ServiceNow’s CFO On The AI ‘Revolution,’ Government Shutdown Impact And Salesforce Competition

‘ServiceNow AI is embedded in how we work. Tasks that used to take 20 minutes now take seconds,’ says ServiceNow President and Chief Financial Officer Gina Mastantuono.

ServiceNow President and Chief Financial Officer Gina Mastantuono told CRN in an interview that concerns about an AI bubble are overblown.

“AI is real,” Mastantuono said in a wide-ranging interview Wednesday. “It’s not hype. It’s not a bubble, it’s a revolution. ServiceNow AI is embedded in how we work. Tasks that used to take 20 minutes now take seconds. Our engineers are using AI code generation to free up capacity for even more innovation. Our sellers have cut meeting prep time by 50 percent, giving them more time to spend with customers. That’s going to drive real value, more innovation, more time with customers.”

Mastantuono also talked about ServiceNow’s growing federal business, which is seeing only a temporary impact thanks to the government shutdown.

“The government is shut down, which means that signing new deals is put on hold for the moment,” she said. “Because of that, my guidance for Q4, I definitely put a bit more prudence into the guide as a result. But that is purely timing. At the end of the day, our demand remains stronger than ever, and this is just a timing issue.”

Mastantuono also answered questions about the growing competition with Salesforce and why ServiceNow decided now to do a five-for-one stock split. And she also discussed the company’s blockbuster third fiscal quarter 2025.

There’s a lot going on at ServiceNow. To learn more, read CRN’s entire conversation with Mastantuono, which has been lightly edited for clarity.

Talk a little about today’s third fiscal quarter 2025 financials.

The results show that ServiceNow continues to be one of the most durable, consistent and over-performing growth companies in the enterprise software industry. And in fact, we’re actually the only large enterprise software company to hit the Rule of 50-plus while delivering over 20 percent revenue growth every single year for the past decade. And I think our Q3 results are testament to this, with another across the board beat-and-raise. You have the numbers, but I’ll call out just a few that I’m super proud of. So top-line subscription revenue was 100 basis points above the high end of our guidance. Operating margin, 300 basis points above guidance. And free cash flow margin, 50 basis points year-over-year improvement. What this really demonstrates is that when you execute with discipline, quarter after quarter, and deliver real innovation, the results follow.

If I break it down a little bit below the numbers to a couple of areas that I think are important, AI-related net new ACV (annual contract value) exceeded expectations once again, led by momentum in both ServiceNow Now Assist and our AI Control Tower. In addition, we had RaptorDB Pro and Workflow Data Fabric, two big new growth areas, continue to gain momentum and deliver stronger than expected results. Really important, our U.S. fed business surpassed expectations. Q3 is always the biggest quarter for Fed. It’s their fiscal year end, and it was the largest Q3 in our history, growing more than 30 percent year-over-year. That was fueled by new agreements and large-scale modernization programs that we’re very excited about.

All of this really allowed us to increase our guidance across the board as well. … What the beat-and-raise quarter shows is that our business continues to show resiliency and scalability.

You mentioned the government business. How has the government shutdown impacted ServiceNow, or what impact do you see if it lasts for any length of time?

A couple things. AI is accelerating mission-critical outcomes across the government. And I think what Q3 demonstrated was that our federal business continues to outperform. It surpassed our expectations in the quarter, and it’s reinforcing that demand is strong, demand is resilient, and our strategy is resonating. And we’re helping government agencies operate like the best-run businesses in the world: fast, efficient, and accountable. I talked about the quarter growing over 30 percent. Our AI pilots are quickly converting into real deployments as agencies are able to realize net ROI in fast time to value. And so demand remains strong. And we saw really incredible results.

On the government shutdown specifically, government services are the heartbeat of our nation, and we are absolutely actively supporting our government customers in navigating the shutdown. The administration’s continued focus on cost efficiency and modernization aligns directly with our strengths. That said, the government is shut down, which means that signing new deals is put on hold for the moment. Because of that, my guidance for Q4, I definitely put a bit more prudence into the guide as a result. But that is purely timing. At the end of the day, our demand remains stronger than ever, and this is just a timing issue, but we want, we want it to be prudent because I just can’t forecast when they’re going to reopen. I wish I could.

AI concept. 3D render

ServiceNow talks a lot about AI. There’s a lot of talk about a possible bubble in investing in the AI business. What does ServiceNow see in terms of the potential for an AI bubble?

I’ll talk first about AI, and then I’ll answer your question about bubbles. One-hundred percent, the enterprise AI race is on, and ServiceNow is leading from a position of strength. Our platform is fueling growth, efficiency, and true measurable ROI for customers around the world. Our AI business is on pace to exceed half a billion dollars in ACV this year. Back in our investor day in May, I talked about a $1-billion goal for 2026 [for our AI business]. We’re well on track, and actually ahead of track. Our AI business is doing extremely well, and the reason for that is that customers are seeing real measurable results with the ServiceNow AI platform. We have incredible customers doing incredible things. We’re also proving impact inside our own business through our Now-on-Now initiatives. I like to say we drink our own champagne. We use our products internally. AI is driving $355 million in annualized value created through productivity gains, most of which I’ve been able to reinvest back into the business in growth areas to drive growth in the future. But I was also able to drive $100 million in projected cost savings hitting the bottom line in 2025 alone. So AI is not hype. It matters, but it matters only if AI drives real outcomes, and the ServiceNow AI platform makes that possible. And why? Because it turns intelligence and data into real results that customers can see and trust.

AI is real. It’s not hype. It’s not a bubble, it’s a revolution. ServiceNow AI is embedded in how we work. Tasks that used to take 20 minutes now take seconds. Our engineers are using AI code generation to free up capacity for even more innovation. Our sellers have cut meeting prep time by 50 percent, giving them more time to spend with customers. That’s going to drive real value, more innovation, more time with customers. And our customers are seeing the same impact. Nvidia uses ServiceNow AI to resolve issues in milliseconds. Starbucks is embedding our AI support centers to lift satisfaction. I talk about the $355 million in annualized value created through productivity gains. That’s durable impact, and not hype. And so I like to say it’s not a bubble, it’s a revolution. AI is going to change how work gets done in the enterprise, for sure. And you’re seeing that value created already.

There’s also a lot of talk about the high failure rate of AI pilot projects, with some reports saying up to 95 percent of AI projects fail. What does ServiceNow see?

I like to tell customers to come use ServiceNow, because our AI is not hype. It’s real and it’s driving customer impact every single day. And so that’s what I would say.

So how do customers get past those initial potential areas of failure?

Listen, I think the whole thing about technology evolution and technology revolution is to be OK with experimentation. Not every single idea is going to pan out as anticipated. You have to be able to fail fast and move on to something else. What we’re seeing is customers are leaning in pretty heavily on how AI is going to transform. And if you have 20 workflows that you can identify with the ServiceNow platform, and only 12 of them work, that’s real meaningful value for customers. And so what we’re talking with customers about is really leaning into experimentation and moving out of PoCs (proofs of concept) and into real implementation. And that’s what we’re seeing happen inside our customer base every single day.

ServiceNow has recently made investments in two companies. It unveiled an investment in Zaelab today, and in September unveiled an investment in Genesys. What’s the focus here?

We’re very excited about the investments that we’re making. Genesys is an investment that expands our partnership, and it’s all about bringing together the best customer experience and AI automation. Together, we’re helping our joint customers deliver faster, smarter, and more personal service from a customer service perspective. We’re really excited about how that’s going to help drive our CRM business and our customer service business.

Zaelab is a venture investment. It’s a small company that expands CRM and digital commerce capabilities for manufacturing and technology customers. That investment also adds 350 certified professionals to our partner ecosystem. That will add more feet on the street to help drive our sales. These are two partnerships that I’m very excited about.

What’s behind the five-for-one stock split ServiceNow’s unveiled today?

I’m very excited about it because I think it really truly reflects continued confidence in our growth trajectory and makes our shares more accessible for a broader base of investors. I think it’s a strong market signal of management’s confidence in the durability and the growth trajectory of the company, while at the same time it makes shares more accessible to a broader base of investors. Many investors still focus on stock price and perceived affordability, and as ServiceNow becomes more well known among consumers, we hope to increase the affordability from their perception. And then on the institutional side of things, some funds actually avoid high-priced stocks, and so this stock split could really make the stock more broadly accessible. You’ve seen the very large increase in share prices that we’ve had over the past three or four years. So the timing makes sense to bring share prices from over $900 to down something that, from a psychology perspective, is perceived as more affordable.

ServiceNow this year said it is investing heavily in CRM and going head-to-head versus Salesforce. At the same time, Salesforce is investing in ITSM (IT service management) to compete harder against ServiceNow. What’s the competitive environment between the two?

End-to-end customer experience transformation continues to build momentum. We’ve talked about our customer service business being more than $1.5 billion and continuing to grow, and the reason for that is customers, quite frankly, are rethinking of CRM, not as a system of record, but a system of action that really can help drive growth, loyalty, and trust. ServiceNow delivers, with AI, a faster, simpler, more autonomous outcome to the sales and building a service process. We’ve been talking about our investment in this space for a while. We made an acquisition earlier in the year, Logik.AI, which is AI-powered CPQ, or configure price quote. It’s arguably one of the most complex processes in the whole CRM larger workflow. We’re actually seeing acceleration from quote generation. Our CPQ offering reduces cycle time for sales teams, which really frees sellers up to focus on customer relationships because of multiple $1 million-plus CPQ deals in Q3.

Really, at the end of the day, we’re entering this market because our customers are pulling us here. They’re seeing our platform do remarkable things for them in IT and HR and employee [management], and they want that same level of experience on the customer side of things. And so I’m very excited about our continued trend in this space. We continue to invest here. But it’s nothing new. We’ve been investing in this space for years and years.

ServiceNow By The Numbers

For its third fiscal quarter 2025, which ended September 30, ServiceNow reported total revenue of $3.41 billion, up 21.8 percent over the $2.80 billion the company reported for its third fiscal quarter 2024.

This included subscription revenue of $3.30 billion, up from $2.72 billion, and professional services and other revenue of $108 million, up from $82 million.

ServiceNow also reported GAAP net income of $502 million or $2.40 per share, up from the $432 million or $2.09 per share it reported for the same period last year. On a non-GAAP basis, the company reported net income of $1.01 billion or $4.82 per share, up from last year’s $775 million or $3.72 per share.