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, 2025 and 2024, and year-to-year comparisons between fiscal 2025 and fiscal 2024 in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). A discussion of our financial condition and results of operations for the fiscal year ended December 31, 2023 and year-to-year comparisons between fiscal 2024 and fiscal 2023 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, 2024, filed on January 30, 2025.
Our free cash flow and non-GAAP consolidated income from operations measures included in the section entitled “Key Business Metrics—Free Cash Flow” and “Key Business Metrics—Non-GAAP Consolidated Income from Operations” are not in accordance with GAAP. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with GAAP. These measures may be different from non-GAAP financial measures used by other companies, limiting their 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 delivers solutions that help public and private organizations govern, secure and manage artificial intelligence and digitalize and streamline workflows to drive collaboration, productivity and better experiences across the enterprise. At the core of these solutions is the ServiceNow AI Platform (“Platform”), a robust, cloud-based Platform that facilitates comprehensive delivery of seamless workflows and drives digital transformation across all departments and personas within an organization. Our Platform’s single data fabric and integrated data layer supports organizations’ operationalization of their AI strategy with speed, scale and security. Our workflow applications built on the Platform are grouped into four areas: Technology, CRM and Industry, Core Business, and Creator and Other. We offer an innovative suite of products, including AI-powered applications, and services designed to automate workflows, integrate systems and empower employees, regardless of existing systems, cloud environments or collaboration tools. Our one platform architecture provides the foundation for organizations to seamlessly integrate AI, data, and workflows and create intelligent processes across their enterprise.
We are closely monitoring ongoing global conflicts. While those events are continuing to evolve and the outcomes remain highly uncertain, we do not believe they will have a material impact on our business and results of operations. However, if the conflicts persist or worsen, leading to greater global economic disruptions and uncertainty, our business and results of operations could be materially impacted.
Additionally, other macroeconomic events, including interest rates, global inflation and tariffs, have led to economic uncertainty in the global economy. To mitigate risk, our cash and cash equivalents are distributed across several large financial institutions and are not concentrated in one financial institution. 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. Further, we have policy restrictions on the types of securities that can be purchased as part of our available-for-sale debt securities portfolio. These restrictions take industry and company concentration limits into consideration among other things. We will continue to monitor the direct and indirect impact of macroeconomic events on our business and financial results.
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.
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On December 5, 2025, our board of directors approved and declared a 5-for-1 split of our common stock (“Stock Split”), with a proportionate increase in the number of shares of authorized common stock. The Stock Split had a record date of December 16, 2025 and an effective date of December 17, 2025. The par value per share of our common stock remains unchanged at $0.001 per share after the Stock Split. Accordingly, an amount equal to the par value of the additional issued shares resulting from the Stock Split was reclassified from additional paid-in capital to common stock. All references made to common share, equity award and per share amounts throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations have been retroactively adjusted to reflect the effects of the Stock Split.
Key Business Metrics
Remaining performance obligations . Transaction price allocated to remaining performance obligations (“RPO”) represents contracted revenue that has not yet been recognized, which includes deferred revenue and non-cancellable amounts that will be invoiced and recognized as revenue in future periods. RPO excludes contracts that are billed in arrears, such as certain time and materials contracts, as we apply the “right to invoice” practical expedient under relevant accounting guidance. Current remaining performance obligations (“cRPO”) represents RPO that will be recognized as revenue in the next 12 months.
As of December 31, 2025, our RPO was $28.2 billion, of which 46% represented cRPO. RPO and cRPO increased by 27% and 25%, respectively, compared to December 31, 2024. Factors that may cause our RPO to vary from period to period include the following:
• Foreign currency exchange rates . While a majority of our contracts have historically been in U.S. Dollars, an increasing percentage of our contracts in recent periods has been in foreign currencies, particularly the Euro and British Pound Sterling. Fluctuations in foreign currency exchange rates as of the balance sheet date will cause variability in our RPO.
• Mix of offerings . In a minority of cases, we allow our customers to host our software by themselves or through a third-party service provider. In self-hosted offerings, we recognize a portion of the revenue upfront upon the delivery of the software and as a result, such revenue is excluded from RPO.
• Subscription start date . From time to time, we enter into contracts with a subscription start date in the future and these amounts are included in RPO if such contracts are signed by the balance sheet date.
• Timing of contract renewals . While customers typically renew their contracts at the end of the contract term, from time to time, customers may do so either before or after the scheduled expiration date. For example, in cases where we are successful in selling additional products or services to an existing customer, a customer may decide to renew its existing contract early to ensure that all its contracts expire on the same date. In other cases, prolonged negotiations or other factors may result in a contract not being renewed until after it has expired.
• Contract duration . While we typically enter into multi-year subscription services, the duration of our contracts varies. Further, we continue to see an increase in the number of 12-month agreements entered into with the U.S. federal government throughout the year, with the highest number of agreements entered into in the quarter ended September 30, driven primarily by timing of their annual budget expenditures. We sometimes also enter into contracts with durations that have a 12-month or shorter term to enable the contracts to co-terminate with the existing contract. The contract duration will cause variability in our RPO.
Number of customers with ACV greater than $5 million . We count the total number of customers with annual contract value (“ACV”) greater than $5 million as of the end of the period. We had 603, 502, and 420 customers with ACV greater than $5 million as of December 31, 2025, 2024 and 2023, respectively. For purposes of customer count, a customer is defined as an entity that has a unique Dunn & Bradstreet Global Ultimate (“GULT”) Data Universal Numbering System (“DUNS”) number and an active subscription contract as of the measurement date. The DUNS number is a global standard for business identification and tracking. We make exceptions for holding companies, government entities and other organizations for which the GULT, in our judgment, does not accurately represent the ServiceNow customer. For example, while all U.S. government agencies roll up to “Government of the United States” under the GULT, we count each government agency that we contract with as a
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separate customer. Our customer count is subject to adjustments for acquisitions, spin-offs and other market activity; accordingly, we restate previously disclosed number of customers with ACV greater than $5 million calculations to allow for comparability. ACV is calculated based on the foreign exchange rate in effect at the time the contract was signed. Foreign exchange rate fluctuations could cause some variability in the number of customers with ACV greater than $5 million. We believe information regarding the total number of customers with ACV greater than $5 million provides useful information to investors because it is an indicator of our growing customer base and demonstrates the value customers are receiving from the Platform.
Free cash flow . We define free cash flow, a non-GAAP financial measure, as GAAP net cash provided by operating activities plus cash outflows for legal settlements and business combination and other related costs including compensation expense, reduced by purchases of property and equipment. Purchases of property and equipment are otherwise included in cash used in investing activities under GAAP. We believe information regarding free cash flow provides useful information to investors because it is an indicator of the strength and performance of our business operations. However, our calculation of free cash flow may not be comparable to similar measures used by other companies. A calculation of free cash flow is provided below:
Year Ended December 31,
(dollars in millions)
GAAP net cash provided by operating activities
Purchases of property and equipment
Business combination and other related costs
Legal settlements
Non-GAAP free cash flow
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. 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 . Non-GAAP consolidated income from operations is identified as an additional measure of profit or loss. This non-GAAP measure is used by the chief operating decision maker to allocate resources and assess performance. We define non-GAAP consolidated income from operations as income from operations excluding certain non-cash or non-recurring items, including stock-based compensation expense, amortization of purchased intangibles, legal settlements, impairment of assets, severance costs, contract termination costs and business combination and other related costs including compensation expense. We believe these adjustments provide useful supplemental information to investors and facilitate the analysis of our operating results and comparison of those results across reporting periods. The following table shows the reconciliation of our reported consolidated income from operations to non-GAAP consolidated income from operations.
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Year Ended December 31,
(dollars in millions)
GAAP income from operations
Stock-based compensation
Amortization of purchased intangibles
Business combination and other related costs
Impairment of assets
Severance costs
Legal settlements
Contract termination costs
Non-GAAP income from operations
Renewal rate . We calculate our renewal rate by subtracting our attrition rate from 100%. Our attrition rate for a period is equal to the ACV from customers lost during the period, divided by the sum of (i) the total ACV from all customers that renewed during the period, excluding changes in price or users, and (ii) the total ACV from all customers lost during the period. Accordingly, our renewal rate is calculated based on ACV and is not based on the number of customers that have renewed. Further, our renewal rate does not reflect increased or decreased purchases from our customers to the extent such customers are not lost customers or lapsed renewals. A lost customer is a customer that did not renew an expiring contract and that, in our judgment, will not be renewed. Typically, a customer that reduces its subscription upon renewal is not considered a lost customer. However, in instances where the subscription decrease represents the majority of the customer’s ACV, we may deem the renewal as a lost customer. For our renewal rate calculation, we define a customer as an entity with a separate production instance of our service and an active subscription contract as of the measurement date, instead of an entity with a unique GULT or DUNS number. 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, 2025, 2024 and 2023. As our renewal rate is impacted by the timing of renewals, which could occur in advance of, or subsequent to the original contract end date, period-to-period comparison of renewal rates may not be meaningful.
Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported revenues and expenses during the reporting periods. These items are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates could occur in the future. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ from these estimates under different assumptions or conditions and such differences could be material.
While our significant accounting policies are more fully described in Note 2 “Summary of Significant Accounting Policies” 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.
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Revenue Recognition
We derive our revenues predominately from subscription revenues, which are primarily comprised of subscription fees that give customers access to the ordered subscription service, related support and updates, if any, to the subscribed service during the subscription term. For our cloud services, we recognize subscription revenues ratably over the contract term beginning on the commencement date of each contract, the date we make our services available to our customers. Our contracts with customers typically include a fixed amount of consideration and are generally non-cancellable and without any refund-type provisions.
Subscription revenues also include revenues from self-hosted offerings in which customers deploy, or we grant customers the option to deploy without significant penalty, our subscription service internally or contract with a third party to host the software. For these contracts, we account for the software element separately from the related support and updates as they are distinct performance obligations. 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.
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. 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.
Deferred Commissions
Deferred commissions are the incremental selling costs that are associated with acquiring customer contracts and consist primarily of sales commissions paid to our sales organization and referral fees paid to independent third parties. Commissions and referral fees earned upon the execution of initial and expansion contracts are primarily deferred and amortized over a period of benefit that we have determined to be five years consistent with prior year. Commissions earned upon the renewal of customer contracts are deferred and amortized over the average renewal term. Additionally, for self-hosted offerings, consistent with the recognition of subscription revenues for self-hosted offerings, a portion of the commission cost is expensed upfront when the self-hosted offering is made available. Determining the period of benefit, including average renewal term, requires judgment for which we take into consideration our customer contracts, our technology life cycle and other factors.
Business Combinations
The allocation of the purchase price in a business combination requires management to make significant estimates in determining the fair value of acquired assets and assumed liabilities, especially with respect to intangible assets. The excess of the purchase price in a business combination over the fair value of these tangible and intangible assets acquired and liabilities assumed is recorded as goodwill. Critical estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows, discount rates, revenue growth rates, royalty rates, technology migration rates and profit margin a market participant would receive. These estimates are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. We typically engage third party valuation appraisal firms to assist us in determining the fair values of intangible assets, including the relief from royalty method and multi-period excess earnings method used to calculate the fair values under the income approach. 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.
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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. 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.
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. We evaluate the recoverability of these future tax deductions and credits by assessing the adequacy of future expected taxable income from all sources, including future growth, forecasted earnings, future taxable income, the mix of earnings in the jurisdictions in which we operate, historical earnings, taxable income in prior years, if carryback is permitted under the law, carryforward periods and prudent and feasible tax planning strategies. A valuation allowance is established if it is more likely than not that all or a portion of the deferred tax asset will not be realized. To the extent sufficient positive evidence becomes available, we may release all or a portion of our valuation allowance in one or more future periods. 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. In making that assessment, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more likely than not that some or all of the deferred tax assets will not be realized. As of June 30, 2023, we achieved cumulative U.S. income during the prior twelve quarters when considering pre-tax income adjusted for permanent differences and other comprehensive losses. Based on all available positive and negative evidence, having demonstrated sustained profitability which is objective and verifiable, and taking into account anticipated future earnings, we concluded it is more likely than not that our U.S. federal and state deferred tax assets will be realizable, with the exception of California. We released $1.05 billion of our valuation allowance during the year ended December 31, 2023. As of December 31, 2025 and 2024, we maintained a valuation allowance of $241 million and $220 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. We will continue to monitor the need for a valuation allowance our deferred tax assets on a quarterly basis. Refer to Note 17 “Provision for ( 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.
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. 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. 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. Changes in the recognition or measurement of uncertain tax positions could result in material increases or decreases in our income tax expense in the period in which we make the change, which could have a material impact on our effective tax rate and operating results.
We calculate the current and deferred income tax provision based on estimates and assumptions that could differ from the actual results reflected in income tax returns filed in subsequent years and record adjustments based on filed income tax returns when identified. The amount of income taxes paid is subject to examination by U.S. federal, state and foreign tax authorities. 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.
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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. 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. 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. We typically invoice our customers for subscription fees in annual increments upon execution of the initial contract or subsequent renewal. 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. Some of our professional services arrangements are on a fixed-fee basis. 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.
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 sales channel. Revenues from our direct sales organization represented 78% of our total revenues for each of the years ended December 31, 2025 and 2024 and 79% of our total revenues for the year ended December 31, 2023. 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 . 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. The increase in customer agreements for the fourth quarter is primarily a result of both large enterprise account buying patterns typical in the software industry, which are driven primarily by the expiration of annual authorized budgeted expenditures, and the terms of our commission plans, which incentivize our direct sales organization to meet their annual quotas by December 31. Furthermore, we usually sign a significant portion of these agreements during the last month, and often the last two weeks, of each quarter. This seasonality of entering into customer agreements is sometimes not immediately apparent in our revenues, due to the fact that we recognize subscription revenues from our cloud offering contracts over the term of the subscription agreement, which is generally 12 to 36 months. In addition, we continue to see an increase in the number of 12-month agreements entered into with the U.S. federal government throughout the year, with the highest number of agreements entered into in the third quarter, driven primarily by the timing of their annual budget expenditures. 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.
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Cost of Revenues
Cost of subscription revenues . Cost of subscription revenues consists primarily of expenses related to hosting our services and providing support to our customers. These expenses are comprised of data center capacity costs, which include colocation costs associated with our data centers as well as interconnectivity between data centers, depreciation related to our infrastructure hardware equipment dedicated for customer use, amortization of intangible assets, expenses associated with software, public cloud service costs, IT services and dedicated customer support, personnel-related costs directly associated with data center operations and customer support, including salaries, benefits, bonuses, stock-based compensation and allocated overhead.
Cost of professional services and other revenues. Cost of professional services and other revenues consists primarily of personnel-related costs directly associated with our professional services and training departments, including salaries, benefits, bonuses and stock-based compensation, the costs of contracted third-party partners, travel expenses and allocated overhead.
Professional services are performed directly by our services team, as well as by contracted third-party partners. Fees paid by us to third-party partners are primarily recognized as cost of revenues as the professional services are delivered. Cost of revenues associated with our professional services engagements contracted with third- party partners as a percentage of professional services and other revenues was 35%, 24% and 10% for the years ended December 31, 2025, 2024 and 2023, respectively.
Sales and Marketing
Sales and marketing expenses consist primarily of personnel-related expenses directly associated with our sales and marketing staff, including salaries, benefits, bonuses, stock-based compensation and allocated overhead. Sales and marketing expenses also include the amortization of commissions paid to our sales employees, including related payroll taxes and fringe benefits. In addition, sales and marketing expenses include branding expenses, marketing program expenses, which include events such as Knowledge, and costs associated with purchasing advertising and marketing data, software and subscription services dedicated for sales and marketing use and allocated overhead.
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. Research and development expenses also include data center capacity costs, costs associated with outside services contracted for research and development purposes and depreciation of infrastructure hardware equipment that is used solely for research and development purposes.
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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.
Provision for (Benefit from) Income Taxes
Provision for (benefit from) income taxes consists of federal, state and foreign income taxes. Our income tax provision for the year ended December 31, 2025 is primarily attributable to the mix of earnings and losses in countries with differing statutory tax rates, offset by excess tax benefits of stock-based compensation. We continue to maintain a valuation allowance against our California deferred tax assets due to the uncertainty regarding realizability of these deferred tax assets as they have not met the “more likely than not” realization criteria, particularly as we expect research and development tax credit generation to exceed our ability to use the credits in future years.
Comparison of the years ended December 31, 2025 and 2024
Revenues
Year Ended December 31,
% Change
(dollars in millions)
Revenues:
Subscription
Professional services and other
Total revenues
Percentage of revenues:
Subscription
Professional services and other
Total
Subscription revenues increased by $2.2 billion for the year ended December 31, 2025, compared to the prior year, primarily driven by increased purchases by new and existing customers. Included in subscription revenues is $492 million and $409 million of revenues recognized upfront from the delivery of software associated with self-hosted offerings during the years ended December 31, 2025 and 2024, respectively.
We expect subscription revenues for the year ending December 31, 2026 to increase in absolute dollars and remain relatively flat as a percentage of revenue as we continue to add new customers and existing customers increase their usage of our products compared to the year ended December 31, 2025.
Our expectations for revenues, cost of revenues and operating expenses for the year ending December 31, 2026 are based on the 31-day average of foreign exchange rates for December 31, 2025.
Professional services and other revenues increased by $57 million for the year ended December 31, 2025, compared to the prior year, due to an increase in services and trainings provided to new and existing customers.
We expect professional services and other revenues for the year ending December 31, 2026 to increase in absolute dollars and remain relatively flat as a percentage of revenue compared to the year ended December 31, 2025.
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Cost of Revenues and Gross Profit Percentage
Year Ended December 31,
% Change
(dollars in millions)
Cost of revenues:
Subscription
Professional services and other
Total cost of revenues
Gross profit (loss) percentage:
Subscription
Professional services and other
Total gross profit percentage
Gross profit:
Cost of subscription revenues increased by $627 million for the year ended December 31, 2025, 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. Personnel-related costs, including stock- based compensation and overhead expenses, increased by $307 million as compared to the prior year. Depreciation expense related to infrastructure hardware equipment and expenses associated with software, maintenance, third-party cloud services and other costs, which together support the expansion of data center capacity increased by $277 million for the year ended December 31, 2025, as compared to the prior year.
We expect our cost of subscription revenues for the year ending December 31, 2026 to increase in absolute dollars as we provide subscription services to more customers and increase usage within our customer instances and increase slightly as a percentage of revenue compared to the year ended December 31, 2025. We will continue to incur incremental costs to attract customers in regulated markets by adopting public cloud offerings as well as increased support for customers impacted by new and evolving data residency requirements. To the extent future acquisitions are consummated, our cost of subscription revenues may increase due to additional non-cash charges associated with the amortization of intangible assets acquired.
Our subscription gross profit percentage was 80% and 82% for the years ended December 31, 2025 and 2024, respectively. We expect our subscription gross profit percentage to decrease slightly for the year ending December 31, 2026 compared to the year ended December 31, 2025, primarily due to the ongoing growth of our third-party cloud services usage and incremental amortization expense of intangible assets acquired through acquisitions completed during the year ended December 31, 2025.
Cost of professional services and other revenues increased by $69 million for the year ended December 31, 2025 as compared to the prior year, primarily driven by an increase in partner ecosystem spend to further help accelerate customer value realization.
Our professional services and other gross loss percentage was 5% for the year ended December 31, 2025, compared to 2% in the prior year, and was primarily driven by partner ecosystem spend to further help accelerate customer value realization increasing at a faster rate than revenue. We expect our professional services and other gross loss percentage to increase for the year ending December 31, 2026 compared to the year ended December 31, 2025.
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Sales and Marketing
Year Ended December 31,
% Change
(dollars in millions)
Sales and marketing
Percentage of revenues
Sales and marketing expenses increased by $534 million for the year ended December 31, 2025, 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 $332 million, compared to the prior year. Amortization expenses associated with deferred commissions increased by $67 million, compared to the prior year, due to an increase in contracts with new customers, expansion and renewal contracts. Other sales and marketing program expenses, which include branding, costs associated with purchasing advertising, marketing events and market data, increased by $68 million compared to the prior year, primarily due to increased program costs and travel costs for our annual Knowledge user conference.
We expect sales and marketing expenses for the year ending December 31, 2026 to increase in absolute dollars and to decrease slightly as a percentage of revenue compared to the year ended December 31, 2025, as we continue to see leverage from increased sales productivity and marketing efficiencies.
Research and Development
Year Ended December 31,
% Change
(dollars in millions)
Research and development
Percentage of revenues
Research and development expenses (“R&D”) increased by $417 million during the year ended December 31, 2025, 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 $383 million compared to the prior year.
We expect R&D expenses for the year ending December 31, 2026 to increase in absolute dollars but remain relatively flat as a percentage of revenue compared to the year ended December 31, 2025, as we continue to improve the existing functionality of our services, develop new applications to fill market needs and enhance our core platform.
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General and Administrative
Year Ended December 31,
% Change
(dollars in millions)
General and administrative
Percentage of revenues
General and administrative expenses (“G&A”) increased by $187 million during the year ended December 31, 2025, compared to the prior year, primarily due to increased headcount resulting in an increase in personnel- related costs including stock-based compensation of $39 million and an increase in outside services of $78 million. The remaining increase was primarily due to an increase in contract termination costs of $37 million and impairment of assets of $30 million for the year ended December 31, 2025, compared to the prior year.
We expect G&A expenses for the year ending December 31, 2026 to decrease in absolute dollars and to decrease slightly as a percentage of revenue compared to the year ended December 31, 2025, as we continue to see leverage from continued G&A productivity.
Stock-based Compensation
Year Ended December 31,
% Change
(dollars in millions)
Cost of revenues:
Subscription
Professional services and other
Operating expenses:
Sales and marketing
Research and development
General and administrative
Total stock-based compensation
Percentage of revenues
Stock-based compensation increased by $209 million during the year ended December 31, 2025, compared to the prior year, primarily due to additional grants to current and new employees.
Stock-based compensation is inherently difficult to forecast due to fluctuations in our stock price. Based upon our stock price as of December 31, 2025, we expect stock-based compensation to continue to increase in absolute dollars for the year ending December 31, 2026 as we continue to issue stock-based awards to our employees but remain relatively flat as a percentage of revenue compared to the year ended December 31, 2025. We expect stock-based compensation as a percentage of revenue to decline over time as we continue to grow.
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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% of total revenues for each of the years ended December 31, 2025 and 2024.
Because we primarily transact in foreign currencies for sales outside of the United States, the general weakening of the U.S. Dollar relative to other major foreign currencies had a favorable impact on our revenues for the year ended December 31, 2025. For entities reporting in currencies other than the U.S. Dollar, if we had translated our results for the year ended December 31, 2025 at the exchange rates in effect for the year ended December 31, 2024 rather than the actual exchange rates in effect during the period, our reported subscription revenues would have been $128 million lower, excluding the impact of our cash flow hedging program. The impact from the foreign currency movements for the year ended December 31, 2025 compared to December 31, 2024 was not material for professional services and other revenues.
In addition, we primarily transact in several foreign currencies for cost of revenues and operating expenses outside of the United States. The movement of the U.S. Dollar had an immaterial impact on our expenses for the year ended December 31, 2025.
Interest Income
Year Ended December 31,
% Change
(dollars in millions)
Interest income
Percentage of revenues
Interest income increased during the year ended December 31, 2025, compared to the prior year, primarily driven by an increase in investment income from our managed portfolio resulting from higher average portfolio balances.
Other Expense, net
Year Ended December 31,
% Change
(dollars in millions)
Interest expense
Other
Other expense, net
Percentage of revenues
Other expense, net decreased by $31 million during the year ended December 31, 2025, compared to the prior year, primarily driven by unrealized gains on strategic investments.
To mitigate our risks associated with fluctuations in foreign currency exchange rates, we enter into foreign currency forward contracts with maturities of 12 months or less to hedge a portion of our net outstanding monetary assets and liabilities. These hedging contracts may reduce, but cannot entirely eliminate, the impact of adverse currency exchange rate movements. The gains recognized for foreign currency forward contracts from derivatives not designated as hedging instruments in other expense, net of $97 million, primarily offset the remeasurement losses of the related foreign currency denominated assets and liabilities of $113 million for the
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year ended December 31, 2025. The gains (losses) recognized for these foreign currency forward contracts in other expense, net, were immaterial for the year ended December 31, 2024.
Provision for Income Taxes
Year Ended December 31,
% Change
(dollars in millions)
Income before income taxes
Provision for income taxes
Effective tax rate
The income tax provision was $513 million and $313 million for the years ended December 31, 2025 and 2024, respectively. The income tax provision was primarily attributable to the mix of earnings and losses in countries with differing statutory tax rates, offset by excess tax benefits of stock-based compensation.
On July 4, 2025, H.R. 1, the "One Big Beautiful Bill Act," was enacted into law, bringing significant amendments to the U.S. tax code. This legislation extends and modifies provisions from the 2017 Tax Cuts and Jobs Act and introduces new tax measures affecting both businesses and individuals. The enacted legislation had an immaterial impact on the Company’s effective tax rate for the year ended December 31, 2025. The Company will continue to monitor any future changes in its business or interpretations of the new tax law that could affect its tax position in subsequent periods.
Liquidity and Capital Resources
We generate cash inflows from operations primarily from selling subscription services which are generally paid in advance of provisioning services, and expend cash outflows to develop new services and core technologies that further enhance the Platform, engage our customers and enhance their experience, and enable and transform our business operations. Subscription services arrangements typically have a three-year duration, and we have experienced a renewal rate of 98% for each of the years ended December 31, 2025, 2024 and 2023. Cash outflows from operations are principally comprised of the salaries, bonuses, commissions, and benefits for our workforce, licenses and services arrangements, including cloud services, that are integral to our business operations and data centers and operating lease arrangements that underlie our facilities. We have generated positive operating cash flows for more than ten years as we continue to grow our business in pursuit of our business strategy, and we expect to grow our business and generate positive cash flows from operations during 2026. When assessing sources of liquidity, we also include cash and cash equivalents, marketable securities and long-term marketable securities totaling $10.1 billion as of December 31, 2025.
Our capital requirements are principally comprised of capital expenditures to support data center capacity expansion, non-contract workforce salaries, bonuses, commissions, and benefits and, to a lesser extent, cancellable and non-cancellable licenses, operating leases and services arrangements that are integral to our business operations. We also acquire technology and businesses to expand our service offerings and functionality. Our capital expenditures are under cancellable and non-cancellable arrangements. Non-cancellable purchase commitments for business operations total $7.9 billion as of December 31, 2025, which are due primarily over the next five years. Operating lease obligations totaling $1.1 billion are principally associated with leased facilities and have varying maturities with $687 million due over the next five years.
Our supply chain finance (“SCF”) program provides suppliers with the opportunity to sell their receivables due from us to a global financial institution. A supplier’s election to receive early payment at a discounted amount from the financial institution does not change the amount that we must remit to the financial institution on our payment date, which is generally 90 days from the invoice date. As of December 31, 2025, our outstanding payment
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obligations to suppliers participating in the SCF program totaled $87 million. These obligations are included in accounts payable in our consolidated balance sheets, and all activity related to these obligations is presented within operating activities in the consolidated statements of cash flows.
We may repurchase our shares of common stock through open market purchases, accelerated share repurchase transactions, privately negotiated transactions or by other means, with the objective to return value to our stockholders and manage the dilution from future employee equity grants and employee stock purchase programs. In May 2023, our board of directors authorized a program to repurchase up to $1.5 billion of our common stock and authorized an additional $3.0 billion in repurchases under the program in January 2025. During the year ended December 31, 2025, the Company repurchased 10.3 million shares of our common stock for $1.8 billion. All repurchases were made in open market transactions. Repurchases of common stock are recognized as treasury stock and held for future issuance. As of December 31, 2025, approximately $1.4 billion of the authorized amount under the share repurchase program remained available for future repurchases. In January 2026, our board of directors authorized an additional $5.0 billion in repurchases under the Share Repurchase Program.
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”).
Our operating cash flows, together with our other sources of liquidity, are available to service our liabilities as well as our cancellable and non-cancellable arrangements. We anticipate cash flows generated from operations, cash, cash equivalents, marketable securities and long-term marketable securities will be sufficient to meet our liquidity needs for at least the next 12 months, although we do expect to seek additional debt financing to fund our acquisition of Armis Security Ltd. discussed in Note 5 “Business Combinations” in the notes to our consolidated financial statements. As we look beyond the next 12 months, we seek to continue to grow cash flows necessary to fund our operations and grow our business. If we require additional capital resources, we may seek to finance our operations from the current funds available or additional equity or debt financing.
Year Ended December 31,
(dollars in millions)
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Net increase in cash, cash equivalents and restricted cash
Operating Activities
Net cash provided by operating activities was $5,444 million for the year ended December 31, 2025 compared to $4,267 million 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, 2025 was $1,689 million compared to $2,501 million for the prior year. The net decrease in cash used in investing activities was primarily due to a $2,603 million decrease in net purchases of marketable securities, partially offset by an $875 million increase in purchases of strategic investments and a $971 million increase in cash used in business combinations.
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Financing Activities
Net cash used in financing activities for the year ended December 31, 2025 was $2,340 million compared to $1,343 million for the prior year. The net increase in cash used in financing activities is due to a $1,144 million increase in repurchases of common stock and a $70 million increase in taxes paid related to net share settlement of equity awards, offset by a $184 million decrease in business combination related to the second installment payment in the acquisition of G2K Group GmbH and a $33 million increase in proceeds from employee stock plans.
Contractual Obligations and Commitments
Our estimated future obligations consist of leases, various non-cancellable agreements with cloud service providers and an information technology equipment provider, purchase obligations, debt and unrecognized tax benefits as of December 31, 2025. Refer to Note 18 “Commitments and Contingencies” and Note 17 “Provision for (Benefit from) Income Taxes” to our consolidated financial statements included in this Annual Report on Form 10-K for more information.
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Item 7A. Qualitative and Quantitative Disclosures About Market Risk
Foreign Currency Exchange Risk
We have foreign currency risks related to our revenue and operating expenses denominated in currencies other than the U.S. Dollar, primarily the Euro and British Pound Sterling. We are a net receiver of Euro and British Pound Sterling, and therefore benefit from a weakening of 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, 2025, 2024 and 2023.
A hypothetical 10% increase in the U.S. Dollar against other currencies would have resulted in a decrease in operating income of $177 million, $150 million and $107 million for the years ended December 31, 2025, 2024 and 2023, respectively. 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.
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 and operating expenses. 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 and operating expenses. Derivative contracts related to hedging of forecasted revenues and operating expenses are designated as cash flow hedges for accounting purposes. 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. 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 relating to the hedging of forecasted revenues as of December 31, 2025 and 2024 indicated that a hypothetical 10% depreciation of the U.S. Dollar from its value as of December 31, 2025 and 2024 would decrease the fair value of our foreign currency contracts by $199 million and $164 million, respectively.
A sensitivity analysis performed on our cash flow hedge portfolio relating to the hedging of forecasted operating expenses as of December 31, 2025 indicated that a hypothetical 10% appreciation of the U.S. Dollar from its value as of December 31, 2025 would decrease the fair value of our foreign currency contracts by $18 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. We mitigate this credit risk by transacting with major financial institutions with high credit ratings. While the contract or notional amount is often used to express the volume of foreign currency derivative contracts, the amounts potentially subject to credit risk are generally limited to the amounts, if any, by which the counterparties’ obligations under the agreements exceed our obligations to the counterparties. 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 “Derivative Contracts” in the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information.
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Interest Rate Sensitivity
We had an aggregate of $10.1 billion in cash, cash equivalents, marketable securities and long-term marketable securities as of December 31, 2025. This amount was invested primarily in money market funds, certificates of deposit, corporate notes and bonds, government and agency securities and other debt securities with a minimum rating of BBB by Standard & Poor’s, Baa2 by Moody’s or BBB by Fitch. The primary objectives of our investment activities are the preservation of capital and support of our liquidity requirements. Our marketable securities and long-term marketable securities 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, 2025, a hypothetical 100 basis point increase in interest rates would have resulted in an approximate $62 million decline of the fair value of our available-for-sale debt securities. This estimate is based on a sensitivity model that measures market value changes when changes in interest rates occur.
As of December 31, 2024, we had an aggregate of $9.9 billion in cash, cash equivalents, marketable securities and long-term marketable securities, and a hypothetical 100 basis point increase in interest rates would have resulted in an approximate $78 million decline in the fair value of our available-for-sale debt securities.
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. 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 are unsecured obligations and the indentures governing the 2030 Notes contain customary events of default and covenants that, among others and subject to exceptions, restrict our ability to incur or guarantee debt secured by liens on specified assets or enter into sale and lease-back transactions with respect to specified properties.
We hold cash balances with multiple financial institutions in various countries and these balances routinely exceed deposit insurance limits.
As of December 31, 2025 and 2024, we had $1,542 million and $472 million, respectively, of strategic investments in privately held companies. Our strategic investments are predominantly comprised of non-marketable equity investments and 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. 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. 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. All of our strategic investments in privately held companies are subject to a risk of partial or total loss of invested capital.
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Item 8. Consolidated Financial Statements and Supplementary Data
SERVICENOW, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID 238 )
Consolidated Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Comprehensive Income
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Note 1 - Description of the Business
Note 2 - Summary of Significant Accounting Policies
Note 3 - Investments
Note 4 - Fair Value Measurements
Note 5 - Business Combinations
Note 6 - Goodwill and Intangible Assets
Note 7 - Property and Equipment
Note 8 - Derivative Contracts
Note 9 - Supply Chain Finance Program
Note 10 - Deferred Revenue and Performance Obligations
Note 11 - Accrued Expenses and Other Current Liabilities
Note 12 - Debt
Note 13 - Accumulated Other Comprehensive Income (Loss)
Note 14 - Stockholders’ Equity
Note 15 - Equity Awards
Note 16 - Net Income Per Share
Note 17 - P rovision for (Benefit From) Income Taxes
Note 18 - Commitments and Contingencies
Note 19 - Segment and Geographic Information
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of ServiceNow, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of ServiceNow, Inc. and its subsidiaries (the “Company”) as of December 31, 2025 and 2024, and the related consolidated statements of comprehensive income, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2025, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
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Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Revenue Recognition – Subscription Revenue
As described in Note 2 to the consolidated financial statements, subscription revenues are primarily comprised of subscription fees that give customers access to the ordered subscription service, related support and updates, if any, to the subscribed service during the subscription term. The Company recognizes subscription revenues ratably over the contract term beginning on the commencement date of each contract, which is the date the Company makes their services available to their customers. The Company’s contracts with customers typically include a fixed amount of consideration and are generally non-cancellable and without any refund-type provisions. The Company recognized subscription revenues of $12.9 billion for the year ended December 31, 2025.
The principal considerations for our determination that performing procedures relating to revenue recognition for subscription revenue is a critical audit matter are a high degree of auditor effort in performing procedures and evaluating audit evidence related to the Company’s subscription revenue recognition.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process for subscription revenue. These procedures also included, among others (i) testing subscription revenue transactions, on a sample basis, by obtaining and inspecting source documents, such as contracts, invoices and cash receipts, and recalculating revenue recognized and (ii) testing outstanding customer invoice balances as of December 31, 2025, on a sample basis, by obtaining and inspecting source documents, such as invoices and subsequent cash receipts.
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Acquisition of Moveworks, Inc. – Valuation of Developed Technology
As described in Notes 2 and 5 to the consolidated financial statements, on December 15, 2025, the Company acquired all outstanding shares of Moveworks, Inc. (Moveworks) for total purchase consideration of $2.4 billion. Of the acquired intangible assets recorded, $505 million related to Moveworks’ developed technology intangible asset. Fair value of the developed technology intangible asset is determined by management using a relief from royalty method under the income approach. Critical estimates include, but are not limited to, future expected cash flows, discount rates, revenue growth rates, royalty rates, and technology migration rates.
The principal considerations for our determination that performing procedures relating to the valuation of developed technology acquired in the acquisition of Moveworks is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the developed technology acquired; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the revenue growth rate, royalty rate, and technology migration rate; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of the developed technology. These procedures also included, among others (i) reading the purchase agreement; (ii) testing management’s process for developing the fair value estimate of the developed technology acquired; (iii) evaluating the appropriateness of the relief from royalty method used by management; (iv) testing the completeness and accuracy of the underlying data used in the relief from royalty method; and (v) evaluating the reasonableness of the significant assumptions used by management related to the revenue growth rate, royalty rate, and technology migration rate. Evaluating management’s assumptions related to the revenue growth rate, royalty rate, and technology migration rate involved considering the consistency with external market and industry data and whether the assumptions were consistent with evidence obtained in other areas of the audit, and for the revenue growth rate and royalty rate, considering the current and past performance of the Moveworks business. Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the relief from royalty method and (ii) the reasonableness of the royalty rate and technology migration rate assumptions.
/s/ PricewaterhouseCoopers LLP
San Jose, California
January 28, 2026
We have served as the Company’s auditor since 2011.
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ServiceNow, Inc.
Consolidated Balance Sheets
(in millions, except number of shares which are reflected in thousands and per share data)
December 31,
Assets
Current assets:
Cash and cash equivalents
Marketable securities
Accounts receivable, net
Current portion of deferred commissions
Prepaid expenses and other current assets
Total current assets
Deferred commissions, less current portion
Long-term marketable securities
Strategic investments
Property and equipment, net
Operating lease right-of-use assets
Intangible assets, net
Goodwill
Deferred tax assets
Other assets
Total assets
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
Accrued expenses and other current liabilities
Current portion of deferred revenue
Current portion of operating lease liabilities
Total current liabilities
Deferred revenue, less current portion
Operating lease liabilities, less current portion
Long-term debt, net
Other long-term liabilities
Total liabilities
Commitments and contingencies (Note 18)
Stockholders’ equity:
Preferred stock, $ 0.001 par value; 10,000 shares authorized; no shares issued or outstanding
Common stock, $ 0.001 par value; shares authorized: 3,000,000 ; shares issued: 1,065,776 and 1,040,757 ; shares outstanding: 1,047,278 and 1,032,437
Treasury stock, at cost (shares held: 18,498 and 8,320 )
Additional paid-in capital
Accumulated other comprehensive income (loss)
Retained earnings
Total stockholders’ equity
Total liabilities and stockholders’ equity
See accompanying notes to consolidated financial statements
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ServiceNow, Inc.
Consolidated Statements of Comprehensive Income
(in millions, except number of shares which are reflected in thousands and per share data)
Year Ended December 31,
Revenues:
Subscription
Professional services and other
Total revenues
Cost of revenues (1) :
Subscription
Professional services and other
Total cost of revenues
Gross profit
Operating expenses (1) :
Sales and marketing
Research and development
General and administrative
Total operating expenses
Income from operations
Interest income
Other expense, net
Income before income taxes
Provision for (benefit from) income taxes
Net income
Net income per share - basic
Net income per share - diluted
Weighted-average shares used to compute net income per share - basic
Weighted-average shares used to compute net income per share - diluted
Other comprehensive income (loss):
Foreign currency translation adjustments
Unrealized gains on marketable securities, net of tax
Unrealized (losses) gains on derivative instruments, net of tax
Other comprehensive income (loss)
Comprehensive income
(1) Includes stock-based compensation as follows:
Year Ended December 31,
Cost of revenues:
Subscription
Professional services and other
Operating expenses:
Sales and marketing
Research and development
General and administrative
See accompanying notes to consolidated financial statements
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ServiceNow, Inc.
Consolidated Statements of Stockholders’ Equity
(in millions, except number of shares which are reflected in thousands)
Common Stock
Treasury Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
(Loss) Income
Total
Stockholders’
Equity
Shares
Amount
Shares
Amount
Balance as of December 31, 2022
Common stock and Treasury stock issued under employee stock plans
Common stock repurchased
Taxes paid related to net share settlement of equity awards
Stock-based compensation
Other comprehensive income, net of tax
Net income
Balance as of December 31, 2023
Common stock and Treasury stock issued under employee stock plans
Common stock repurchased
Taxes paid related to net share settlement of equity awards
Stock-based compensation
Other comprehensive loss, net of tax
Net income
Balance as of December 31, 2024
Common stock and Treasury stock issued under employee stock plans
Common stock repurchased
Taxes paid related to net share settlement of equity awards
Stock-based compensation
Issuance of common stock for business combinations
Equity awards assumed in business combinations
Other comprehensive income, net of tax
Net Income
Balance as of December 31, 2025
See accompanying notes to consolidated financial statements
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ServiceNow, Inc.
Consolidated Statements of Cash Flows
(in millions)
Year Ended December 31,
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Amortization of deferred commissions
Stock-based compensation
Deferred income taxes
Other
Changes in operating assets and liabilities, net of effect of business combinations:
Accounts receivable
Deferred commissions
Prepaid expenses and other assets
Accounts payable
Deferred revenue
Accrued expenses and other liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of property and equipment
Business combinations, net of cash acquired
Purchases of other intangibles
Purchases of marketable securities
Purchases of strategic investments
Sales and maturities of marketable securities
Other
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from employee stock plans
Repurchases of common stock
Taxes paid related to net share settlement of equity awards
Business combination
Net cash used in financing activities
Foreign currency effect on cash, cash equivalents and restricted cash
Net change in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of period
Cash, cash equivalents and restricted cash at end of period
Cash, cash equivalents and restricted cash at end of period:
Cash and cash equivalents
Restricted cash included in prepaid expenses and other current assets
Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows
Supplemental disclosures of other cash flow information:
Interest paid
Income taxes paid, net of refunds (1)
Non-cash investing and financing activities:
Property and equipment included in accounts payable, accrued expenses and other liabilities
Fair value of common stock issued for business combinations
(1) Income taxes paid, net of refunds, disaggregated by jurisdiction, are outlined below:
Year Ended December 31,
Federal
State
Foreign
Income taxes paid, net of refunds
Income taxes paid, net of refunds exceeding 5 percent of total income taxes paid, net of refunds
Foreign
India
Brazil
Ireland
Netherlands
State
New Jersey
Illinois
*The amount of income taxes paid during the year does not meet the 5% disaggregation threshold.
See accompanying notes to consolidated financial statements
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ServiceNow, Inc.
Notes to Consolidated Financial Statements
Unless the context requires otherwise, references in this report to “ServiceNow,” the “Company,” “we,” “us” and “our” refer to ServiceNow, Inc. and its consolidated subsidiaries.
(1) Description of the Business
ServiceNow delivers solutions that help public and private organizations govern, secure and manage artificial intelligence (“AI”) and digitalize and streamline workflows to drive collaboration, productivity and better experiences across the enterprise. At the core of these solutions is the ServiceNow AI Platform (“Platform”), a robust, cloud-based Platform that facilitates comprehensive delivery of seamless workflows and drives digital transformation across all departments and personas within an organization. Our Platform’s single data fabric and integrated data layer supports organizations’ operationalization of their AI strategy with speed, scale and security. Our workflow applications built on the Platform are grouped into four areas: Technology, CRM and Industry, Core Business, and Creator and Other. We offer an innovative suite of products, including AI-powered applications, and services designed to automate workflows, integrate systems and empower employees, regardless of existing systems, cloud environments or collaboration tools. Our one platform architecture provides the foundation for organizations to seamlessly integrate AI, data, and workflows and create intelligent processes across their enterprise.
(2) Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements have been prepared in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) and include our accounts and the accounts of our wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated upon consolidation.
Common Stock Split
On December 5, 2025, our board of directors approved and declared a 5 -for-1 split of our common stock (“Stock Split”), with a proportionate increase in the number of shares of authorized common stock. The Stock Split had a record date of December 16, 2025 and an effective date of December 17, 2025. The par value per share of our common stock remains unchanged at $ 0.001 per share after the Stock Split. Accordingly, an amount equal to the par value of the additional issued shares resulting from the Stock Split was reclassified from additional paid-in capital to common stock. All references made to common share, equity award and per share amounts in the accompanying consolidated financial statements and applicable disclosures have been retroactively adjusted to reflect the effects of the Stock Split.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as reported amounts of revenues and expenses during the reporting period. Such management estimates and assumptions include, but are not limited to, standalone selling price (“SSP”) for each distinct performance obligation included in customer contracts with multiple performance obligations, the period of benefit for deferred commissions, valuation of intangible assets, the useful life of property and equipment and identifiable intangible assets, stock-based compensation expense and income taxes. Actual results could differ from those estimates.
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Foreign Currency Translation and Transactions
The functional currency for most of our foreign subsidiaries is their respective local currency. Assets and liabilities of the wholly-owned non-U.S. Dollar functional currency subsidiaries are translated into U.S. Dollars at exchange rates in effect at each period end. Amounts classified in stockholders’ equity are translated at historical exchange rates. Revenues and expenses are translated at the average exchange rates during the period. The resulting translation adjustments are recorded in accumulated other comprehensive income (loss) as a component of stockholders’ equity. Foreign currency transaction gains and losses are included in other expense, net within the consolidated statements of comprehensive income, and were immaterial for all periods presented.
Revenue Recognition
Revenues are recognized when control of services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services.
Subscription revenues
Subscription revenues are primarily comprised of subscription fees that give customers access to the ordered subscription service, related support and updates, if any, to the subscribed service during the subscription term. We recognize subscription revenues ratably over the contract term beginning on the commencement date of each contract, which is the date we make our services available to our customers. Our contracts with customers typically include a fixed amount of consideration and are generally non-cancellable and without any refund-type provisions. We typically invoice our customers annually in advance for our subscription services upon execution of the initial contract or subsequent renewal, and our invoices are typically due within 30 days from the invoice date.
Subscription revenues also include revenues from self-hosted offerings in which customers deploy, or we grant customers the option to deploy without significant penalty, our subscription service internally or contract with a third party to host the software. For these contracts, we account for the software element separately from the related support and updates as they are distinct performance obligations. Refer to the discussion below related to contracts with multiple performance obligations for further details. The transaction price is allocated to separate performance obligations on a relative 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.
Professional services and other revenues
Our professional services arrangements are primarily on a time-and-materials basis, and we generally invoice our customers monthly in arrears for these 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. Other revenues mainly 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 from the invoice date.
Contracts with multiple performance obligations
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. We evaluate the terms and conditions included within our customer contracts to ensure appropriate revenue recognition, including whether products and services are considered distinct performance obligations that should be accounted for separately versus together. For contracts with multiple performance obligations, the transaction price is allocated to the separate performance obligations on a relative SSP basis. We determine SSP by considering the historical selling price of these performance obligations in similar transactions as well as other factors, including, but not limited to, competitive pricing of similar products, other software vendor pricing, industry publications and current pricing practices.
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Contract balances
Deferred revenue consists primarily of payments received related to unsatisfied performance obligations at the end of the period. Once our services are available to customers, we record amounts due in accounts receivable and in deferred revenue. To the extent we bill customers in advance of the billing period commencement date, the accounts receivable and corresponding deferred revenue amounts are netted to zero on our consolidated balance sheets, unless such amounts have been paid as of the balance sheet date.
Deferred Commissions
Deferred commissions are the incremental selling costs that are associated with acquiring customer contracts and consist primarily of sales commissions paid to our sales organization and referral fees paid to independent third parties. Deferred commissions also include the associated payroll taxes and fringe benefit costs associated with payments to our sales employees to the extent they are incremental. Commissions and referral fees earned upon the execution of initial and expansion contracts are primarily deferred and amortized over a period of benefit that we have determined to be five years . Commissions earned upon the renewal of customer contracts are deferred and amortized over the average renewal term. Additionally, for self-hosted offerings, consistent with the recognition of subscription revenue for self-hosted offerings, a portion of the commission cost is expensed upfront when the self-hosted offering is made available, and the remaining portion of the commission cost is expensed over the period of benefit. We determine the period of benefit by taking into consideration our customer contracts, our technology life cycle and other factors. The amortization of deferred commissions is included in sales and marketing expense in our consolidated statements of comprehensive income. There was no impairment loss in relation to the incremental selling costs capitalized for all periods presented.
Fair Value Measurements
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. We use a fair value hierarchy that is based on three levels of inputs, of which the first two are considered observable and the last unobservable. The three levels of the fair value hierarchy are as follows:
Level 1—Quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2—Other inputs that are directly or indirectly observable in the marketplace; and
Level 3—Significant unobservable inputs that are supported by little or no market activity.
Cash and Cash Equivalents
Cash and cash equivalents consist of highly liquid investments with original or remaining maturities of three months or less at the date of purchase.
Accounts Receivable, net
We record trade accounts receivable at the net invoice value and such receivables are non-interest bearing. We consider receivables past due based on the contractual payment terms. We reserve for specific amounts if collectability is no longer reasonably assured based on an assessment of various factors including historical loss rates and expectations of forward-looking loss estimates. Individual accounts receivable are written off when we become aware of a specific customer’s inability to meet its financial obligation, and all collection efforts are exhausted.
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Marketable Securities
Marketable securities consist of commercial paper, corporate notes and bonds, certificates of deposit, U.S. government and agency securities and mortgage-backed and asset-backed securities. We classify investments in debt securities as available-for-sale at the time of purchase. All marketable securities are recorded at estimated fair value with original maturities of less than one year at time of purchase classified as short-term and original maturities of greater than one year at time of purchase classified as long-term. Unrealized gains and losses are included in accumulated other comprehensive income (loss), net of tax, a component of stockholders’ equity, except for credit-related impairment losses for available-for-sale debt securities.
For all our available-for-sale debt securities with unrealized loss positions we have determined it is more likely than not we will hold the securities until maturity or a recovery of the cost basis. Available-for-sale securities in an unrealized loss position are written down to its fair value with the corresponding charge recorded in other expense, net in our consolidated statements of comprehensive income, if it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis, or we have the intention to sell the security. Credit-related impairment losses, not to exceed the amount that fair value is less than the amortized cost basis, are recognized through an allowance for credit losses with changes in the allowance for credit losses recorded in other expense, net in the consolidated statements of comprehensive income. For purposes of identifying and measuring impairment, the policy election was made to exclude the applicable accrued interest from both the fair value and amortized cost basis. Applicable accrued interest, net of the allowance for credit losses (if any) of $ 74 million and $ 79 million, is recorded in prepaid expenses and other current assets on the consolidated balance sheets as of December 31, 2025 and 2024, respectively.
Realized gains and losses from the sales of available-for-sale debt securities are determined based on the specific identification method and are reported in other expense, net in the consolidated statements of comprehensive income.
Strategic Investments
Strategic investments consist of debt and non-marketable equity investments in privately held companies in which we do not have a controlling interest. Privately held equity securities in which we do not have a controlling financial interest in but exercise significant influence over the investee are accounted for under equity method accounting. These investments are measured at cost less any impairment, plus or minus our share of equity method investee income or loss. Our share of the investee’s results of operations is recorded in other expense, net on our consolidated statements of comprehensive income. For those privately held equity securities that do not have readily determinable fair values and for which we do not have a controlling financial interest or exercise significant influence, we have elected to apply the measurement alternative, measuring them at cost, less any impairment, plus or minus adjustments resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Upward and downward adjustments to the carrying value are recorded in other expense, net on our consolidated statements of comprehensive income. An impairment loss is recorded when an event or circumstance indicates a in value has occurred.
Derivative Financial Instruments
Derivatives designated as hedging instruments
We record derivatives at fair value as either assets or liabilities on our consolidated balance sheets. For derivative contracts entered into to hedge a portion of our forecasted foreign currency denominated revenues and operating expenses that are designated and qualify as cash flow hedges, the unrealized gain or loss on the derivative instrument is reported as a component of accumulated other comprehensive income (loss) and reclassified into earnings as subscription revenues, research and development expenses, or sales and marketing expenses, as appropriate, when the hedged transaction affects earnings.
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The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. We also formally assess, both at the inception of the hedge, and on an ongoing basis, whether each derivative is highly effective in offsetting changes in cash flows of the hedged item. Fluctuations in the value of the derivative instruments are generally offset by changes in the hedged item; however, if it is determined that a derivative is not highly effective as a hedge or if a derivative ceases to be a highly effective hedge, the Company will discontinue hedge accounting prospectively for the affected derivative.
Derivatives not designated as hedging instruments
Derivative contracts not designated as hedging instruments consist of foreign currency forward contracts that we primarily use to hedge monetary assets and liabilities denominated in non-functional currencies. These foreign currency forward contracts are recorded at fair value and have maturities of 12 months or less. The changes in the fair value of these contracts are recorded in other expense, net on the consolidated statements of comprehensive income. Outstanding foreign currency forward contracts are recorded at gross fair value as prepaid expenses and other current assets as well as accrued expenses and other current liabilities on the consolidated balance sheets.
Property and Equipment, net
Property and equipment are stated at cost net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets as follows:
Computer equipment and software
3 - 5 years
Furniture and fixtures
3 - 7 years
Leasehold and other improvements
shorter of the lease term or 10 years
Capitalized Software Development Costs
Software development costs for software to be sold, leased or otherwise marketed are expensed as incurred until the establishment of technological feasibility, at which time those costs are capitalized until the product is available for general release to customers and amortized over the estimated life of the product. Costs and time incurred between the establishment of technological feasibility and product release have not been material, and all software development costs have been charged to research and development expense in our consolidated statements of comprehensive income.
Leases
We determine if an arrangement is or contains a lease at inception. Operating lease right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. Lease payments consist primarily of the fixed payments under the arrangement, less any lease incentives. We generally use an incremental borrowing rate estimated based on the information available at the lease commencement date to determine the present value of lease payments, unless the implicit rate is readily determinable. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
We account for lease and non-lease components as a single lease component for office leases. Lease and non- lease components for all other leases are generally accounted for separately. Additionally, we do not record leases on the balance sheet that, at the lease commencement date, have a lease term of 12 months or less.
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Operating leases are included in operating lease right-of-use assets, current portion of operating lease liabilities, and operating lease liabilities, less current portion in our consolidated balance sheets. We did not have any financing leases in any of the periods presented.
Business Combinations
We allocate the acquisition purchase price to the tangible and intangible assets acquired and liabilities assumed, based on their estimated fair values. The excess of the purchase price over the fair value of these assets acquired and liabilities assumed is recorded as goodwill. Allocation of the purchase price requires significant estimates in determining the fair value of acquired assets and assumed liabilities, especially with respect to intangible assets. Critical estimates include, but are not limited to, future expected cash flows, discount rates, revenue growth rates, royalty rates, technology migration rates and profit margin a market participant would receive. These estimates are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. We typically engage third party valuation appraisal firms to assist us in determining the fair values of intangible assets, including the relief from royalty method and multi-period excess earnings method used to calculate the fair values under the income approach. During the measurement period, which may not be later than one year from the acquisition date, the Company may record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed, with the corresponding offset to goodwill.
Goodwill and Intangible Assets
Goodwill is evaluated for impairment at least annually or more frequently if circumstances indicate that goodwill may not be recoverable. A qualitative assessment is performed to determine whether it is more likely than not that the fair value of its reporting unit is less than its carrying amount. If the reporting unit does not pass the qualitative assessment, the carrying amount of the reporting unit, including goodwill, is compared to fair value and goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value. Any excess of the carrying value of the goodwill above its fair value is recognized as an impairment loss.
Intangible assets consist of developed technologies and other intangible assets, including patents and contractual agreements. Intangible assets are amortized over the period of estimated benefit using the straight-line method and estimated useful lives ranging from two to twelve years .
Impairment of Long-Lived Assets
We evaluate long-lived assets, including purchased intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Recoverability is measured by comparing the carrying amount to the future undiscounted cash flows we expect the asset to generate. Any excess of the carrying value of the asset above its fair value is recognized as an impairment loss.
Advertising Costs
Advertising costs, excluding costs related to our annual Knowledge user conference and other user forums, are expensed as incurred and are included in sales and marketing expense. These costs for the years ended December 31, 2025, 2024 and 2023 were $ 348 million, $ 295 million and $ 221 million, respectively.
Stock-based Compensation
We recognize compensation expense related to stock options and restricted stock units (“RSUs”) with only service conditions on a straight-line basis over the requisite service period. For stock options and RSUs with service, performance and market conditions (performance-based RSUs (“PRSUs”)), expenses are recognized on a graded
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vesting basis over the requisite service period and for awards with performance conditions, when it is probable that the performance condition will be achieved. The probability of achievement is assessed periodically to determine whether the performance metric continues to be probable. When there is a change in the probability of achievement, any cumulative effect of the change is recognized in the period of the change and the remaining unrecognized compensation will be amortized prospectively over the respective vesting period. We recognize compensation expense related to shares issued pursuant to the employee stock purchase plan (“ESPP”) on a straight-line basis over the six-month offering period. We recognize compensation expense net of estimated forfeiture activity. Amounts withheld related to the minimum statutory tax withholding requirements paid by us on behalf of our employees are recorded as a liability and a reduction to additional paid-in capital when paid and are included as a reduction of cash flows from financing activities.
We estimate the fair value of stock options with only service conditions and shares issued pursuant to the ESPP using the Black-Scholes options pricing model and the fair value of RSU awards (including PRSUs) using the fair value of our common stock on the date of grant. For stock options and PRSUs with service, performance and market conditions, we estimate the fair value of the options granted and the corresponding derived service periods using the Monte Carlo simulation, which requires the use of various assumptions, including the stock price volatility and risk-free interest rate as of the valuation date corresponding to the length of time remaining in the performance period.
Concentration of Credit Risk and Significant Customers
Financial instruments potentially exposing us to credit risk consist primarily of cash, cash equivalents, derivative contracts, investments and accounts receivable. We hold cash at financial institutions that management believes are high credit quality financial institutions and invest in investment-grade debt securities. Our derivative contracts expose us to credit risk to the extent that the counterparties may be unable to meet the terms of the arrangement. 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 are not required to pledge, and are not entitled to receive, cash collateral related to these derivative instruments.
Credit risk arising from accounts receivable is mitigated to a certain extent due to our large number of customers and their dispersion across various industries and geographies. We had one customer, a U.S. federal channel partner and systems integrator, that represented 11 % and 12 % of our accounts receivable balance as of December 31, 2025 and 2024, respectively, and 11 % of our total revenues for the years ended December 31, 2025 and 2024. Based on our periodic credit evaluations, there have been no historical collection concerns with this customer. There were no customers that individually exceeded 10% of our total revenues for the year ended December 31, 2023. For purposes of assessing concentration of credit risk and significant customers, a group of customers under common control or customers that are affiliates of each other are regarded as a single customer. The allowance for credit losses and write offs were not material for each of the periods ending December 31, 2025, 2024 and 2023.
Income Taxes
We use the asset and liability method of accounting for income taxes, in which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. We measure deferred tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be reversed. We recognize the effect on deferred tax assets and liabilities of a change in tax rates within the provision for income taxes as income and expense in the period that includes the enactment date. A valuation allowance is established if it is more likely than not that all or a portion of the deferred tax asset will not be realized. In determining the need for a valuation allowance, we consider future growth, forecasted earnings, forecasted taxable income, the mix of earnings in the jurisdictions in which we operate, historical earnings, taxable income in prior years, if carryback is permitted under the law, carryforward periods and prudent and feasible tax planning strategies.
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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. 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. We recognize interest accrued and penalties related to unrecognized tax benefits in our tax provision.
We calculate the current and deferred income tax provision based on estimates and assumptions that could differ from the actual results reflected in income tax returns filed in subsequent years and record adjustments based on filed income tax returns when identified. The amount of income taxes paid is subject to examination by U.S. federal, state and foreign tax authorities. 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.
Prior Period Reclassifications
Certain prior period amounts have been reclassified to conform to the current period presentation. Strategic investments, previously presented within other assets, were reclassified to be presented separately on our consolidated balance sheets. The reclassification had no impact on our previously reported total assets or net cash from operating or investing activities and did not result in a restatement of prior period consolidated financial statements.
Recently Issued Accounting Pronouncement Adopted
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, “Income Taxes - Improvements to Income Tax Disclosures,” which requires enhancement and further transparency to certain income tax disclosures, most notably the tax rate reconciliation and income taxes paid. We adopted this standard effective January 1, 2025 using a retrospective approach. Refer to our consolidated statements of cash flows and Note 17 “Provision for (Benefit from) Income Taxes” for further information.
Recently Issued Accounting Pronouncements Pending Adoption
In September 2025, the FASB issued ASU 2025-06, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software,” which modernizes the recognition and disclosure framework for internal-use software costs by removing all references to software development project stages so that the guidance is neutral to different software development methods. This ASU is effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods, and can be applied using a prospective, retrospective or modified transition approach with early adoption permitted. We are currently evaluating the impact of the adoption of this standard.
In November 2024, the FASB issued ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures: Disaggregation of Income Statement Expenses,” which requires disclosure of disaggregated information about specific categories underlying certain income statement expense line items in the footnotes to the financial statements for both annual and interim periods. This ASU is effective for fiscal years beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027 with early adoption permitted. We are currently evaluating the impact of the adoption of this standard.
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(3) Investments
Marketable Securities
The following is a summary of our available-for-sale debt securities recorded within marketable securities and long-term marketable securities on the consolidated balance sheets (in millions):
December 31, 2025
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
Available-for-sale debt securities:
Commercial paper
Corporate notes and bonds
Certificates of deposit
U.S. government and agency securities
Mortgage-backed and asset-backed securities
Total available-for-sale debt securities
December 31, 2024
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
Available-for-sale debt securities:
Commercial paper
Corporate notes and bonds
Certificates of deposit
U.S. government and agency securities
Mortgage-backed and asset-backed securities
Total available-for-sale debt securities
As of December 31, 2025, the contractual maturities of our available-for-sale debt securities, excluding those securities classified within cash and cash equivalents on the consolidated balance sheet and mortgage-backed and asset-backed securities that do not have a single maturity, did not exceed 37 months. The fair values of available-for-sale debt securities, by remaining contractual maturity, are as follows (in millions):
December 31, 2025
Due within 1 year
Due in 1 year through 5 years
Instruments not due in single maturity
Total
As of December 31, 2025 and 2024, unrealized losses of $ 14 million and $ 18 million, respectively, are from available-for-sale debt securities in a continuous unrealized loss position greater than 12 months. As of December 31, 2025, the fair value of available-for-sale debt securities in a continuous unrealized loss position totaled $ 171 million, the majority of which was in a continuous unrealized loss position for greater than 12 months. As of December 31, 2024, the fair value of available-for-sale debt securities in a continuous unrealized loss position totaled $ 2,419 million, the majority of which was in a continuous unrealized loss position for less than 12 months.
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For all available-for-sale debt securities that were in unrealized loss positions, we have determined that it is more likely than not we will hold the securities until maturity or a recovery of the cost basis. Unrealized losses on available-for-sale debt securities were due primarily to changes in market interest rates, and credit-related impairment losses were immaterial as of December 31, 2025.
Strategic Investments
As of December 31, 2025 and 2024, the total amount of strategic investments in privately held companies included in our consolidated balance sheets was $ 1,542 million and $ 472 million, respectively. Our strategic investments are predominantly comprised of non-marketable equity investments, which are primarily accounted for using the measurement alternative. Under this approach, the investments are measured at cost minus impairment, if any, plus or minus changes resulting from qualifying observable price changes resulting from the issuance of similar or identical securities in an orderly transaction by the same issuer. Determining whether an observed transaction is similar to a security within our portfolio requires judgment based on the rights and preferences of the securities. Recording upward and downward adjustments to the carrying value of our non- marketable equity investments as a result of observable price changes requires quantitative assessments of the fair value of our non-marketable equity investments using various valuation methodologies and involves the use of estimates. The adjustments made during the years ended December 31, 2025, 2024 and 2023 were immaterial. The remaining strategic investments are accounted for using the equity method of accounting as we have the ability to exercise significant influence but not control over the investee. For the years ended December 31, 2025, 2024 and 2023, our share of the investees’ results of operations included in other expense, net in our consolidated statements of comprehensive income was immaterial. We classify these fair value measurements as Level 3 within the fair value hierarchy.
In September 2025, the Company purchased $ 750 million of preferred shares of Genesys, a privately held AI-powered experience orchestration software company.
(4) Fair Value Measurements
The following table presents our fair value hierarchy for our assets measured at fair value on a recurring basis as of December 31, 2025 (in millions):
Level 1
Level 2
Total
Cash equivalents:
Money market funds
Commercial paper
Corporate notes and bonds
Deposits
U.S. government and agency securities
Marketable securities:
Commercial paper
Corporate notes and bonds
Certificates of deposit
U.S. government and agency securities
Mortgage-backed and asset-backed securities
Total
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The following table presents our fair value hierarchy for our assets measured at fair value on a recurring basis as of December 31, 2024 (in millions):
Level 1
Level 2
Total
Cash equivalents:
Money market funds
Commercial paper
Corporate notes and bonds
Deposits
U.S. government and agency securities
Marketable securities:
Commercial paper
Corporate notes and bonds
Certificates of deposit
U.S. government and agency securities
Mortgage-backed and asset-backed securities
Total
We determine the fair value of our security holdings based on pricing from our service providers and market prices from industry-standard independent data providers. Such market prices may be quoted prices in active markets for identical assets (Level 1 inputs), pricing determined using inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs) or using unobservable inputs that are supported by little or no market activity (Level 3 inputs). Our strategic investments are not included in the table above and are discussed in Note 3 “Investments”. Refer to Note 8 “Derivative Contracts” for the fair value measurement of our derivative contracts and Note 12 “Debt” for the fair value measurement of our long-term debt, which are also not included in the table above.
(5) Business Combinations
2025 Business Combinations
Moveworks, Inc.
On December 15, 2025, we acquired all outstanding shares of Moveworks, Inc. (“Moveworks”), a privately held company that provides enterprise search and front-end virtual agent technology. The acquisition is intended to drive use of our Platform to accelerate enterprise adoption and innovation across key growth areas, including CRM. The preliminary aggregate purchase price consideration for Moveworks was $ 2.4 billion, which was comprised of the following (in millions):
Fair Value
Fair value of common stock issued (1)
Cash
Settlement of pre-existing loan
Stock-based compensation awards attributable to pre-combination services
Total purchase consideration
(1) The fair value of the stock consideration is based on the December 15, 2025 closing price of ServiceNow common stock at $ 153.04 and approximately 9.6 million shares of ServiceNow common stock.
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The allocation of the total purchase price is summarized below (in millions):
Purchase Price
Allocation
Asset Life
Current assets
Intangible assets
2 - 5 years
Goodwill
Indefinite
Other assets
Assets acquired
Current liabilities assumed
Long-term liabilities assumed
Deferred tax liabilities, non-current
Net assets acquired
Identifiable intangible assets acquired in connection with the Moveworks acquisition (in millions) and the weighted-average lives are as follows:
Intangible
Assets
Asset Life (years)
Developed technology
Customer relationships
Order backlog
Brand assets
Total
Goodwill, which is not deductible for income tax purposes, is primarily attributed to the value expected from synergies resulting from the business combination. The fair values assigned to tangible and intangible assets acquired, liabilities assumed and income taxes payable and deferred taxes are based on management’s estimates and assumptions. The provisional measurements of fair value for certain assets and liabilities may be subject to change as additional information is received. The Company expects to finalize the valuation as soon as practicable, but not later than one year from the acquisition date.
As contemplated by the terms of the merger agreement, in August 2025, the Company and Moveworks entered into a term loan credit agreement pursuant to which Moveworks drew $ 25 million. In December 2025, Moveworks drew an additional $ 5 million on the term loan credit agreement. The loan was settled on the closing date of the Moveworks acquisition.
Logik.io Inc.
On May 30, 2025, we acquired all outstanding shares of Logik.io Inc., a provider of an AI-powered, composable Configure, Price, Quote (“CPQ”) solution for total purchase consideration of $ 506 million, which consists primarily of approximately 2.1 million shares of ServiceNow common stock with a value of approximately $ 434 million and $ 62 million in cash. The fair value of the stock consideration is based on the May 30, 2025 closing price of ServiceNow common stock at $ 202.22 . The acquisition is intended to expand our growing CRM footprint and accelerate our sales and order management capabilities with the acquired CPQ solutions technology.
The purchase price was allocated based on the estimated fair value of the developed technology intangible asset of $ 85 million ( five-year estimated useful life), customer-related and backlog assets of $ 14 million ( three -year estimated useful life), net tangible assets of $ 25 million, deferred tax liabilities of $ 22 million and goodwill of $ 404 million, which is not deductible for income tax purposes.
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Goodwill is primarily attributed to the value expected from synergies resulting from the business combination. The fair values assigned to tangible and intangible assets acquired, liabilities assumed and income taxes payable and deferred taxes are based on management’s estimates and assumptions.
Other Acquisitions
In July 2025, we completed the acquisition of data.world, Inc., a leader in enterprise data cataloging and governance. The acquisition is intended to strengthen the Company’s AI platform by allowing customers to enrich data with meaning, context and relationships while enabling AI agents and workflows to operate. The acquisition is not material to our consolidated financial statements.
During the year ended December 31, 2025, we also completed other acquisitions that were not material to our consolidated financial statements, either individually or in the aggregate.
Pending Business Combinations
In December 2025, we signed a definitive agreement to acquire Veza Technologies, Inc., a privately held company that provides a unified access platform, with native products offering access search, access intelligence, access monitoring and access workflows, for approximately $ 1.25 billion cash consideration, subject to customary adjustments. The acquisition is expected to close during the first half of 2026, subject to customary regulatory approvals and closing conditions.
In December 2025, we signed a definitive agreement to acquire Armis Security Ltd. a cyber-exposure management and cyber-physical security solutions provider, for approximately $ 7.75 billion cash consideration, subject to customary adjustments. The acquisition is expected to close during the second half of 2026, subject to customary regulatory approvals and closing conditions.
2024 Business Combinations
During the year ended December 31, 2024, we completed certain acquisitions for total purchase consideration of $ 112 million, primarily to enhance our products with the acquired technology and engineering workforce. The acquisitions were not material to our consolidated financial statements, either individually or in the aggregate.
2023 Business Combinations
On July 17, 2023, we acquired all outstanding shares of G2K Group GmbH, an artificial intelligence powered platform, for $ 465 million in a cash transaction. The consideration was paid in two installments, with the first payment made in July 2023 and the second payment made in February 2024. The acquisition is intended to enhance our Platform with the acquired smart Internet of Things technology, enabling businesses to intelligently action digital and in-store data with enterprise-grade workflows.
The purchase price was allocated based on the fair value of the developed technology intangible asset of $ 75 million ( six-year estimated useful life), net tangible liabilities of $ 1 million, deferred tax liabilities of $ 23 million and goodwill of $ 414 million, which is not deductible for income tax purposes.
Goodwill is primarily attributed to the value expected from synergies resulting from the business combination. The fair values assigned to tangible and intangible assets acquired, liabilities assumed and income taxes payable and deferred taxes are based on management’s estimates and assumptions.
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We have included the financial results of business combinations in the consolidated financial statements from the respective dates of acquisition, which were not material. Aggregate acquisition-related costs associated with business combinations were $ 96 million for the year ended December 31, 2025 and immaterial for each of the years ended December 31, 2024 and 2023, and were included in general and administrative expenses in our consolidated statements of comprehensive income as incurred.
(6) Goodwill and Intangible Assets
The changes in the carrying amounts of goodwill were as follows (in millions):
Carrying Amount
Balance as of December 31, 2023
Goodwill acquired
Foreign currency translation adjustments
Balance as of December 31, 2024
Goodwill acquired
Foreign currency translation adjustments
Balance as of December 31, 2025
Intangible assets, net consists of the following (in millions):
December 31, 2025
December 31, 2024
Developed technology
Customer relationships
Patents
Other
Intangible assets, gross
Less: accumulated amortization
Intangible assets, net
The weighted-average useful life of the acquired developed technology for each of the years ended December 31, 2025 and 2024 was approximately five years . Amortization expense for intangible assets was approximately $ 120 million, $ 94 million and $ 85 million for the years ended December 31, 2025, 2024 and 2023, respectively.
The following table presents the estimated future amortization expense related to intangible assets held as of December 31, 2025 (in millions):
Fiscal Period:
Thereafter
Total future amortization expense
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(7) Property and Equipment
Property and equipment, net consists of the following (in millions):
December 31,
Computer equipment
Computer software
Leasehold and other improvements
Furniture and fixtures
Construction in progress
Property and equipment, gross
Less: Accumulated depreciation
Property and equipment, net
Construction in progress consists of costs primarily related to leasehold and other improvements. Depreciation expense was $ 508 million, $ 371 million and $ 372 million for the years ended December 31, 2025, 2024 and 2023, respectively.
(8) Derivative Contracts
Derivatives Designated as Hedging Instruments
We enter into forward contracts to hedge a portion of our forecasted foreign currency denominated revenues, and beginning in the fourth quarter of 2025, we also entered into forward contracts to hedge a portion of our forecasted foreign currency denominated expenses. These forward contracts are recorded at fair value and have maturities of up to 34 months. We had outstanding cash flow hedges with total notional values of $ 2.2 billion and $ 1.7 billion as of December 31, 2025 and 2024, respectively. We classify cash flows related to our cash flow hedges as operating activities in our consolidated statements of cash flows.
The total gross fair values of derivatives designated as hedging instruments recorded within the consolidated balance sheets were as follows (in millions):
Consolidated Balance Sheets Location
December 31, 2025
December 31, 2024
Prepaid expenses and other current assets
Other assets
Accrued expenses and other current liabilities
Other long-term liabilities
As of December 31, 2025, approximately $ 38 million of the pre-tax derivative loss from accumulated other comprehensive income (loss) is expected to be recognized in subscription revenues within the next 12 months.
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All hedging relationships are formally documented at the inception of the hedge and the hedges must be highly effective in offsetting changes to future cash flows on hedged transactions. We evaluate hedge effectiveness at the inception of the hedge prospectively, and on an ongoing basis both retrospectively and prospectively. We report changes in fair value of these cash flow hedges as a component of accumulated other comprehensive income (loss) and subsequently reclassify into earnings in the same period the forecasted transaction affects earnings. Amounts reclassified to subscription revenues were a loss of $ 42 million for the year ended December 31, 2025 and a gain of $ 14 million for the year ended December 31, 2024. There were no net gains or losses recognized in research and development expenses and sales and marketing expenses for the year ended December 31, 2025. There was no ineffectiveness in the Company’s cash flow hedging program for the years ended December 31, 2025 and 2024.
Derivatives not Designated as Hedging Instruments
Our derivatives not designated as hedging instruments consist of foreign currency forward contracts that we primarily use to hedge monetary assets and liabilities denominated in non-functional currencies. These foreign currency forward contracts are recorded at fair value and have maturities of 12 months or less. The changes in the fair value of these contracts are recorded in other expense, net on the consolidated statements of comprehensive income. As of December 31, 2025 and 2024, we had foreign currency forward contracts with total notional values of $ 2.5 billion and $ 2.2 billion, respectively, which were not designated as hedging instruments. The gross fair value of these foreign currency forward contracts was immaterial as of December 31, 2025 and 2024. The gains recognized for foreign currency forward contracts from derivatives not designated as hedging instruments in other expense, net of $ 97 million, primarily offset the remeasurement losses of the related foreign currency denominated assets and liabilities of $ 113 million for the year ended December 31, 2025. The gains (losses) recognized for foreign currency forward contracts from derivatives not designated as hedging instruments were immaterial for the years ended December 31, 2024 and 2023. Realized gains (losses) from settlement of the derivative assets and liabilities are classified as investing activities in the consolidated statements of cash flows.
All foreign currency forward contracts, both designated and not designated as hedging instruments, are classified within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments in active markets, such as currency spot and forward rates.
(9) Supply Chain Finance Program
Our supply chain finance (“SCF”) program provides suppliers with the opportunity to sell their receivables due from us to a global financial institution acting as our paying agent. A supplier’s election to receive early payment at a discounted amount from the financial institution does not change the amount that we must remit to the financial institution on our payment date, which is generally 90 days from the invoice date. Participating suppliers negotiate their sales of receivables directly with the financial institution at their sole discretion and we have no economic interest in a supplier’s decision to participate in the SCF program. We do not have pledged assets or other guarantees under our SCF program. These obligations are included in accounts payable in our consolidated balance sheets and all activity related to these obligations is presented within operating activities in our consolidated statements of cash flows.
The summary of our outstanding payment obligations under the SCF program is as follows (in millions):
Year Ended December 31, 2025
Obligations outstanding at the beginning of the year
Invoices added during the year
Invoices paid during the year
Obligations outstanding at the end of the year
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(10) Deferred Revenue and Performance Obligations
Revenues recognized from beginning period deferred revenue during the years ended December 31, 2025 and 2024 were $ 6.9 billion and $ 5.7 billion, respectively.
Remaining Performance Obligations
Transaction price allocated to remaining performance obligations (“RPO”) represents contracted revenue that has not yet been recognized, which includes deferred revenue and non-cancellable amounts that will be invoiced and recognized as revenues in future periods. RPO excludes contracts that are billed in arrears, such as certain time and materials contracts, as we apply the “right to invoice” practical expedient under relevant accounting guidance.
As of December 31, 2025, the total non-cancellable RPO under our contracts with customers was $ 28.2 billion, and we expect to recognize revenues on approximately 46 % of these RPO over the following 12 months. The majority of the non-current RPO will be recognized over the next 13 to 36 months.
(11) Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following (in millions):
December 31,
Accrued payroll
Taxes payable
Other employee-related liabilities
Other
Total accrued expenses and other current liabilities
(12) Debt
For the periods ended December 31, 2025 and 2024, the carrying value of our outstanding debt was $ 1,491 million and $ 1,489 million, respectively, net of unamortized debt discount and issuance costs of $ 9 million and $ 11 million, respectively.
We consider the fair value of the 2030 Notes at December 31, 2025 and 2024 to be a Level 2 measurement. The estimated fair value of the 2030 Notes based on the closing trading price per $100, was $ 1,324 million and $ 1,247 million at December 31, 2025 and 2024, respectively.
2030 Notes
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 2030 Notes were issued at 99.63 % of principal and we incurred $ 13 million for debt issuance costs. The effective interest rate for the 2030 Notes was 1.53 % and included interest payable, amortization of debt issuance cost and amortization of debt discount. 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 are unsecured obligations and the indentures governing the 2030 Notes contain customary events of default and covenants that, among others and subject to exceptions, restrict our ability to incur or guarantee debt secured by liens on specified assets or enter into sale and lease-back transactions with respect to specified properties.
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(13) Accumulated Other Comprehensive Income (Loss)
The following tables show the components of accumulated other comprehensive income (loss), net of tax, in the stockholders’ equity section of our consolidated balance sheets (in millions):
Unrealized Gains
(Losses) on
Derivative
Instruments
Unrealized Gains
(Losses) on
Marketable
Securities
Foreign Currency
Translation
Adjustment
Total
Balance as of December 31, 2024
Other comprehensive (loss) income before reclassifications
Amounts reclassified from accumulated other comprehensive loss
Net current period other comprehensive (loss) income
Balance as of December 31, 2025
Unrealized Gains
(Losses) on
Derivative
Instruments
Unrealized Gains
(Losses) on
Marketable
Securities
Foreign Currency
Translation
Adjustment
Total
Balance as of December 31, 2023
Other comprehensive income (loss) before reclassifications
Amounts reclassified from accumulated other comprehensive loss
Net current period other comprehensive income (loss)
Balance as of December 31, 2024
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(14) Stockholders' Equity
Common Stock
We are authorized to issue a total of 3.0 billion shares of common stock as of December 31, 2025. Holders of our common stock are not entitled to receive dividends unless declared by our board of directors. As of December 31, 2025, we had 1,047 million shares of common stock, net of treasury stock, outstanding and had reserved shares of common stock for future issuance as follows (in thousands):
December 31, 2025
Stock plans:
Options outstanding
RSUs (1)
Shares of common stock available for future grants:
Amended and Restated 2021 Equity Incentive Plan (2)
Amended and Restated 2012 Employee Stock Purchase Plan (2)
Total shares of common stock reserved for future issuance
(1) Represents the number of shares issuable upon settlement of outstanding restricted stock units (“RSUs”) and performance-based RSUs (“PRSUs”), as discussed in Note 15 “Equity Awards”.
(2) Refer to Note 15 “Equity Awards” for a description of these plans.
During the years ended December 31, 2025 and 2024, we issued a total of 11.9 million and 12.8 million shares, respectively, from stock option exercises, vesting of RSUs, net of employee payroll taxes, and purchases from the employee stock purchase plan (“ESPP”).
Treasury Stock
In May 2023, our board of directors authorized a program to repurchase up to $ 1.5 billion of our common stock (the “Share Repurchase Program”). In January 2025, our board of directors authorized an additional $ 3.0 billion in repurchases under the Share Repurchase Program. Under the program, we may repurchase our common stock from time to time through open market purchases, accelerated share repurchase transactions, privately negotiated transactions, or by other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, in accordance with applicable securities laws and other restrictions. The Share Repurchase Program does not have a fixed expiration date, may be suspended or discontinued at any time, and does not obligate us to acquire any amount of common stock. The timing, manner, price, and amount of any repurchases will be determined by us at our discretion and will depend on a variety of factors, including business, economic and market conditions, prevailing stock prices, corporate and regulatory requirements, and other considerations.
During the years ended December 31, 2025 and 2024, the Company repurchased approximately 10.3 million and 4.0 million shares of its common stock for $ 1.8 billion and $ 696 million, respectively. All repurchases were made in open market transactions. Repurchases of common stock are recognized as treasury stock and held for future issuance. As of December 31, 2025, approximately $ 1.4 billion of the authorized amount under the Share Repurchase Program remained available for future repurchases. In January 2026, our board of directors authorized an additional $ 5.0 billion in repurchases under the Share Repurchase Program.
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Preferred Stock
Our board of directors has the authority, without further action by stockholders, to issue up to 10 million shares of preferred stock in one or more series. Our board of directors may designate the rights, preferences, privileges and restrictions of the preferred stock, including dividend rights, conversion rights, voting rights, terms of redemption, liquidation preference and number of shares constituting any series or the designation of any series. The issuance of preferred stock could have the effect of restricting dividends on our common stock, diluting the voting power of our common stock, impairing the liquidation rights of our common stock or delaying or preventing a change in control. As of December 31, 2025 and 2024, no shares of preferred stock were outstanding.
(15) Equity Awards
We have three equity incentive plans: 2012 Equity Incentive Plan (the “2012 Plan”), amended and restated 2021 Equity Incentive Plan (the “2021 Plan”) and 2022 New-Hire Equity Incentive Plan (the “2022 Plan”). The 2012 Plan was terminated in connection with the initial approval of the 2021 Plan on June 7, 2021 but continues to govern the terms of outstanding equity awards that were granted prior to the termination of the 2012 Plan. As of June 7, 2021, we no longer grant equity awards pursuant to the 2012 Plan. The 2021 Plan, as amended and restated, was approved by the shareholders on June 1, 2023 to increase shares available for future grants by approximately 50 million shares. Upon effectiveness of the 2021 Plan, as amended and restated, the 2022 Plan was terminated, and no additional awards under the 2022 Plan have been made since the amendment and restatement of the 2021 Plan. Outstanding equity awards under the 2022 Plan continue to be subject to the terms and conditions of the 2022 Plan.
The 2021 Plan and the 2012 Plan provide for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, RSUs, performance-based stock awards and other forms of equity compensation (collectively, “equity awards”). The 2022 Plan permits the grant of any of the foregoing awards with the exception of incentive stock options. In addition, the 2022 Plan, the 2021 Plan and the 2012 Plan provide for the grant of performance cash awards. Incentive stock options may be granted only to employees. All other equity awards may be granted to employees, including officers, as well as directors and consultants.
Our Amended and Restated 2012 Employee Stock Purchase Plan (the “2012 ESPP”) authorizes the issuance of shares of common stock pursuant to purchase rights granted to our employees. The price at which common stock is purchased under the 2012 ESPP is equal to 85 % of the fair market value of our common stock on the first or last day of the offering period, whichever is lower. Offering periods are six months long and begin on February 1 and August 1 of each year. The number of shares of common stock reserved for issuance will not be increased without shareholder approval.
Stock Options
Stock options are exercisable at a price equal to the market value of the underlying shares of common stock on the date of the grant as determined by the closing price of our common stock as reported on the New York Stock Exchange on the date of grant. Stock options granted under the 2012 Plan to new employees generally vest 25 % one year from the date the requisite service period begins and continue to vest monthly for each month of continued employment over the remaining three years . Options granted generally are exercisable for a period of up to ten years contingent on each holder’s continuous status as a service provider.
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A summary of stock option activity for the year ended December 31, 2025 was as follows:
Number of
Shares
(in thousands)
Weighted-
Average
Exercise
Price Per
Share
Weighted-
Average
Remaining
Contractual
Term
(in years)
Aggregate
Intrinsic
Value
(in millions)
Outstanding as of December 31, 2024
Granted (1)
Exercised
Forfeited
Outstanding as of December 31, 2025
Vested and expected to vest as of December 31, 2025
Vested and exercisable as of December 31, 2025
(1) Relates to stock options assumed in business combinations.
Aggregate intrinsic value represents the difference between the estimated fair value of our common stock and the exercise price of outstanding, in-the-money options. The total intrinsic value for stock options exercised for the years ended December 31, 2025, 2024 and 2023, was $ 12 million, $ 35 million and $ 15 million, respectively.
The total fair value of shares vested was $ 26 million, $ 98 million and $ 7 million for the years ended December 31, 2025, 2024 and 2023, respectively. The weighted-average grant-date fair value of stock options granted was $ 133.64 for the year ended December 31, 2025. No stock options were granted during the years ended December 31, 2024 and 2023.
During the year ended December 31, 2021, a one-time long-term performance-based option award was granted to the Chief Executive Officer (“2021 CEO Performance Award”) and to certain executives (collectively “2021 Performance Awards”) under the 2021 Plan at a total grant date fair value of $ 232 million. The 2021 Performance Awards will vest in eight equal tranches based on service and achievement of both performance and market conditions, subject to continued employment and specifically for the 2021 CEO Performance Award, as CEO or Executive Chairman of the Company, through each vesting date. The performance and market conditions for a particular tranche may be achieved at different points in time and in any order but will become eligible to vest only when all service, performance and market conditions for the respective tranche are met but no earlier than two years from date of grant. The performance and market conditions must be achieved by September 30, 2026 (the “Performance Period”). The stock price metric will be achieved when both the 180-day volume weighted-average price (“VWAP”) and the 30-day VWAP equal or exceed the respective tranche stock price metric on any day during the Performance Period. The performance metric is achieved when the trailing four-quarter cumulative GAAP subscription revenues equal or exceed the respective tranche performance target. Shares acquired upon exercise of the options cannot be sold, transferred or disposed until after the end of the Performance Period and the 2021 Performance Awards will expire ten years from the respective date of grant. As of December 31, 2025, the first four tranches were vested based on of both the performance and market conditions.
The fair value of the 2021 Performance Awards and the corresponding derived service periods were estimated using the Monte Carlo simulation. Stock-based compensation expense is recognized on a graded vesting basis over the requisite service period for each respective tranche, but not shorter than the two-year minimum service period, and includes an assessment of when it is probable the performance condition will be achieved, which involves a subjective assessment of our future financial projections.
As of December 31, 2025, total unrecognized compensation cost, adjusted for estimated forfeitures, related to unvested stock options was approximately $ 47 million. The weighted-average remaining vesting period of unvested stock options as of December 31, 2025 was approximately two years .
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RSUs
A summary of RSU activity for the year ended December 31, 2025 was as follows:
Number of
Shares
Weighted-
Average
Grant-Date
Fair Value Per
Share
(in thousands)
Outstanding as of December 31, 2024
Granted
Vested
Forfeited
Outstanding as of December 31, 2025
Expected to vest as of December 31, 2025
RSUs outstanding as of December 31, 2025 were comprised of 24.3 million RSUs with only service conditions and 1.7 million RSUs with both service and performance conditions, including certain RSUs with additional market conditions. The total intrinsic value of the RSUs vested was $ 2.6 billion, $ 2.4 billion and $ 1.6 billion for the years ended December 31, 2025, 2024 and 2023, respectively. As of December 31, 2025, the aggregate intrinsic value of RSUs outstanding was $ 4.0 billion and RSUs expected to vest was $ 3.6 billion. The weighted-average grant- date fair value of RSUs granted was $ 190.71 , $ 158.23 and $ 95.84 per share for the years ended December 31, 2025, 2024 and 2023, respectively.
PRSUs have service, performance and market vesting conditions. The ultimate number of shares eligible to vest range from 0 % to 200 %, subject to our board of directors compensation committee’s approval of performance metrics achievement and, for certain PRSUs, total shareholder return relative to that of the S&P 500 index. The eligible shares subject to PRSUs granted during the year ended December 31, 2025 will vest in one to three years contingent on each holder’s continuous status as an employee on the applicable vesting dates. The number of PRSUs granted included in the table above reflects the shares that could be eligible to vest at 100 % of target for PRSUs and includes adjustments for over or under achievement for PRSUs granted in the prior year.
We recognized $ 149 million, $ 147 million and $ 145 million of stock-based compensation expense, net of actual and estimated forfeitures, associated with PRSUs on a graded vesting basis during the years ended December 31, 2025, 2024 and 2023, respectively.
As of December 31, 2025, total unrecognized compensation cost, adjusted for estimated forfeitures, related to unvested RSUs was $ 3.2 billion and the weighted-average remaining vesting period was approximately three years .
Total stock-based compensation expense for the years ended December 31, 2025, 2024 and 2023 was $ 1,955 million, $ 1,746 million and $ 1,604 million, respectively. For the years ended December 31, 2025, 2024 and 2023, we recorded $ 365 million, $ 340 million and $ 296 million, respectively, of tax benefits on total stock-based compensation expense, which are reflected in the provision for (benefit from) income taxes in the consolidated statements of comprehensive income.
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Valuation Assumptions
The following assumptions were used in the Black-Scholes options pricing model and the Monte Carlo simulation model, to estimate our stock-based compensation on the date of grant for ESPP, stock options and PRSUs, respectively, as applicable.
Year Ended December 31,
Risk-Free Interest Rate
ESPP
Stock Options
PRSU
Expected Term (in years)
ESPP
Stock Options
Expected Volatility
ESPP
Stock Options
PRSU
* There were no stock option grants in 2024 and 2023.
Expected volatility. The expected volatility is based on the historical volatility of our common stock for a period similar to our expected term.
Expected term. We determine the expected term based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior. We estimate the expected term for ESPP using the purchase period.
Risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for the expected term of the stock-based award.
Expected dividend yield. Our expected dividend yield is zero , as we have not and do not currently intend to declare dividends in the foreseeable future.
(16) Net Income Per Share
Basic net income per share attributable to common stockholders is computed by dividing net income attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net income per share is computed by dividing net income attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, adjusted for the effects of dilutive shares of common stock, which are comprised of outstanding stock options, RSUs and ESPP obligations. Stock awards with performance or market conditions are included in dilutive shares to the extent all conditions are met. The potentially dilutive shares of common stock are computed using the treasury stock method or the as-if converted method, as applicable. The effects of outstanding stock options, RSUs and ESPP obligations are excluded from the computation of diluted net income per share in periods in which the effect would be antidilutive.
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The following table presents the calculation of basic and diluted net income per share attributable to common stockholders, as adjusted to give effect to the Stock Split (in millions, except for number of shares reflected in thousands and per share data):
Year Ended December 31,
Numerator:
Net income
Denominator:
Weighted-average shares outstanding - basic
Weighted-average effect of potentially dilutive securities:
Common stock options, RSUs and ESPP obligations
Weighted-average shares outstanding - diluted
Net income per share - basic
Net income per share - diluted
Common stock options, RSUs and ESPP obligations excluded from diluted net income per share because their effect would have been anti-dilutive
(17) Provision for (Benefit from) Income Taxes
The components of income before income taxes by U.S. and foreign jurisdictions were as follows (in millions):
Year Ended December 31,
United States
Foreign
Total
The provision for (benefit from) income taxes consists of the following (in millions):
Year Ended December 31,
Current provision:
Federal
State
Foreign
Deferred provision:
Federal
State
Foreign
Provision for (benefit from) income taxes
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The effective income tax rate differs from the federal statutory income tax rate applied to the income before income taxes due to the following (in millions):
Year Ended December 31,
U.S. federal statutory tax rate
State and local income tax, net of federal benefit (1)
Foreign tax effects
Ireland
Statutory tax rate difference between Ireland and United States
Other
Brazil
Withholding
Other
Other foreign jurisdictions
Effect of cross-border tax laws
Global intangible low-taxed income
Other
Research and development tax credits
Changes in valuation allowances
Nontaxable or nondeductible items
Stock-based compensation
Officer’s compensation
Other
Change in unrecognized tax benefits
Acquisition-related effects
Other
Provision for (benefit from) income taxes
(1) The states that contribute to the majority (greater than 50%) of the tax effect in this category include Illinois, New Jersey, Virginia, Minnesota, and New York for 2025; Virginia, New York, Illinois, Minnesota, and Georgia for 2024; and Illinois, Virginia, Minnesota, and Pennsylvania for 2023.
Significant components of our deferred tax assets are shown below (in millions). A valuation allowance has been recognized to offset our deferred tax assets, as necessary, by the amount of any tax benefits that, based on evidence, are not expected to be realized.
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December 31,
Deferred tax assets:
Net operating loss carryforwards
Credit carryforwards
Lease liability
Capitalized research and development
Depreciation and amortization
Accrued expenses
Other
Total deferred tax assets
Less: valuation allowance
Deferred tax liabilities:
Right of use asset
Depreciation and amortization
Other
Net deferred tax assets
As of December 31, 2025, the Company does not expect to incur material additional income taxes upon the distribution of earnings from its foreign subsidiaries. While the Company intends to repatriate these foreign earnings, there may be local withholding taxes due to various foreign countries and/or U.S. state taxes payable upon distribution of certain lower-tier earnings. The estimated impact of these foreign withholding taxes, after considering available U.S. foreign tax credits, and state taxes is currently immaterial to the Company’s consolidated financial statements.
As of December 31, 2025, we had U.S. federal net operating loss and federal tax credit carryforwards of $ 578 million and $ 341 million, respectively, as reported on our tax returns. The federal tax credits will begin to expire in 2041 if not utilized. In addition, as of December 31, 2025, we had state net operating loss and state tax credit carryforwards of approximately $ 1.0 billion and $ 354 million, respectively, as reported on our tax returns. The state net operating loss will begin to expire in 2033 if not utilized. State tax credits and a portion of the federal net operating loss carryforwards can be carried forward indefinitely. Utilization of our net operating loss and credit carryforwards may be subject to annual limitation due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. Such an annual limitation could result in the expiration of the net operating loss and tax credit carryforwards before utilization.
As of December 31, 2025, we had Canada net operating loss and tax credit carryforwards of $ 161 million and $ 14 million, respectively, as reported on our tax returns. The Canada net operating loss and tax credits will begin to expire in 2039 and 2037, respectively, if not utilized. In addition, as of December 31, 2025, we had United Kingdom net operating loss carryforwards of $ 162 million, as reported on our tax returns. The United Kingdom net operating loss can be carried forward indefinitely.
The increase in the 2025 valuation allowance of $ 21 million was primarily attributable to California tax credit generation.
The increase in the 2024 valuation allowance of $ 24 million was primarily attributable to California tax credit generation. The decrease in the 2023 valuation allowance of $ 1.03 billion was primarily attributable to the $ 1.05 billion release of certain U.S. federal and state valuation allowances offset by approximately a $ 20 million increase in the California valuation allowance.
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The income tax benefit was $ 723 million for the year ended December 31, 2023. The income tax benefit was primarily attributable to the release of the valuation allowance of certain U.S. federal and state deferred tax assets. We regularly assess the need for a valuation allowance against our deferred tax assets. In making that assessment, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more likely than not that some or all of the deferred tax assets will not be realized. As of June 30, 2023, we achieved cumulative U.S. income during the prior twelve quarters when considering pre-tax income adjusted for permanent differences and other comprehensive losses. Based on all available positive and negative evidence, having demonstrated sustained profitability which is objective and verifiable, and taking into account anticipated future earnings, we concluded it is more likely than not that our U.S. federal and state deferred tax assets will be realizable, with the exception of California. We released $ 1.05 billion of our valuation allowance during the year ended December 31, 2023. As of December 31, 2025 and 2024, we maintained a valuation allowance of $ 241 million and $ 220 million, respectively, our California deferred tax assets due to the uncertainty regarding realizability of these deferred tax assets as they have not met the “more likely than not” realization criteria, particularly as we expect research and development tax credit generation to exceed our ability to use the credits in future years. We will continue to monitor the need for a valuation allowance our deferred tax assets on a quarterly basis.
A reconciliation of the beginning and ending balance of total unrecognized tax benefits is as follows (in millions):
Year Ended December 31,
Balance at the beginning of the period
Tax positions taken in prior period:
Gross increases
Gross decreases
Tax positions taken in current period:
Gross increases
Settlements
Balance at the end of the period
As of December 31, 2025, we had gross unrecognized tax benefits of approximately $ 404 million, of which $ 304 million would impact the effective tax rate, if recognized. We recognize accrued interest and penalties related to unrecognized tax benefits as income tax expense. Accrued interest and penalties included in our liability related to unrecognized tax benefits were $ 17 million and $ 9 million as of December 31, 2025 and 2024, respectively. The amount of unrecognized tax benefits could be reduced upon expiration of the applicable statutes of limitations. Interest and penalties accrued on these uncertain tax positions are recognized as income tax expense and will be released upon the expiration of the statutes of limitations. These amounts are also not material for any periods presented. Further, $ 114 million and $ 68 million of unrecognized tax benefits have been recorded as liabilities as of December 31, 2025 and 2024, respectively.
We are subject to taxation in the United States and foreign jurisdictions. As of December 31, 2025, our tax years 2004 to 2025 remain subject to examination in most jurisdictions.
Due to differing interpretations of tax laws and regulations, tax authorities may dispute our tax filing positions. We periodically evaluate our exposures associated with our tax filing positions and believe that adequate amounts have been reserved for adjustments that may result from tax examinations.
On July 4, 2025, H.R. 1, the "One Big Beautiful Bill Act," was enacted into law, bringing significant amendments to the U.S. tax code. This legislation extends and modifies provisions from the 2017 Tax Cuts and Jobs Act and introduces new tax measures affecting both businesses and individuals. The enacted legislation had an immaterial impact on the Company’s effective tax rate for the year ended December 31, 2025.
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(18) Commitments and Contingencies
Operating Leases
For some of our offices and data centers, we have entered into non-cancellable operating lease agreements with various expiration dates through 2036. Certain lease agreements include options to renew or terminate the lease, which are not reasonably certain to be exercised and therefore are not factored into our determination of lease payments.
Total operating lease costs were $ 147 million, $ 130 million and $ 129 million for each of the years ended December 31, 2025, 2024 and 2023, respectively.
For the years ended December 31, 2025 and 2024, total cash paid for amounts included in the measurement of operating lease liabilities was $ 107 million and $ 85 million, respectively. Operating lease liabilities arising from obtaining operating right-of-use assets totaled $ 225 million and $ 84 million for the years ended December 31, 2025 and 2024, respectively.
As of December 31, 2025, the weighted-average remaining lease term is approximately eight years , and the weighted-average discount rate is 4 %.
Maturities of operating lease liabilities as of December 31, 2025 are presented in the table below (in millions):
Fiscal Period:
Thereafter
Total operating lease payments
Less: imputed interest
Present value of operating lease liabilities
In addition to the amounts above, as of December 31, 2025, we have leases, primarily for offices, that have not yet commenced with minimum undiscounted cash flows of $ 381 million. These leases are expected to commence between 2026 and 2027 with lease terms of five to sixteen years .
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Other Commitments
Other contractual commitments primarily consist of data center and IT operations, cloud services and sales and marketing activities related to our daily business operations. Future minimum payments under our non-cancellable purchase commitments as of December 31, 2025 are presented in the table below (in millions):
Fiscal Period:
Cloud Services
Obligations
Other Purchase
Obligations
Total Purchase
Obligations
Thereafter
Total
We have entered into various non-cancellable agreements with cloud service providers, under which we have committed to spend an aggregate of approximately $ 4.8 billion through 2030 on cloud services. In addition, we have entered into a non-cancellable agreement with an information technology equipment provider, under which we have committed to spend $ 1.9 billion through 2028 on capital expenditures to expand our data centers. The unutilized amounts are included within the table above.
In addition to the amounts above, the repayment of our 2030 Notes with an aggregate principal amount of $ 1.5 billion is due on September 1, 2030. Refer to Note 12 “Debt” for further information regarding our 2030 Notes.
Legal Proceedings
We are party to certain litigation and other legal proceedings. While legal proceedings are inherently unpredictable and subject to uncertainties, we do not believe the ultimate resolution of any such proceedings is likely to result in a material loss. We accrue for loss contingencies when it is both probable that we will incur the loss and when we can reasonably estimate the amount of the loss or range of loss.
Other
As previously disclosed, through its internal processes, the Company received a complaint that raised potential compliance issues related to one of its government contracts. The Company initiated an internal investigation, with the assistance of outside legal counsel, into the validity of these claims that concern the hiring of the Chief Information Officer of the U.S. Army as the Company’s Head of Global Public Sector in March 2023. As a result of the investigation, the Company’s board of directors determined that the Company’s President and Chief Operating Officer and the hired individual violated Company policy regarding a possible conflict relating to such individual’s hiring. On July 24, 2024, the Company and its President and Chief Operating Officer came to a mutual agreement that he would resign from all positions with the Company, effective immediately. The other individual also has departed the Company. The Company has informed the Department of Justice, the Department of Defense Office of Inspector General and the Army and Office of the and is continuing to cooperate with the Department of Justice, which has commenced its own and required the Company to deliver certain documents in connection with these matters. The Company cannot predict the timing, outcome or possible impact of the .
2025 Annual Report
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Indemnification Provisions
Our agreements include provisions indemnifying customers against intellectual property and other third-party claims. In addition, we have entered into indemnification agreements with our directors, executive officers and certain other officers that will require us, among other things, to indemnify them against certain liabilities that may arise as a result of their affiliation with us. We have not incurred any material costs as a result of such indemnification obligations and have not recorded any material liabilities related to such obligations in the consolidated financial statements.
(19) Segment and Geographic Information
Segment Information
Our chief operating decision maker (“CODM”), the Chief Executive Officer, manages the Company’s business activities as a single operating and reportable segment at the consolidated level. Accordingly, our CODM uses consolidated net income to measure segment profit or loss, allocate resources and assess performance. Further, the CODM reviews and utilizes functional expenses (cost of revenues, sales and marketing, research and development, and general and administrative) at the consolidated level to manage the Company’s operations. Other segment items included in consolidated net income are interest income, other expense, net and the provision for (benefit from) income taxes, which are reflected in the consolidated statements of comprehensive income.
Geographic Information
Revenues by geographic area, based on the location of our users, were as follows for the periods presented (in millions):
Year Ended December 31,
North America (1)
EMEA (2)
Asia Pacific and other
Total revenues
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Property and equipment, net by geographic area were as follows (in millions):
December 31,
Property and equipment, net:
North America (3)
EMEA (2)
Asia Pacific and other
Total property and equipment, net
(1) Revenues attributed to the United States were 94 % of North America revenues for each of the years ended December 31, 2025, 2024, and 2023.
(2) Europe, the Middle East and Africa (“EMEA”).
(3) Property and equipment, net attributed to the United States were 82 % and 79 % of property and equipment, net attributable to North America as of December 31, 2025 and 2024, respectively.
