NOW, Servicenow, Inc.
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.
Read top to bottom, the owner's questions in the order an owner asks them: what the business is, whether the record holds, whether it survives and is any good, and what you would be paying. New to the questions? Start with the Method.
The business in brief
read the 10-K →What this business is and what moves its needle, read from the numbers in its filings. The quantitative detail is in the sections below; the verdict is left to you.
- What it is
- Revenue is Subscription (97%) and Technology Service (3%).
- Situation
- Cyclical. margins collapse repeatedly across the cycle, a single year misleads; look at normalized, through-cycle earnings and the balance sheet at the trough.
- What moves the needle
- Engagement and pricing power, not factories. What decides it: whether the gross margin holds as the business scales, how much of the profit is paid out to employees as stock, and whether revenue keeps compounding.
- Is it a good business?
- Return on capital has sat near the cost of capital (median 8%). The steadier read is owner earnings: roughly 30% of revenue reaches owners as cash, consistently. The cycle and the balance sheet decide this one, so weigh the worst year against the median, and read the 10-K.
Every line here is arithmetic from the company's own filings, not a model's opinion, and each figure appears in full in the sections below.
Where the money comes from
read the 10-K →Subscription is 97% of revenue, so this is largely a single-line business.
- Subscription97%$12.9B
- Technology Service3%$395M
From the segment footnote of the company's own 10-K. Shares are of total revenue; the profit bar shows each segment's share of segment operating profit, before unallocated corporate costs.
The record, 2016–2025
realized figures from each filing, no estimates| 2016’16 | 2017’17 | 2018’18 | 2019’19 | 2020’20 | 2021’21 | 2022’22 | 2023’23 | 2024’24 | 2025’25 | TTMTTMMar 2026 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| RevenueRevenue | $1.4B | $1.9B | $2.6B | $3.5B | $4.5B | $5.9B | $7.2B | $9.0B | $11.0B | $13.3B | $14.0B |
| Gross marginGross mgn | 71% | 74% | 76% | 77% | 78% | 77% | 78% | 79% | 79% | 78% | 77% |
| Operating marginOp. mgn | −27.5% | −3.4% | −1.6% | 1.2% | 4.4% | 4.4% | 4.9% | 8.5% | 12.4% | 13.7% | 13.4% |
| Net incomeNet inc. | ($414M) | ($117M) | ($27M) | $627M | $119M | $230M | $325M | $1.7B | $1.4B | $1.7B | $1.8B |
| EPS (diluted)EPS | $-0.50 | $-0.14 | $-0.03 | $0.63 | $0.12 | $0.22 | $0.32 | $1.68 | $1.37 | $1.67 | $1.69 |
| Owner earningsOwner earn. | $54M | $492M | $587M | $971M | $1.4B | $1.8B | $2.2B | $2.7B | $3.4B | $4.6B | $4.6B |
| Owner earnings marginOE mgn | 3.8% | 25.7% | 22.5% | 28.1% | 30.3% | 30.5% | 30.0% | 30.1% | 31.1% | 34.5% | 33.2% |
| ROICROIC | -216% | -97% | -6% | 3% | 14% | 12% | 8% | 13% | 15% | 15% | 13% |
| Cash & investmentsCash+inv | $1.2B | $2.2B | $566M | $776M | $1.7B | $1.7B | $1.5B | $1.9B | $2.3B | $3.7B | $4.1B |
| Net debt / (cash)Net debt | ($1.2B) | ($2.2B) | ($566M) | ($776M) | ($1.7B) | ($1.6B) | ($1.5B) | ($1.9B) | ($2.3B) | ($3.7B) | ($2.6B) |
| Book value / shareBVPS | $0.65 | $0.90 | $1.24 | $2.14 | $2.77 | $3.60 | $4.90 | $7.42 | $9.22 | $12.39 | $11.28 |
Owner’s Scorecard
Will it survive?
- Can it pay its interest? 67.6×ComfortableOperating income $1.8B ÷ interest expense $27M
Operating profit covers interest with the kind of margin Graham wanted for a defensive holding. Necessary, not sufficient, it says solvent, not cheap.
- Debt-freeNo interest-bearing debt reported
The business doesn't depend on lenders, the strongest position to negotiate, wait, or weather a bad year from.
- Debt, net of cash +$4.8BNet cash, debt-freeCash $3.7B + ST investments $1.1B − debt $0
Cash and short-term investments exceed every dollar of debt by $4.8B, on net the company owes nothing, and can act from strength when others can't. It also holds $391M in longer-dated marketable securities; counting those, it sits at net cash of $5.2B. Net debt is the leverage figure that matters; the gross ratio above ignores the cash already set against it. Strategic or illiquid investments aren't counted here.
- TightDSO 72 + DIO 0 − DPO 25 days
Days cash is tied up between paying suppliers and collecting from customers. Lower is better; a long cycle means growth itself eats cash. (Little or no inventory, a services / asset-light model, so the inventory leg is ~0.)
Is it a good business?
- HighNOPAT $1.4B ÷ invested capital $9.2B (debt + equity − cash)
The rate the business earns on the money tied up in it, Buffett's north star, because over time a stock tracks the ROIC beneath it. Above ~15% sustained hints at a moat; below ~8% the company may destroy value as it grows. Asset-light businesses (R&D expensed, little capital) read artificially high, pair this with Owner Earnings.
- Cash machineOwner Earnings $4.6B = operating cash $5.4B − capex $868M
What an owner could take out without starving the business. That's 34% of revenue. Treating stock comp as the real expense it is (less $2.0B of SBC) leaves $2.6B. Honest caveat: capex here blends maintenance and growth, so steady-state Owner Earnings may run higher (see capex vs. depreciation).
- Cash-backedCash from ops $5.4B ÷ net income $1.7B
How much of reported profit showed up as operating cash. Above 1× is reassuring; well below suggests earnings lean on accruals. One year is noisy, growth and working-capital swings distort it, and this is operating cash, not free cash. Watch the multi-year trend.
How is the cash used?
- Returns about halfDividends + buybacks $1.8B ÷ Owner Earnings $4.6B
Of $4.6B Owner Earnings, $1.8B (40%) went back to shareholders, $0 dividends, $1.8B buybacks. But the buybacks barely exceed stock issued to employees ($2.0B SBC), net of dilution, little was truly returned. Returning most of it signals a mature cash machine; reinvesting most could mean a long runway, or empire-building. The split doesn't say which; the return earned on it (see ROIC) does.
- Investing or harvesting? 1.18×MaintainingCapex $868M ÷ depreciation $738M
Descriptive, not a grade. Above ~1× means investing faster than assets wear out (growth, or, sustained for years, today's earnings carrying less depreciation than tomorrow's will). Below means spending less than it's wearing out (efficiency, or a melting asset base). The ratio won't tell you which; the filings will.
Durability & moat, 2016–2025
A moat is a high return that doesn’t fade, reinvested at high returns. Here is what the record says, judgments, not another chart of the numbers.
- Profitable years 7 of 10
Lost money in 3 year(s), look at what happened there before trusting the average.
- Return on capital ≥ 15% 0 of 3 yrs
A moat shows up as a high return on invested capital that holds year after year, not one good vintage.
- Operating margin −27% (FY2016) → 14% (FY2025)
Margins widened over the record, pricing power intact or improving.
- Reinvestment, incremental ROIC returns capital
The capital base barely grew: this business returns cash through dividends and buybacks rather than reinvesting. Judge it on the cash returned, not on compounding.
- Owner earnings growth +35%/yr
Free cash to owners grew about 35% a year over the record.
- Worst year 2016 · −27.5% op. margin
Operations went underwater in 2016, understand why before trusting the good years.
Solvent is not the same as cheap; growing is not the same as good. These are vital signs, not a verdict, the judgment is yours, and the filing is one click away.
How the cash was used, 2016–2025
Over the record, the business generated $22.7B of operating cash, and how management split it is, as Buffett insists, the job that matters most. Here it reads as a balanced allocator, splitting cash between the business, owners, and the balance sheet.
- Reinvested$4.5B · 20%
- Buybacks$3.1B · 14%
- Retained (debt / cash)$15.0B · 66%
It reinvested $4.5B (20%) back into the business and returned $3.1B (14%) to owners, $0 in dividends, $3.1B in buybacks.
Buybacks are gross of stock issued to employees; net of that, the real return to owners is lower (see Management & pay). And the mix alone doesn't grade management, what matters is the return earned on the dollars reinvested (see incremental ROIC in the durability report).
Management & pay
read the proxy →Two questions Buffett actually asks about pay: is stock compensation, a real expense, whatever the income statement pretends, quietly large, and is the top wildly out of line with the floor. He's no populist about it; he just wants pay that's rational and earned, and comp committees that aren't lapdogs.
- CEO pay ratio251:1
What the chief earns for every dollar the median employee makes, per the 2026 proxy. A high ratio isn't proof of anything, some businesses are genuinely top-heavy in scarce skill, but a runaway figure is where Buffett starts asking whether the board is doing its job or just keeping the chair company.
- Stock-based compensation$2.0B
The slice of the business handed to employees in shares this year, 15% of revenue, equal to 107% of operating profit. Buffett's oldest accounting fight: this is compensation, compensation is an expense, real whether or not the headline earnings admit it. And note the trap, the cash-flow statement adds SBC back, so the operating cash, and the owner earnings drawn from it, are flattered by exactly this amount; counted as the cost it is, what an owner keeps is lower.
Graham’s defensive-investor test
2 of 5 metGraham gave the defensive investor seven numerical criteria in The Intelligent Investor. Here they are, run mechanically on the filings, his framework, not our verdict. Meeting them is a floor of safety, not a reason to buy; missing one is no veto, since many fine modern businesses fail his strictest liquidity tests by design. The worth is in seeing exactly where a company stands against the canon, every number sourced.
- Adequate size PassRevenue ≥ $2B · $13.3B
Big enough to weather a storm. Graham's 1972 floor was ~$100M of sales (≈ $700M today); we use a $2B revenue line as a conservative modern stand-in.
- Strong liquidity MissCurrent ratio ≥ 2× · 1.00×
Current assets at least twice current liabilities, near-term bills covered without touching the business. Strict by design: many cash-rich modern firms run leaner and miss it, holding their cushion in longer-dated securities.
- Conservative debt PassDebt ≤ working capital · $0 vs $28M WC
Graham's rule that borrowings not exceed net current assets. Capital-heavy and buyback-heavy firms routinely fail it, read it next to interest coverage, not alone.
- Earnings stability MissA profit every year (10-yr record) · 3 loss years
Graham wanted earnings in each of the past ten years, the stability a defensive owner leans on.
- Dividend record MissUninterrupted dividends · none paid
An unbroken dividend was Graham's mark of durability. He wanted twenty years; the filings show about ten, and a single suspension breaks the streak. Non-payers, many fine modern compounders, fall outside his defensive net by design.
- Earnings growth —Earnings +33% over the record · —
Earnings were negative early in the record, a growth rate isn't meaningful.
- Moderate price —P/E ≤ 15 and P/E × P/B ≤ 22.5 · decided by the price
Graham's valuation gate, the wall he kept between a sound business and a sound investment. Earnings are $1.67/share and book value $12.39/share. Enter a price in “What the price implies” just below for the P/E, P/B, and whether it clears. But this is the rule Buffett outgrew: there's no hard P/E law, and a wonderful business can deserve a far richer multiple if the thesis holds, treat it as the bargain-hunter's floor, not a verdict on the price.
Graham would be the first to say a checklist is a starting point, not an answer. These are his defensive, bargain-hunter's tests, the cigar-butt lens. Buffett and Munger grew past it, paying fair prices for wonderful businesses; that lens lives in the moat and owner-earnings work above, and both still matter. Clearing Graham’s tests earns a closer look; failing them earns harder questions, not a dismissal.
What the price implies
reverse-DCFA price is the one input we don't pull, you bring it. Type today's close (read it off any broker or quote site) and see the owner-earnings growth you'd have to believe to justify it, set beside what Servicenow, Inc. has actually delivered. Nothing is stored; the number stays in your browser.
Enter a price above to run it.
Graham capped the multiple at 15×; Buffett and Munger let that rule go, a wonderful business can deserve 50× if the thesis holds. Read it as the bargain-hunter's floor, not a ceiling on good sense.
The discount rate is your interest rate, what a dollar years from now is worth today, anchored to the long-term Treasury yield (~4–5% today, plus whatever premium you want for risk). Drag it toward the risk-free rate and watch how much growth the price suddenly “needs”: interest rates are gravity on valuations.
Owner earnings $4.6B on 1040M diluted shares; net cash $2.6B. This is a lens, not a price target, it says what you'd have to believe, not what the company is worth, and it runs on one year of (noisy) owner earnings at assumptions you can see and change.
What the filing emphasizes, FY2025
read the 10-K →Each year a 10-K must name what could go wrong, in the company's own words. Here are the ones Graham and Buffett would stop on, each set against the figure from the same filings that bears on it, anchored to a period you can find in the record above. We point; the judgment is yours.
- Customer concentrationMD&A
Who the revenue leans on. When one buyer is a large slice of sales, that buyer holds the pricing power, and its troubles become the company's.
“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.”
From the recordRevenue exposed (TTM)$14.0B - Pricing power & competitionBusiness
Whether the company sets its price or takes it. Durable pricing power is the surest mark of a moat; price competition is the surest mark there isn't one.
“We operate in a highly competitive and rapidly evolving market characterized by fragmentation, low barriers to entry, shifting customer needs and frequent introductions of new products and services.”
From the recordOperating margin13.4% (TTM), near a 10-yr high - Concentrated dependenceBusiness
What the whole business leans on, a product, a platform, a partner. Concentration cuts both ways, and the filing is where management has to admit it.
“We do not consider our business to be materially dependent on any single patent or group of related patents.”
From the recordOwner-earnings margin at stake (TTM)33% - Debt terms & refinancingRisk Factors
The fine print behind the debt. Covenants and near-term maturities decide who is really in control when a year goes badly.
“We are required to comply with the covenants set forth in the indentures governing the 2030 Notes.”
From the recordBalance sheet (TTM)+$4.8B net cash, debt-free · interest covered 67.6× - Litigation & contingenciesRisk Factors
Claims an owner inherits. Most disclosure is boilerplate; this fires only on an actual matter, a named suit, a settlement, a contingency, a number.
“This disparity may increase the risk that our competitors or other third parties may sue us for patent infringement and may limit our ability to counterclaim for patent infringement or settle through patent cross- licenses.”
A judgment, not a number, weigh it against the filing yourself. - Cyclicality & demandRisk Factors
How the business behaves when the economy turns. A cyclical earns its keep across the whole cycle, not at the peak.
“The success of our activities is affected by general economic and market conditions, including, among others, inflation, interest rates, tax rates, foreign exchange rates, economic downturns, recession, economic uncertainty, political instability, warfare, changes in laws, trade barriers, supply cha…”
From the recordWorst year on record−27.5% operating margin (FY2016) - Regulation & policyBusiness
Rules that can rewrite the economics, tariffs, antitrust, data, export controls.
“Because our AI agents can access required information and understand the context of requests in a single environment, employees can complete their onboarding without contacting multiple departments.”
A judgment, not a number, weigh it against the filing yourself.
What changed, FY2025 vs FY2024
read the 10-K →Most of a 10-K is boilerplate carried over verbatim; the signal is in what's new. These lines appear this year and weren't there last, figure updates filtered out, so only the language shift remains.
- “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 o…”
- “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. 2025 Annual Report Part II Marketable Securities Marketable securities consist of commercial paper, corporate notes and b…”
- “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 t…”
- “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 Part II year e…”
- “Our strategy of migrating an increasing portion of Company hosted instances to these providers depends on our ability to adequately prepare our operations to facilitate the migration, our customers' willingness to use public cloud services to host their instances, and customer demand not materially …”
Classic text analysis over the filing itself, no model wrote a word of this, and every quote is the company's own.
Peers, Enterprise software
The same industry, side by side on owner economics, compare, don't rank by a single number.● marks best in the group.
| Company | Revenue | Gross margin | Op. margin | ROIC | Owner earn. margin |
|---|---|---|---|---|---|
| INTUIntuit Inc. | $18.8B | 99% | 26.1% | 17% | 33% |
| NOWServicenow, Inc. | $13.3B | 78% | 13.7% | 15% | 34% |
| WDAYWorkday, Inc. | $9.6B | 99% | 7.5% | 5% | 29% |
| SNPSSynopsys Inc | $7.1B | 77% | 13.0% | 2% | 19% |
| SNAPSnap Inc. | $5.9B | 55% | -9.0% | -9% | 7% |
| CDNSCadence Design Systems, Inc. | $5.3B | 99% | 28.2% | 44% | 30% |
| RBLXRoblox Corporation | $4.9B | 78% | -25.2% | -534% | 28% |
| CRWDCrowdstrike Holdings, Inc. | $4.8B | 75% | -6.1% | — | 27% |