NOW 10-Q filed 2026-07-23 | Key takeaways

M&A: ServiceNow closed two security-focused acquisitions in Q2 2026 — Armis Security Ltd. for approximately $7.6 billion cash on April 20, 2026 (adding $5.323B goodwill and $2.530B intangibles) and Veza Technologies for approximately $1.2 billion on March 2, 2026 — driving goodwill from $3.578B to $9.837B versus year-end 2025.

Revenue growth: Total revenues of $3.987 billion (+24% YoY) and subscription revenues of $3.877 billion (+25% YoY) in Q2 2026; H1 2026 total revenues reached $7.757 billion (+23%).

Margin and operating income pressure: Subscription gross profit percentage fell to 73% from 80% and GAAP operating income declined to $162 million (-55% YoY), reflecting third-party cloud services growth and incremental amortization of acquired intangibles.

Tax rate shock: Effective tax rate rose to 32% in Q2 2026 from 18% in Q2 2025 (31% for H1 2026 vs 18%), driven by stock-based compensation shortfalls partially offset by the release of a valuation allowance on certain California deferred tax assets.

Financing actions: ServiceNow issued $4.0 billion of senior unsecured notes across five tranches (May 2026 maturities 2028–2056), established a $3.0 billion unsecured revolving credit facility in April 2026 (no borrowings), had $2.1 billion of commercial paper outstanding at a 3.98% weighted-average rate, and repaid the $4.0 billion term loan originally drawn to fund Armis.

RPO and customer metrics: Remaining performance obligations of $29.0 billion (+21% YoY) with 46% expected to be recognized over the next 12 months; customers with ACV greater than $5 million grew to 658 from 533.

Customer concentration: One U.S. federal channel partner and systems integrator represented 13% of revenue for the three and six months ended June 30, 2026 (vs 11% in prior-year periods) and 12% of accounts receivable as of June 30, 2026.

ServiceNow closed the Armis Security Ltd. acquisition on April 20, 2026 for preliminary purchase price consideration of approximately $7.6 billion cash, adding $5.323B of goodwill, $2.530B of intangible assets (developed technology $1.95B at 5-6 year lives, customer relationships $473M, order backlog $54M, brand assets $53M), and $405M of deferred tax assets; the Veza Technologies acquisition (March 2, 2026) for approximately $1.2 billion was also closed with preliminary $826M of goodwill and $356M of intangible...

ServiceNow expanded its debt structure in April-May 2026: $4.0B senior unsecured term loan was drawn in April 2026 and repaid in May 2026; $4.0B aggregate principal of five-tranche senior unsecured notes issued in May 2026 (2028-2056 maturities, coupons 4.250%-6.300%); $3.0B unsecured revolving credit facility entered in April 2026 (no borrowings outstanding); $3.0B commercial paper program established in April 2026 ($2.1B outstanding at 3.98% weighted-average rate).

One U.S. federal channel partner and systems integrator represented 12% of accounts receivable as of June 30, 2026 and 13% of total revenues for each of the three and six months ended June 30, 2026 (vs 11% for prior-year periods).

Income tax provision of $140M (Q2 2026) and $344M (H1 2026) included stock-based compensation shortfalls partially offset by the release of a valuation allowance on certain California deferred tax assets; effective tax rate rose to 32% (Q2 2026) and 31% (H1 2026) from 18% in prior-year periods.

Business description now explicitly references that 'the combination of ServiceNow's Security Operations with Armis' cyber asset intelligence and Veza's identity governance capabilities delivers end-to-end visibility, risk controls, and automated responses across the enterprise.'

Q2 2026 added a 'Prior Period Reclassifications' note stating that 'certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications did not result in a restatement of prior period condensed consolidated financial statements.'