How NOW (ServiceNow) Makes Money in 2025: A Deep-Dive With Income Statement

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Understanding how a cloud-based enterprise software provider like NOW Income Statement Overview makes money is essential for investors and anyone interested in the business of enterprise SaaS solutions. In this post, we break down NOW's quarterly income statement (Q3 2025) using a Sankey chart to visualize the financial flows — what comes in, where it goes, and what's left as profit.

Quick NOW Overview

NOW Income Statement Overview operates a cloud-based platform that enables enterprises to automate digital workflows across IT, employee, and customer experiences. Revenue comes primarily from subscription-based software services, with a smaller portion from professional services and other offerings. The business is structured around two main segments: Subscription Revenue and Professional Services & Other Revenue.

Revenue Breakdown

• Total Revenue (Q3 2025): $3.41B (+21.8% YoY)
  • Subscription Revenue: $3.30B (96.8% of total)
  • Professional Services & Other Revenue: $108M (3.2% of total)
  • Growth is powered by expanding enterprise adoption of digital workflow solutions and strong renewal rates in subscription contracts.

Gross Profit and Margins

• Gross Profit: $2.63B (77.3% gross margin)
  • Cost of Revenue: $774M (+32.5% YoY)
  • NOW maintains robust margins due to its scalable cloud software model and high recurring revenue base.
• Most costs come from cloud infrastructure, customer support, and implementation services.

Operating Income and Expenses

• Operating Income: $572M (+36.8% YoY, 16.8% margin)
• Operating Expenses: $2.06B (+14.8% YoY)
  • R&D: $750M (+19.8% YoY, 22.0% of revenue) — Focused on platform innovation, AI/ML integration, and expanding workflow capabilities.
  • SG&A: $1.31B (+12.1% YoY, 38.5% of revenue) — Includes global sales force expansion, marketing, and administrative functions.
  • NOW continues to prioritize innovation and invest in growth while maintaining operational efficiency.

Net Income

• Pre-Tax Income: $694M (+34.5% YoY, 20.4% margin)
• Income Tax: $192M (27.7% effective tax rate)
• Net Income: $502M (+16.2% YoY, 14.7% net margin)
• NOW converts a significant portion of sales into profit due to its recurring revenue model and operational leverage.

What Drives NOW's Money Machine?

• Subscription Revenue: 96.8% of revenue, driven by multi-year enterprise contracts and high renewal rates.
• Platform Adoption: Over 90% of Fortune 500 companies use NOW’s platform, fueling consistent growth.
• R&D Investment: $750M in Q3 2025, targeting AI-driven workflow automation and new product modules.
• Emerging Growth Areas: Expansion into industry-specific solutions and AI-powered workflow automation, though these are not yet major profit contributors.

Visualizing NOW's Financial Flows

The Sankey chart below visualizes how each dollar flows from gross revenue, through costs and expenses, down to net income. This helps investors spot where value is created, what areas weigh on profits, and how efficiently the company operates.

• Most revenue flows into gross profit, with operating expenses (especially SG&A) taking the largest chunk.
• Even after heavy R&D and SG&A investments, 14.7% of revenue drops to the bottom line.

Key Takeaways

• NOW's money comes overwhelmingly from subscription-based software revenue
• High gross and net margins illustrate the power of NOW's scalable SaaS business model
• Heavy investment in R&D, balanced by efficiency in operating costs
• Ongoing growth is driven by enterprise digital transformation and workflow automation adoption

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FAQ About NOW's Income Statement

1. What is the main source of NOW's revenue in 2025?

NOW generates over 96% of its revenue from subscription-based software services. Professional services and other revenue account for just over 3% of the total.

2. How profitable is NOW in Q3 2025?

NOW reported net income of $502M in Q3 2025, with a net margin of approximately 14.7%, reflecting strong profitability driven by recurring revenue and operational leverage.

3. What are the largest expense categories for NOW?

The biggest expenses on NOW's income statement are operating expenses, particularly Research & Development (R&D) at $750M and Sales, General & Administrative (SG&A) at $1.31B in Q3 2025, as NOW prioritizes platform innovation and global sales expansion.

4. Why does Professional Services & Other Revenue operate at a loss?

Professional Services & Other Revenue, despite generating $108M in revenue, posted an operating loss in Q3 2025. This is because NOW aggressively invests in customer onboarding and implementation services, believing these will drive long-term subscription growth—even if the division is unprofitable today.

5. How does NOW's effective tax rate compare to previous years?

NOW's effective tax rate in Q3 2025 was 27.7%, consistent with previous years. This moderate rate is primarily due to international structuring and tax benefits from share-based compensation.