ServiceNow (NOW) Q2 2024 earnings summary

Executive summary

• Q2 2024 delivered strong beats across all top-line and profitability metrics, with subscription revenues reaching $2.542 billion, up 23% year-over-year, and total revenues at $2.63 billion, up 22%, driven by robust AI-driven demand and customer expansion.

• Leadership changes followed an internal investigation, including the departure of the President and COO, with interim leadership in place to ensure continuity and compliance.

• The company is positioned as a leading AI platform for business transformation, with rapid adoption of GenAI products, expanding industry partnerships, and recognition in major global rankings.

• Free cash flow for Q2 was $359 million, with a margin of 14%, and for the first half of 2024 reached $1.58 billion, up 33% year-over-year.

• Renewal rate remained strong at 98%, reflecting high customer retention and large enterprise adoption.

Financial highlights

• Q2 subscription revenues reached $2.542 billion, up 23% year-over-year in constant currency, exceeding guidance by 100 basis points.

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

• Non-GAAP operating margin was 27% in Q2 2024; free cash flow margin was 14%.

• Non-GAAP net income for Q2 2024 was $651 million, with diluted EPS of $3.13; GAAP net income was $262 million, with diluted EPS of $1.26.

• Cash, cash equivalents, and investments totaled $8.9 billion as of June 30, 2024.

Outlook and guidance

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

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

• Q3 2024 subscription revenues expected between $2.660–$2.67 billion, with cRPO growth of 22–22.5% and operating margin of 29.5%.