 164.08 207.21 S&P Systems Software 100.00 151.38 216.60 325.96 236.39 370.89 Unregistered Sales of Equity Securities None 32 Table of Contents Issuer Purchases of Equity Securities Share repurchases of our common stock for the three months ended December 31, 2023 were as follows: Issuer Purchases of Equity Securities Total Number of Shares Purchased as Part of Publicly Announced Program (in thousands) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (1) (in billions) Period Total Number of Shares Purchased (in thousands) Average Price Paid Per Share October 1 - 31 35 $ 572.45 35 $ 1.20 November 1 - 30 365 644.02 365 0.96 December 1 - 31 — — — 0.96 Fourth Quarter 2023 400 $ 639.59 400 $ 0.96 (1) On May 16, 2023, the Board of Directors authorized a program to repurchase up to $1.5 billion of our common stock. 33 Table of Contents
Biggest changeThe comparisons in the graph below are based upon historical data and are not indicative of, nor intended to forecast, future performance of our common stock. 34 Base Period Dec 31, 2019 Dec 31, 2020 Dec 31, 2021 Dec 31, 2022 Dec 31, 2023 Dec 31, 2024 ServiceNow, Inc. 100.00 194.97 229.92 137.53 250.24 375.50 NYSE Composite 100.00 106.99 129.11 117.04 133.16 154.19 S&P 500 100.00 118.40 152.39 124.79 157.59 197.02 S&P Systems Software 100.00 143.08 215.33 156.16 245.01 288.35 35 Table of Contents Unregistered Sales of Equity Securities None Issuer Purchases of Equity Securities Share repurchases of our common stock for the three months ended December 31, 2024 were as follows: Issuer Purchases of Equity Securities Total Number of Shares Purchased as Part of Publicly Announced Program (in thousands) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (1) (in millions) Period Total Number of Shares Purchased (in thousands) Average Price Paid Per Share October 1 - 31 86 $ 927.22 86 $ 482 November 1 - 30 162 1,022.16 162 316 December 1 - 31 45 1,106.67 45 266 Fourth Quarter 2024 293 $ 1,007.28 293 $ 266 (1) On May 16, 2023, our board of directors authorized a program to repurchase up to $1.5 billion of our common stock.
Stockholders As of December 31, 2023, there were 13 registered stockholders of record (not including an indeterminate number of beneficial holders of stock held in street name through brokers and other intermediaries) of our common stock.
Stockholders As of December 31, 2024, there were 13 registered stockholders of record (not including an indeterminate number of beneficial holders of stock held in street name through brokers and other intermediaries) of our common stock.
The graph below compares the cumulative total stockholder return on our common stock with the cumulative total return on the S&P 500 Index, NYSE Composite Index and the Standard & Poor Systems Software Index for each of the last five fiscal years ended December 31, 2019 through December 31, 2023, assuming an initial investment of $100.
The graph below compares the cumulative total stockholder return on our common stock with the cumulative total return on the S&P 500 Index, NYSE Composite Index and the Standard & Poor Systems Software Index for each of the last five fiscal years ended December 31, 2020 through December 31, 2024, assuming an initial investment of $100.
Added
As of December 31, 2024, approximately $266 million remained available for future repurchases under the share repurchase program. In January 2025, our board of directors authorized an additional $3.0 billion in repurchases under the share repurchase program.
Added
Refer to Note 13 “Stockholders’ Equity” in the notes to the consolidated financial statements included in Part II, Item 8 of this Annual Report for additional information. 36 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

98 edited+16 added−13 removed58 unchanged
Biggest changeWe 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. 40 Tabl e of Contents Comparison of the years ended December 31, 2023 and 2022 Revenues Year Ended December 31, % Change 2023 2022 (dollars in millions) Revenues: Subscription $ 8,680 $ 6,891 26 % Professional services and other 291 354 (18 %) Total revenues $ 8,971 $ 7,245 24 % Percentage of revenues: Subscription 97 % 95 % Professional services and other 3 % 5 % Total 100 % 100 % Subscription revenues increased by $1.8 billion for the year ended December 31, 2023, compared to the prior year, primarily driven by increased purchases by new and existing customers.
Biggest changeAs of December 31, 2024 and 2023, we maintained a valuation allowance of $220 million and $196 million, respectively, 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.
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.
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, stock-based compensation and allocated overhead.
Research and Development Research and development expenses consist primarily of personnel-related expenses directly associated with our research and development staff, including salaries, benefits, bonuses and stock-based compensation and allocated overhead.
Research and Development Research and development expenses consist primarily of personnel-related expenses directly associated with our research and development staff, including salaries, benefits, bonuses, stock-based compensation and allocated overhead.
General and Administrative General and administrative expenses consist primarily of personnel-related expenses for our executive, finance, legal, human resources, facilities and administrative personnel, including salaries, benefits, bonuses and stock-based compensation, external legal, accounting and other professional services fees, other corporate expenses, amortization of intangible assets and allocated overhead.
General and Administrative General and administrative expenses consist primarily of personnel-related expenses for our executive, finance, legal, human resources, facilities and administrative personnel, including salaries, benefits, bonuses, stock-based compensation, external legal, accounting and other professional services fees, other corporate expenses, amortization of intangible assets and allocated overhead.
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.
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.
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.
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 expect R&D expenses for the year ending December 31, 2024 to increase in absolute dollars but remain relatively flat as a percentage of revenue compared to the year ended December 31, 2023, as we continue to improve the existing functionality of our services, develop new applications to fill market needs and enhance our core platform.
We expect R&D expenses for the year ending December 31, 2025 to increase in absolute dollars but remain relatively flat as a percentage of revenue compared to the year ended December 31, 2024, as we continue to improve the existing functionality of our services, develop new applications to fill market needs and enhance our core platform.
To mitigate our risks associated with fluctuations in foreign currency exchange rates, we enter into foreign currency derivative 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.
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.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section of our Annual Report on Form 10-K discusses our financial condition and results of operations for the fiscal years ended December 31, 2023 and 2022, and year-to-year comparisons between fiscal 2023 and fiscal 2022 in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”).
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section of our Annual Report on Form 10-K discusses our financial condition and results of operations for the fiscal years ended December 31, 2024 and 2023, and year-to-year comparisons between fiscal 2024 and fiscal 2023 in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”).
We believe information regarding the total number of customers with ACV greater than $1 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. 35 Table of Contents Free cash flow.
We believe information regarding the total number of customers with ACV greater than $1 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. 38 Table of Contents Free cash flow.
We expect subscription revenues for the year ending December 31, 2024 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, 2023.
We expect subscription revenues for the year ending December 31, 2025 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, 2024.
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 98% for each of the years ended December 31, 2023, 2022, and 2021.
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 98% for each of the years ended December 31, 2024, 2023 and 2022.
A discussion of our financial condition and results of operations for the fiscal year ended December 31, 2021 and year-to-year comparisons between fiscal 2022 and fiscal 2021 that is not included in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed on January 31, 2023.
A discussion of our financial condition and results of operations for the fiscal year ended December 31, 2022 and year-to-year comparisons between fiscal 2023 and fiscal 2022 that is not included in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed on January 25, 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.
As of December 31, 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 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 2024.
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 2025.
Subscription services arrangements typically have a three-year duration, and we have experienced a renewal rate of 98% for each of the years ended December 31, 2023, 2022 and 2021.
Subscription services arrangements typically have a three-year duration, and we have experienced a renewal rate of 98% for each of the years ended December 31, 2024, 2023 and 2022.
Amortization expenses associated with deferred commissions increased by $99 million, compared to the prior year, due to an increase in contracts with new customers, expansion and renewal contracts.
Amortization expenses associated with deferred commissions increased by $90 million, compared to the prior year, due to an increase in contracts with new customers, expansion and renewal contracts.
See the “Risk Factors” section in Part I, Item 1A of this Annual Report for further discussion of the possible impact of the above conflicts and macroeconomic events on our business and financial results . 34 Table of Contents Key Business Metrics Remaining performance obligations.
See the “Risk Factors” section in Part I, Item 1A of this Annual Report for further discussion of the possible impact of conflicts and macroeconomic events on our business and financial results . 37 Table of Contents Key Business Metrics Remaining performance obligations.
Our expectations for revenues, cost of revenues and operating expenses for the year ending December 31, 2024 are based on the 31-day average of foreign exchange rates for December 31, 2023.
Our expectations for revenues, cost of revenues and operating expenses for the year ending December 31, 2025 are based on the 31-day average of foreign exchange rates for December 31, 2024.
We expect stock-based compensation as a percentage of revenue to decline over time as we continue to grow. Foreign Currency Exchange Our international operations have provided and will continue to provide a significant portion of our total revenues. Revenues outside North America represented 36% and 35% of total revenues for the years ended December 31, 2023 and 2022, respectively.
We expect stock-based compensation as a percentage of revenue to decline over time as we continue to grow. Foreign Currency Exchange Our international operations have provided and will continue to provide a significant portion of our total revenues. Revenues outside North America represented 37% and 36% of total revenues for the years ended December 31, 2024 and 2023, respectively.
A release of the valuation allowance, if any, would result in the recognition of certain deferred tax assets and a material income tax benefit for the period in which such release is recorded. We regularly assess the need for a valuation allowance against our deferred tax assets.
A release of the valuation allowance, if any, would result in the recognition of certain deferred tax assets and a material income tax benefit for the period in which such release is recorded. 41 Table of Contents We regularly assess the need for a valuation allowance against our deferred tax assets.
While these events are still evolving and the outcome remains highly uncertain, we do not believe the 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.
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.
To mitigate risk, our cash and cash equivalents are distributed across several large financial institutions and are not concentrated in one financial institution. We have not experienced any impact to our liquidity or to our current and projected business operations and financial condition due to recent bank failures.
To mitigate risk, our cash and cash equivalents are distributed across several large financial institutions and are not concentrated in one financial institution. We have not experienced any impact to our liquidity or to our current and projected business operations and financial condition due to recent macroeconomic events.
Furthermore, the majority of our non-marketable equity investments do not have material relationships with any one financial institution, and therefore, we believe that our exposure to loss is immaterial. We will continue to monitor the direct and indirect impact of macroeconomic events on our business and financial results.
Furthermore, the majority of our non-marketable equity investments do not have material relationships with any one financial institution, and therefore, we believe that our exposure to loss as a result of bank failure is immaterial. We will continue to monitor the direct and indirect impact of macroeconomic events on our business and financial results.
Our customers in these regions represented an immaterial portion of our net assets and total consolidated revenues both as of and for the year ended December 31, 2023 and December 31, 2022. Additionally, other macroeconomic events, including rising interest rates, global inflation and bank failures, have led to economic uncertainty in the global economy.
Our customers in these regions represented an immaterial portion of our net assets and total consolidated revenues both as of and for the years ended December 31, 2024 and December 31, 2023. Additionally, other macroeconomic events, including higher interest rates, global inflation and bank failures, have led to economic uncertainty in the global economy.
Included in subscription revenues is $322 million and $253 million of revenues recognized upfront from the delivery of software associated with self-hosted offerings during the years ended December 31, 2023 and 2022, respectively.
Included in subscription revenues is $409 million and $322 million of revenues recognized upfront from the delivery of software associated with self-hosted offerings during the years ended December 31, 2024 and 2023, respectively.
Other sales and marketing program expenses, which include branding, costs associated with purchasing advertising, marketing events and market data, increased by $44 million compared to the prior year, primarily due to increased program costs and travel for our annual Sales Kickoff.
Other sales and marketing program expenses, which include branding, costs associated with purchasing advertising, marketing events and market data, increased by $95 million compared to the prior year, primarily due to increased program costs and travel for our annual Sales Kickoff and Knowledge user conference.
In May 2023, our board of directors authorized a program to repurchase up to $1.5 billion of our common stock. During the year ended December 31, 2023, we repurchased 0.9 million shares of our common stock for $538 million. All repurchases were made in open market transactions.
In May 2023, our board of directors authorized a program to repurchase up to $1.5 billion of our common stock. During the year ended December 31, 2024, the Company repurchased 0.8 million shares of our common stock for $696 million. All repurchases were made in open market transactions.
We expect our cost of subscription revenues for the year ending December 31, 2024 to increase in absolute dollars as we provide subscription services to more customers and increase usage within our customer instances but remain relatively flat as a percentage of revenue compared to the year ended December 31, 2023.
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.
Based upon our stock price as of December 31, 2023, we expect stock-based compensation to continue to increase in absolute dollars for the year ending December 31, 2024 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, 2023.
Based upon our stock price as of December 31, 2024, 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 remain relatively flat as a percentage of revenue compared to the year ended December 31, 2024.
When assessing sources of liquidity, we also include cash and cash equivalents, short-term investments and long-term investments totaling $8.1 billion as of December 31, 2023.
When assessing sources of liquidity, we also include cash and cash equivalents, short-term investments and long-term investments totaling $9.9 billion as of December 31, 2024.
Financing Activities Net cash used in financing activities for the year ended December 31, 2023 was $803 million compared to $344 million for the prior year.
Financing Activities Net cash used in financing activities for the year ended December 31, 2024 was $1,343 million compared to $803 million for the prior year.
Components of Results of Operations Revenues Subscription revenues . Subscription revenues are primarily comprised of fees that give customers access to the ordered subscription service for both self-hosted offerings and cloud-based subscription offerings, and related standard and enhanced support and updates, if any, to the subscription service during the subscription term.
Subscription revenues are primarily comprised of fees that give customers access to the ordered subscription service for both self-hosted offerings and cloud-based subscription offerings, and related standard and enhanced support and updates, if any, to the subscription service during the subscription term. For our cloud-based offerings, we recognize revenue ratably over the subscription term.
Additionally, we have historically seen higher disbursements in the quarters ended March 31 and September 30 due to payouts under our annual commission plans, purchases under our employee stock purchase plan, payouts under our bonus plans and coupon payments related to our 2030 Notes beginning in 2021. Renewal rate.
Additionally, we have historically seen higher disbursements in the quarters ended March 31 and September 30 due to payouts under our annual commission plans, purchases under our employee stock purchase plan, payouts under our bonus plans and coupon payments related to our 2030 Notes. Non-GAAP consolidated income from operations.
Refer to Note 17 “Commitments and Contingencies,” Note 5 “Business Combinations” and Note 16 “(Benefit from) Provision for Income Taxes” to our consolidated financial statements included in this Annual Report on Form 10-K for more information.
Refer to Note 17 “Commitments and Contingencies,” and Note 16 “Provision for (Benefit from) Income Taxes” to our consolidated financial statements included in this Annual Report on Form 10-K for more information. 51 Table of Contents
Subscription revenues consist of the following: Year Ended December 31, % Change 2023 2022 (dollars in millions) Digital workflow products $ 7,679 $ 6,077 26 % ITOM products 1,001 814 23 % Total subscription revenues $ 8,680 $ 6,891 26 % Our digital workflow products include most of our product offerings and are generally priced on a per user basis.
Subscription revenues consist of the following: Year Ended December 31, % Change 2024 2023 (dollars in millions) Digital workflow products $ 9,422 $ 7,679 23 % ITOM products 1,224 1,001 22 % Total subscription revenues $ 10,646 $ 8,680 23 % Our digital workflow products include most of our product offerings and are generally priced on a per user basis.
We count the total number of customers with annual contract value (“ACV”) greater than $1 million as of the end of the period. We had 1,897, 1,643, and 1,350 customers with ACV greater than $1 million as of December 31, 2023, 2022 and 2021, respectively.
We count the total number of customers with annual contract value (“ACV”) greater than $1 million as of the end of the period. We had 2,109, 1,885, and 1,626 customers with ACV greater than $1 million as of December 31, 2024, 2023 and 2022, respectively.
General and Administrative Year Ended December 31, % Change 2023 2022 (dollars in millions) General and administrative $ 863 $ 735 17 % Percentage of revenues 10 % 10% General and administrative expenses (“G&A”) increased by $128 million during the year ended December 31, 2023, compared to the prior year, primarily due to increased headcount resulting in an increase in personnel-related costs including stock-based compensation and overhead expenses of $83 million.
General and Administrative Year Ended December 31, % Change 2024 2023 (dollars in millions) General and administrative $ 936 $ 863 8 % Percentage of revenues 9 % 10% General and administrative expenses (“G&A”) increased by $73 million during the year ended December 31, 2024, compared to the prior year, primarily due to increased headcount resulting in an increase in personnel-related costs, excluding stock-based compensation, of $37 million.
Evaluating the terms and conditions included within our customer contracts for appropriate revenue recognition and determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment.
For these contracts, the transaction price is allocated to the separate performance obligations on a relative SSP basis. Evaluating the terms and conditions included within our customer contracts for appropriate revenue recognition and determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment.
The transaction price is allocated to separate performance obligations on a relative standalone selling price (“SSP”) basis. The transaction price allocated to the software element is recognized when transfer of control of the software to the customer is complete. The transaction price allocated to the related support and updates are recognized ratably over the contract term.
The transaction price is allocated to separate performance obligations on a relative standalone selling price (“SSP”) basis. The transaction price allocated to the software element is recognized when transfer of control of the software to the customer is complete.
As of December 31, 2023, our RPO was $18.0 billion, of which 48% represented cRPO. RPO and cRPO increased by 29% and 24%, respectively, compared to December 31, 2022. Factors that may cause our RPO to vary from period to period include the following: • Foreign currency exchange rates .
As of December 31, 2024, our RPO was $22.3 billion, of which 46% represented cRPO. RPO and cRPO increased by 23% and 19%, respectively, compared to December 31, 2023. Factors that may cause our RPO to vary from period to period include the following: • Foreign currency exchange rates .
A calculation of free cash flow is provided below: Year Ended December 31, 2023 2022 2021 (in millions) Free cash flow: Net cash provided by operating activities $ 3,398 $ 2,723 $ 2,191 Purchases of property and equipment (694) (550) (392) Repayments of convertible senior notes attributable to debt discount — — 15 Business combination and other related costs 24 7 53 Free cash flow $ 2,728 $ 2,180 $ 1,867 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.
A calculation of free cash flow is provided below: Year Ended December 31, 2024 2023 2022 (in millions) Free cash flow: Net cash provided by operating activities $ 4,267 $ 3,398 $ 2,723 Purchases of property and equipment (852) (694) (550) Business combination and other related costs 23 24 7 Legal settlements 17 — — Free cash flow $ 3,455 $ 2,728 $ 2,180 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.
The net increase in operating cash flow was primarily due to higher collections driven by revenue growth. 47 Tabl e of Contents Investing Activities Net cash used in investing activities for the year ended December 31, 2023 was $2.2 billion compared to $2.6 billion for the prior year.
The net increase in operating cash flows was primarily due to higher collections driven by revenue growth. Investing Activities Net cash used in investing activities for the year ended December 31, 2024 was $2.5 billion compared to $2.2 billion for the prior year.
We sell our subscription services primarily through our direct sales organization. We also sell services through managed service providers and resale partners. We also generate revenues from certain professional services and from training of customers and partner personnel, through both our direct team and indirect channel sales.
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.
We have historically experienced seasonality in terms of when we enter into customer agreements. We sign a significantly higher percentage of agreements with new customers, as well as expansion with existing customers, in the fourth quarter of each year.
We sign a significantly higher percentage of agreements with new customers, as well as expansion with existing customers, in the fourth quarter of each year.
The net decrease in cash used in investing activities was primarily due to a $681 million decrease in net purchases of investments, a $92 million decrease in purchases of non-marketable investments, offset by a $191 million increase in business combinations and a $144 million increase in purchases of property and equipment.
The net increase in cash used in investing activities was primarily due to a $167 million increase in net purchases of investments, a $158 million increase in purchases of property and equipment, a $106 million increase in purchases of non-marketable investments and a $37 million increase in purchases of other intangible assets, partially offset by a $166 million decrease in cash used in business combinations.
Actual results may differ from these estimates under different assumptions or conditions and such differences could be material. 36 Tabl e of Contents While our significant accounting policies are more fully described in Note 2 in the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K, we believe that the following accounting policies are critical to the process of making significant judgments and estimates in the preparation of our audited consolidated financial statements.
While our significant accounting policies are more fully described in Note 2 in the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K, we believe that the following accounting policies are critical to the process of making significant judgments and estimates in the preparation of our audited consolidated financial statements.
We have also issued long-term debt to finance our business . 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”).
Refer to Note 13 “Stockholders’ Equity” to our consolidated financial statements included in this Annual Report on Form 10-K for additional information. We have also issued long-term debt to finance our business . 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”).
The estimate of the potential outcome of any uncertain tax issue is subject to management’s assessment of relevant risks, facts and circumstances existing at that time.
The estimate of the potential outcome of any uncertain tax issue is subject to management’s assessment of relevant risks, facts and circumstances existing at that time. To the extent the assessment of such tax position changes, we record the change in estimate in the period in which we make the determination.
We expect our professional services and other gross loss percentage to improve for the year ending December 31, 2024 compared to the year ended December 31, 2023. 42 Tabl e of Contents Sales and Marketing Year Ended December 31, % Change 2023 2022 (dollars in millions) Sales and marketing $ 3,301 $ 2,814 17 % Percentage of revenues 37 % 39 % Sales and marketing expenses increased by $487 million for the year ended December 31, 2023, compared to the prior year, primarily due to increased headcount resulting in an increase in personnel-related costs including stock-based compensation and overhead expenses of $334 million, compared to the prior year.
Sales and Marketing Year Ended December 31, % Change 2024 2023 (dollars in millions) Sales and marketing $ 3,854 $ 3,301 17 % Percentage of revenues 35 % 37 % Sales and marketing expenses increased by $553 million for the year ended December 31, 2024, compared to the prior year, primarily due to increased headcount resulting in an increase in personnel-related costs including stock-based compensation and overhead expenses of $330 million, compared to the prior year.
We recognize interest accrued and penalties related to unrecognized tax benefits in our tax provision. Significant judgment is required to evaluate uncertain tax positions. Our evaluations are based upon a number of factors, including changes in facts or circumstances, changes in tax law or guidance, correspondence with tax authorities during the course of audits and effective settlement of audit issues.
Our evaluations are based upon a number of factors, including changes in facts or circumstances, changes in tax law or guidance, correspondence with tax authorities during the course of audits and effective settlement of audit issues.
Our subscription gross profit percentage was 82% and 83% for the years ended December 31, 2023 and 2022, respectively. We expect our subscription gross profit percentage to remain relatively flat for the year ending December 31, 2024 compared to the year ended December 31, 2023.
Our subscription gross profit percentage was 82% for each of the years ended December 31, 2024 and 2023. We expect our subscription gross profit percentage to decrease slightly for the year ended December 31, 2025 compared to the year ended December 31, 2024.
This measure may be different from non-GAAP financial measures used by other companies, limiting its usefulness for comparison purposes. We encourage investors to carefully consider our results under GAAP, as well as our supplemental non-GAAP results, to more fully understand our business. Overview ServiceNow was founded on a simple premise: to make work flow better.
We encourage investors to carefully consider our results under GAAP, as well as our supplemental non-GAAP results, to more fully understand our business. Overview ServiceNow was founded on a simple premise: to make work flow better.
We enter into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. For these contracts, the transaction price is allocated to the separate performance obligations on a relative SSP basis.
The transaction price allocated to the related support and updates are recognized ratably over the contract term. 40 Table of Contents We enter into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations.
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.
Deferred tax assets represent amounts available to reduce income taxes payable on taxable income in future years. Such assets arise because of temporary differences between the financial reporting and tax bases of assets and liabilities, as well as from net operating loss and tax credit carryforwards.
Such assets arise because of temporary differences between the financial reporting and tax bases of assets and liabilities, as well as from net operating loss and tax credit carryforwards.
Repurchases of common stock are recognized as treasury stock and held for future issuance. As of December 31, 2023, $962 million of the originally authorized amount under the Share Repurchase Program remained available for future repurchases.
Repurchases of common stock are recognized as treasury stock and held for future issuance. As of December 31, 2024, approximately $266 million of the originally authorized amount under the share repurchase program remained available for future repurchases. In January 2025, our board of directors authorized an additional $3.0 billion in repurchases under the share repurchase program.
Tax laws are complex and subject to different interpretations by the taxpayer and respective government taxing authorities. Significant judgment is required in determining our tax expense (benefit) and in evaluating our tax positions, including evaluating uncertainties and the complexity of taxes on foreign earnings. We review our tax positions quarterly and adjust the balances as new information becomes available.
Significant judgment is required in determining our tax expense (benefit) and in evaluating our tax positions, including evaluating uncertainties and the complexity of taxes on foreign earnings. We review our tax positions quarterly and adjust the balances as new information becomes available. Deferred tax assets represent amounts available to reduce income taxes payable on taxable income in future years.
We evaluate these estimates and assumptions as new information is obtained and may record adjustments to the fair value of the tangible and intangible assets acquired and liabilities assumed but not later than one year from the acquisition date. 37 Tabl e of Contents Income Taxes Our annual tax rate is based on our income, statutory tax rates and tax planning opportunities available to us in the various jurisdictions in which we operate.
We evaluate these estimates and assumptions as new information is obtained and may record adjustments to the fair value of the tangible and intangible assets acquired and liabilities assumed but not later than one year from the acquisition date.
Some of our professional services arrangements are on a fixed fee. Professional services revenues are recognized as services are delivered. Other revenues primarily consist of fees from customer training delivered on-site or through publicly available classes. Typical payment terms require our customers to pay us within 30 days of invoice.
Other revenues primarily consist of fees from customer training delivered on-site or through publicly available classes. Typical payment terms require our customers to pay us within 30 days of invoice. We sell our subscription services primarily through our direct sales organization. We also sell services through managed service providers and resale partners.
We recognize the tax benefit of an uncertain tax position only if it is more likely than not the position is sustainable upon examination by the taxing authority based on the technical merits. We measure the tax benefit recognized as the largest amount of benefit which is more likely than not to be realized upon settlement with the taxing authority.
Our tax positions are subject to income tax audits by multiple tax jurisdictions throughout the world. We recognize the tax benefit of an uncertain tax position only if it is more likely than not the position is sustainable upon examination by the taxing authority based on the technical merits.
To the extent the assessment of such tax position changes, we record the change in estimate in the period in which we make the determination. 38 Tabl e of Contents Change in Accounting Estimate 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 to five years.
Change in Accounting Estimate 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 to five years. This change in accounting estimate was effective beginning fiscal year 2024.
As we look beyond the next 12 months, we seek to continue to grow free 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.
As we look beyond the next 12 months, we seek to continue to grow free cash flows necessary to fund our operations and grow our business.
Research and Development Year Ended December 31, % Change 2023 2022 (dollars in millions) Research and development $ 2,124 $ 1,768 20 % Percentage of revenues 24 % 24 % Research and development expenses (“R&D”) increased by $356 million during the year ended December 31, 2023, compared to the prior year, primarily due to increased headcount resulting in an increase in personnel-related costs including stock-based compensation and overhead expenses of $312 million compared to prior year.
We expect sales and marketing expenses for the year ending December 31, 2025 to increase in absolute dollars and to decrease slightly 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. 46 Table of Contents Research and Development Year Ended December 31, % Change 2024 2023 (dollars in millions) Research and development $ 2,543 $ 2,124 20 % Percentage of revenues 23 % 24 % Research and development expenses (“R&D”) increased by $419 million during the year ended December 31, 2024, compared to the prior year, primarily due to increased headcount resulting in an increase in personnel-related costs including stock-based compensation and overhead expenses of $350 million compared to prior year.
Cost of revenues associated with our professional services engagements contracted with third-party partners as a percentage of professional services and other revenues was 10%, 12% and 14% for the years ended December 31, 2023, 2022 and 2021, 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 24%, 10% and 12% for the years ended December 31, 2024, 2023 and 2022, respectively. 43 Table of Contents 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.
The net increase in cash used in financing activities is primarily due to repurchases of common stock for $538 million, a $32 million increase in taxes paid related to net share settlement of equity awards, offset by a $17 million increase in proceeds from employee stock plans and a $94 million decrease in repayments of convertible senior notes attributable to principal.
The net increase in cash used in financing activities is primarily due to a $241 million increase in taxes paid related to net share settlement of equity awards, a $184 million increase in business combination related to the second installment payment in the acquisition of G2K Group GmbH and a $158 million increase in repurchases of common stock, offset by a $43 million increase in proceeds from employee stock plans.
This larger mix of contracts with 12-month renewal terms in the third quarter will generally cause variability in our RPO and cRPO in subsequent quarters until they are renewed.
This larger mix of contracts with 12-month renewal terms in the third quarter will generally cause variability in our RPO and cRPO in subsequent quarters until they are renewed. Although these seasonal factors may be common in the technology industry, historical patterns should not be considered a reliable indicator of our future sales activity or performance.
Cost of professional services and other revenues decreased by $71 million for the year ended December 31, 2023 as compared to the prior year. The decrease was primarily due to a decrease in contracted third-party partners spend and decreased headcount resulting in a decrease in personnel-related costs, including stock-based compensation.
Cost of professional services and other revenues increased by $30 million for the year ended December 31, 2024 as compared to the prior year, primarily due to an increase in partner ecosystem investments to further accelerate customer value realization, partially offset by a decrease in fixed personnel-related costs, including stock-based compensation, due to decreased internal headcount.
Revenues from our direct sales organization represented 79% of our total revenues for each of the years ended December 31, 2023, 2022 and 2021. 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. Seasonality .
Revenues from our direct sales organization represented 78% of our total revenues for the year ended December 31, 2024 and 79% of our total revenues for each of the years ended December 31, 2023 and 2022.
We expect professional services and other revenues for the year ending December 31, 2024 to increase in absolute dollars and to remain relatively flat as a percentage of revenue compared to the year ended December 31, 2023 as we continue to execute our professional services strategy. 41 Tabl e of Contents Cost of Revenues and Gross Profit Percentage Year Ended December 31, % Change 2023 2022 (dollars in millions) Cost of revenues: Subscription $ 1,606 $ 1,187 35 % Professional services and other 315 386 (18 %) Total cost of revenues $ 1,921 $ 1,573 22 % Gross profit percentage: Subscription 82 % 83 % Professional services and other (8 %) (9 %) Total gross profit percentage 79 % 78 % Gross profit: $ 7,050 $ 5,672 24 % Cost of subscription revenues increased by $419 million for the year ended December 31, 2023, compared to the prior year, primarily due to increased headcount and increased costs to support the growth of our subscription offerings including costs to support customers in regulated markets.
Cost of Revenues and Gross Profit Percentage Year Ended December 31, % Change 2024 2023 (dollars in millions) Cost of revenues: Subscription $ 1,942 $ 1,606 21 % Professional services and other 345 315 10 % Total cost of revenues $ 2,287 $ 1,921 19 % Gross profit (loss) percentage: Subscription 82 % 82 % Professional services and other (2 %) (8 %) Total gross profit percentage 79 % 79 % Gross profit: $ 8,697 $ 7,050 23 % 45 Table of Contents Cost of subscription revenues increased by $336 million for the year ended December 31, 2024, compared to the prior year, primarily due to increased headcount and increased costs to support the growth of our subscription offerings including costs to support customers in regulated markets.
Our contracts are generally non-cancellable during the subscription term, though a customer can terminate for breach if we materially fail to perform. Professional services and other revenues . Our arrangements for professional services are primarily on a time-and-materials basis, and we generally invoice our customers monthly in arrears for the professional services based on actual hours and expenses incurred.
Our arrangements for professional services are primarily on a time-and-materials basis, and we generally invoice our customers monthly in arrears for the professional services based on actual hours and expenses incurred. Some of our professional services arrangements are on a fixed-fee basis. Professional services revenues are recognized as services are delivered.
Stock-based Compensation Year Ended December 31, % Change 2023 2022 (dollars in millions) Cost of revenues: Subscription $ 202 $ 157 29 % Professional services and other 52 67 (22 %) Operating expenses: Sales and marketing 505 459 10 % Research and development 579 495 17 % General and administrative 266 223 19 % Total stock-based compensation $ 1,604 $ 1,401 14 % Percentage of revenues 18 % 19 % Stock-based compensation increased by $203 million during the year ended December 31, 2023, compared to the prior year, primarily due to additional grants to current and new employees.
We expect G&A expenses for the year ending December 31, 2025 to increase in absolute dollars but 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. 47 Table of Contents Stock-based Compensation Year Ended December 31, % Change 2024 2023 (dollars in millions) Cost of revenues: Subscription $ 250 $ 202 24 % Professional services and other 46 52 (12 %) Operating expenses: Sales and marketing 565 505 12 % Research and development 655 579 13 % General and administrative 230 266 (14 %) Total stock-based compensation $ 1,746 $ 1,604 9 % Percentage of revenues 16 % 18 % Stock-based compensation increased by $142 million during the year ended December 31, 2024, compared to the prior year, primarily due to additional grants to current and new employees.
For our cloud-based offerings, we recognize revenue ratably over the subscription term. For self-hosted offerings, a substantial portion of the sales price is recognized upon delivery of the software, which may cause greater variability in our subscription revenues and subscription gross margin.
For self-hosted offerings, a substantial portion of the sales price is recognized upon delivery of the software, which may cause greater variability in our subscription revenues and subscription gross margin. Pricing includes multiple instances, hosting and support services, data backup and disaster recovery services, as well as future updates, when and if available, offered during the subscription term.
Our professional services and other gross loss percentage improved to 8% for the year ended December 31, 2023, compared to 9% in the prior year, primarily due to decreased headcount resulting in a decrease in personnel-related costs and a decrease in contracted third-party partners spend.
Our professional services and other gross loss percentage improved to 2% for the year ended December 31, 2024, compared to 8% in the prior year, primarily due to an increase in revenue and a decrease in fixed personnel-related costs, including stock-based compensation, as we execute our strategy to shift a portion of professional services to variable spending with strategic third-party partners.
See Note 16 – Income Taxes, in the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information on discussion on valuation allowance. Our tax positions are subject to income tax audits by multiple tax jurisdictions throughout the world.
We will continue to monitor the need for a valuation allowance against our deferred tax assets on a quarterly basis. Refer to Note 16 “Provision for (Benefit from) Income Taxes,” in the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information on our valuation allowance.
Because we primarily transact in foreign currencies for sales outside of the United States, the general weakening of the U.S. Dollar relative to certain major foreign currencies (primarily the Euro and British Pound Sterling) during the year ended December 31, 2023 had a favorable impact on our revenues. For entities reporting in currencies other than the U.S.
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 year ended December 31, 2024. 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.
See Note 16– Income Taxes, in the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for our reconciliation of income taxes at the statutory federal rate to the provision for income taxes. 46 Tabl e of Contents 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 cash outflows to develop new services and core technologies that further enhance the Now Platform, engage our customer and enhance their experience, and enable and transform our business operations.
We will continue to monitor the need for a valuation allowance against our deferred tax assets on a quarterly basis. 49 Table of Contents 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.
We expect sales and marketing expenses for the year ending December 31, 2024 to increase in absolute dollars and to decrease as a percentage of revenue compared to the year ended December 31, 2023, as we continue to see leverage from increased sales productivity and marketing efficiencies in 2024.
We expect professional services and other revenues for the year ending December 31, 2025 to remain relatively flat both in absolute dollars and as a percentage of revenue compared to the year ended December 31, 2024.
Year Ended December 31, 2023 2022 (in millions) Net cash provided by operating activities $ 3,398 $ 2,723 Net cash used in investing activities (2,167) (2,583) Net cash used in financing activities (803) (344) Net increase/(decrease) in cash, cash equivalents and restricted cash 429 (257) Operating Activities Net cash provided by operating activities was $3.4 billion for the year ended December 31, 2023 compared to $2.7 billion for the prior year.
If we require additional capital resources, we may seek to finance our operations from the current funds available or additional equity or debt financing. 50 Table of Contents Year Ended December 31, 2024 2023 (dollars in millions) Net cash provided by operating activities $ 4,267 $ 3,398 Net cash used in investing activities (2,501) (2,167) Net cash used in financing activities (1,343) (803) Net increase in cash, cash equivalents and restricted cash 406 429 Operating Activities Net cash provided by operating activities was $4.3 billion for the year ended December 31, 2024 compared to $3.4 billion for the prior year.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

12 edited+7 added−2 removed5 unchanged
Biggest changeDollar against other currencies would have resulted in a decrease in operating income of $107 million, $75 million and $62 million for the years ended December 31, 2023, 2022 and 2021, respectively. This analysis disregards the possibilities that rates can move in opposite directions and that losses from one geographic area may be offset by gains from another geographic area.
Biggest changeA hypothetical 10% increase in the U.S. Dollar against other currencies would have resulted in a decrease in operating income of $150 million, $107 million and $75 million for the years ended December 31, 2024, 2023 and 2022, respectively.
Our investments are exposed to market risk due to fluctuations in interest rates, which may affect our interest income and the fair market value of our investments. As of December 31, 2023, a hypothetical 100 basis point increase in interest rates would have resulted in an approximate $60 million decline of the fair value of our available-for-sale debt securities.
Our investments are exposed to market risk due to fluctuations in interest rates, which may affect our interest income and the fair market value of our investments. As of December 31, 2024, a hypothetical 100 basis point increase in interest rates would have resulted in an approximate $78 million decline of the fair value of our available-for-sale debt securities.
We hold cash balances with multiple financial institutions in various countries and these balances routinely exceed deposit insurance limits. As of December 31, 2023 and 2022, we had $268 million and $252 million, respectively, of non-marketable equity investments in privately held companies.
We hold cash balances with multiple financial institutions in various countries and these balances routinely exceed deposit insurance limits. As of December 31, 2024 and 2023, we had $469 million and $268 million, respectively, of non-marketable equity investments in privately held companies.
To mitigate our risks associated with fluctuations in foreign currency exchange rates, we enter into foreign currency derivative contracts to hedge a portion of our net outstanding monetary assets and liabilities.
To mitigate our risks associated with fluctuations in foreign currency exchange rates, we enter into foreign currency forward contracts to hedge a portion of our net outstanding monetary assets, liabilities and forecasted foreign currency denominated revenues.
Dollar relative to these currencies and, conversely, are adversely affected by a strengthening of the U.S. Dollar relative to these currencies. Revenues denominated in U.S. Dollar as a percentage of total revenues was 71%, 72% and 70% for the years ended December 31, 2023, 2022 and 2021, respectively. A hypothetical 10% increase in the U.S.
Dollar relative to these currencies and, conversely, are adversely affected by a strengthening of the U.S. Dollar relative to these currencies. Revenues denominated in U.S. Dollar as a percentage of total revenues were 71% for each of the years ended December 31, 2024 and 2023 and 72% for the year ended December 31, 2022.
Interest is payable semi-annually in arrears on March 1 and September 1 of each year, beginning on March 1, 2021, and the entire outstanding principal amount is due at maturity on September 1, 2030.
The 2030 Notes were issued at 99.63% of principal and we incurred approximately $13 million of debt issuance costs. Interest is payable semi-annually in arrears on March 1 and September 1 of each year, beginning on March 1, 2021, and the entire outstanding principal amount is due at maturity on September 1, 2030.
Recording upward and downward adjustments to the carrying value of our non-marketable equity investments requires quantitative assessments of the fair value of our non-marketable equity investments using various valuation methodologies and involves the use of estimates. The timing and amount of observable price changes are influenced by market dynamics that can impact the valuation of our non-marketable equity investments.
For those non-marketable equity investments using measurement alternative, recording upward and downward adjustments to the carrying value of these non-marketable equity investments requires quantitative assessments of the fair value of our non-marketable equity investments using various valuation methodologies and involves the use of estimates.
As of December 31, 2022, we had an aggregate of $6.4 billion in cash, cash equivalents, short-term investments and long-term investments, and a hypothetical 100 basis point increase in interest rates would have resulted in an approximate $39 million decline of the fair value of our available-for-sale debt securities.
As of December 31, 2023, we had an aggregate of $8.1 billion in cash, cash equivalents, short-term investments and long-term investments, and a hypothetical 100 basis point increase in interest rates would have resulted in an approximate $60 million decline of the fair value of our available-for-sale debt securities. 52 Table of Contents Market Risk 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.
We are not required to pledge, and are not entitled to receive, cash collateral related to these derivative instruments. We do not enter into derivative contracts for trading or speculative purposes.
We are not required to pledge, and are not entitled to receive, cash collateral related to these derivative instruments. We do not enter into derivative contracts for trading or speculative purposes. Refer to Note 8 in the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information.
We mitigate this credit risk by transacting with major financial institutions with high credit ratings and entering into master netting arrangements, which permit net settlement of transactions with the same counterparty.
We mitigate this credit risk by transacting with major financial institutions with high credit ratings.
Refer to Note 8 in the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information. 48 Tabl e of Contents Interest Rate Sensitivity We had an aggregate of $8.1 billion in cash, cash equivalents, short-term investments and long-term investments as of December 31, 2023.
Interest Rate Sensitivity We had an aggregate of $9.9 billion in cash, cash equivalents, short-term investments and long-term investments as of December 31, 2024.
These changes could be material based on market conditions and events. 49 Tabl e of Contents
The timing and amount of observable price changes are influenced by market dynamics that can impact the valuation of our non-marketable equity investments. These changes could be material based on market conditions and events.
Removed
These derivative contracts are intended to offset gains or losses related to remeasuring monetary assets and liabilities that are denominated in currencies other than the functional currency of the entities in which they are recorded. These derivative contracts expose us to credit risk to the extent that the counterparties may be unable to meet the terms of the arrangement.
Added
This analysis disregards the impact from the Company’s cash flow hedging program and possibilities that rates can move in opposite directions and that losses from one geographic area may be offset by gains from another geographic area.
Removed
Market Risk 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 were issued at 99.63% of principal and we incurred approximately $13 million of debt issuance costs.
Added
These foreign currency forward contracts are intended to offset gains or losses related to remeasuring monetary assets and liabilities and to reduce foreign exchange impact on our forecasted revenues. Derivative contracts related to hedging of forecasted revenues are designated as cash flow hedges for accounting purposes.
Added
For contracts qualifying as cash flow hedges, the derivative’s gain or loss is initially reported as a component of accumulated other comprehensive income (loss) and subsequently reclassified into earnings in the same period the forecasted transaction affects earnings.
Added
For contracts not designated as cash flow hedges for accounting purposes, the derivative’s gain or loss is recognized immediately in earnings within our consolidated statements of comprehensive income. A sensitivity analysis performed on our cash flow hedge portfolio as of December 31, 2024 indicated that a hypothetical 10% depreciation of the U.S.
Added
Dollar from its value as of December 31, 2024 would decrease the fair value of our foreign currency contracts by $164 million. These foreign currency forward contracts expose us to credit risk to the extent that the counterparties may be unable to meet the terms of the arrangement.
Added
Our non-marketable equity investments are primarily accounted for using: (i) measurement alternative which measures the investments at cost minus impairment, if any, and adjusted for observable transactions for the same or similar investments of the same issuer and (ii) equity method which measures the investment at cost minus impairment, plus or minus our share of equity method investee income or loss.
Added
All of our non-marketable equity investments in privately held companies are subject to a risk of partial or total loss of invested capital. 53 Table of Contents

Other NOW 10-K year-over-year comparisons