NOW 10-K & 10-Q changes, risk factors and insider trading

•Risks Related to Our Ability to Grow Our Business

•A failure to innovate and adapt how we offer our products in response to rapidly evolving technological changes and in the midst of an intensely competitive market may harm our competitive position and business prospects.

•Our customer deals are becoming more complex, which tend to involve longer andlonger, more expensive sales cycles, increased pricing pressurepressure, and implementation and configuration challenges.

•Risks Related to the Operation of Our Business

•Delays in the release of, or actual or perceived defects in, our products may slow the adoption of our latest technologies, reduce our ability to efficiently provide services, decrease customer satisfaction,satisfaction and adversely impact future product sales.

•Delays in improving our information systems and processes could interfere with our ability to support our existing and growing customerbase of customers and employee baseemployees as we scale.

•We may not be able to protect or enforce our intellectual propertyIP rights.

•Various factors, including our customers’ business, integration, migration, compliance and security requirements,requirements or errors by us, our partners,partners or our customers, may cause implementations of our products to be delayed, inefficient or otherwise unsuccessful.

•Our failure or perceived failure to achieve our ESGcorporate sustainability goals or maintain ESGcorporate sustainability practices that meet evolving stakeholder expectations could adversely affect us.

•Risks Related to the Financial Performance or Financial Position of Our Business

•Because we generally recognize revenues from our subscription serviceservices over the subscription term, a decrease in new subscriptions or renewals may not be immediately reflected in our operating results.

•Risks Related to General Economic Conditions

•Risks Related to Ownership of Our Common Stock

Governments have adopted, and likely will continue to adopt, laws and regulations affecting the use, storage and movement of data, including laws related to data privacy and security, the use of machine learning and artificial intelligence (“AI”),AI, and data sovereignty or residency requirements. Changing laws, regulations and standards applying to the collection, storage, use, sharing, portability, transfer or other control or processing of data, including personal data, could affect our ability to efficiently and cost-effectively offer our services and to develop our products and services for maximum utility, as well as our customers’ ability to use data or share data. Such changes may restrict our ability to use, store or otherwise process customer data in connection with providing services and could alter or increase our compliance requirements. In some cases, this could impact our ability to offer our services in certain locations or our customers’ ability to deploy our services globally. For example, the EU Data Act has significant requirements regarding data portability, interoperability and accessibility and unclear data transfer restrictions, any of which could impact our operations. In addition, the relatively new Trans-Atlantic Data Privacy Framework, which facilitates the transfer of data between the United States (“U.S.”) and European Union (“EU”), may be subject to legal challenges and regulatory interpretations that could create uncertainties and impact our operations and compliance obligations.

We offer some region-specific services,services by whichwhere customer data is hosted locally and customers may elect to receive support from locally-based ServiceNow teams. Setting up and maintaining these region-specific services require significant investment, including to comply with applicable laws and regulations. Actual or perceived non-compliance with those lawslaws, andregulations, regulationsor couldthe terms of our region-specific service offerings may result in proceedingsinvestigations or investigationsproceedings against us by regulatory authorities or others, lead to significant fines,fines or damages, orders, litigation orlitigation, reputational harm and mayother otherwiseadverse adverselyimpacts impacton our business.

We will also need to continually adapt to customer privacy and security requirements as they change over time. For example, as customers increasingly adopt a hybrid (on-premises and off-premises/hyperscale cloud) approach for their IT workloads, our cloud services may fail to address evolving customer requirements, including data localization. Further, due to heightened concerns relating to privacy and security regulatory matters, our customers mayfrom time to time request certain certificationscertifications, and a failure to obtain,obtain or consistently maintain,maintain those certifications may adversely impact our reputation and business.

A failure to innovate and adapt how we offer our products in response to rapidly evolving technological changes and in the midst of an intensely competitive market may harm our competitive position and business prospects.

We compete in markets that evolve rapidly. The pace of innovation will continue to accelerate as customers recognize the advantages of acquiring leading digital technologies and adopting AI native solutions and modern cloud-based infrastructure. Cutting-edge capabilities such as AI, machine learning, hyper automation, low-code/no-code application development, system observability and predictive insights become increasingly relevant to the customer’s evolving needs. With this rapid evolution, we are increasingly competing with alternative solutions and approaches to solve customer needs, and we expect additional competition as we shift our products and services to compete with providers in new and adjacent markets.

Competitors, regardless of their size, may be able to respond more quickly and effectively to new or changing opportunities, technologies, standards, customer requirements and buying practices. They may introduce new technology, solve similar problems in different ways or more effectively utilize existing technology that reduces demand for our services. They may utilize acquisitions, integrations or consolidations to offer integrated or bundled products, enhanced functionality or other advantages. Some of our existing competitors and potential competitors are larger and have greater name recognition, the ability to more efficiently scale their business, more established operations and customer relationships,relationships and greater financial and technical resources than we do. “Systems of record” operators may attempt to create technology solutions or other mechanisms that would prevent our systems from integrating with theirs. They may create pricing pressures by reducing the price of competing products, services or subscriptions or bundling their offeringsofferings, causing our offerings to appear relatively more expensive. CompetitionCompanies fromwhose cloud-basedproducts are integrated with our Platform could also seek to compete with us by blocking, limiting or imposing fees on particular integrations or data access. Cloud-based and AI native vendors may increasebuild as they buildmore business applications or AI powered automation solutions that compete with our products and services. We may also encounter customer reluctance or unwillingness to migrate away from their current solutions.

•invest in and continually optimize our own technology platform so that we continue to meet the very high-performance expectations of our customers;

•successfully deliver and promote new, scalable technologies and productsproducts, such as AI, to meet customer needs and priorities;

Sales outside of North America represented 37% and 36% of our total revenues for each of the years ended December 31, 20242025 and 2023, respectively.2024. The growth of our business depends on our ability to increase our sales outside of the U.S. as a percentage of our total revenues. Additionally, operating in international markets requires significant investment and management attention and subjects us to varying regulatory, political and economic risks. We have made, and will continue to make, substantial investments in data centers, geographic-specific service delivery models, advisory councils, cloud computing infrastructure, sales, marketing, partnership arrangements, personnel and facilities in new geographic markets. When we make these investments, it is typically unclear when we will see a return on our investment, and we may significantly underestimate the level of investment and time required to be successful. Our rate of acquisition of new large enterprise customers, a factor affecting our growth, has been generally lower in territories where we are less established and where there may be heightened or evolving regulations and operational and IP risks. We have experienced,experienced and may continue to experience,experience difficulties in new geographic markets, including hiring qualified sales management personnel, penetrating the target market,market and managing local operations. Risks associated with making our products and services available in international markets include, for example:

•compliance with multiple, conflicting and changing governmental laws and regulations, including antitrust and competition regulations;

•potential changes in international trade policies, tariffs, agreements and practices, including the adoption and expansion of formal or informal trade restrictions or regulatory frameworks that may favor local competitorscompanies;

•governmental direction, business practices and/or cultural norms that may favor local competitorscompanies;

•more prevalent cybersecurity, intellectual propertyIP and AI risks; and

We are increasingly innovating and expanding offerings on our platform by integrating AI technology.technology into our customer-facing products and internal operations. We expectconsider AI to be an increasingly important driver of future growth, although, like many innovations, it presents risks and uncertainties that may impact our ability to realize its desired or anticipated benefits for our business.

AI technology is rapidly evolving andquickly. toTo remain competitive, we will need tomust make significant investments to continue to successfully develop and incorporate thethis technology into our products. Our ability to incorporate AI technology into our products depends on the availabilityavailability, performance and pricing of third-party hardware and software equipment and technical infrastructure. Our competitors or other third parties may develop or incorporate AI into their products more quickly or successfully than us. Other companiesThey may also have or in the future may obtain intellectual proprietaryIP rights that would prevent, limit,limit or interfere with our ability to make, use,use or sell our AI products. For these reasons, among others, we may not be able to compete effectively in the evolving AI market.

Our business model may be affected by global trends and laws that govern the use of AI and machine learning.AI. For example, the EU AI Act places new requirements on providers of AI technologies that will need to be addressed in alignment with various deadlines in the coming years.deadlines. These and other laws or regulations or enforcement practices may cause us to modify our data handling and compliance practices, which could be costly or disruptive to our operations, and may also impact our ability to use certain data to support our products or our product development efforts or hinder our customers’ ability to adopt or continue to use our products.

We may face new or heightened legal, ethical and other challenges arising out of the perceived or actual impact of AI on human rights, intellectualIP, property,privacy, privacysecurity, employment and employment,the environment, among other areas. For example, our use of AIAI, both internally and in our customer-facing products, could lead to copyright infringement claims or other intellectual propertyIP claims, potentially requiring us to pay compensation or licensing fees to third parties. Additionally, social and ethical concerns surrounding the use of AI in our offerings could harm our brand and may cause us to incur additional costs. AI systems may not perform as intended or may produce outcomes, such as unreliable or biased results, that could negatively affect customer trust, result in limited adoption of our AI enabled products, expose us to reputational harm or create potential liability. Failure by us or others in our industry to adequately address these concerns could erode public confidence in AI and slow adoption of AI in our products.

An increasing portion of our revenues is generated by sales through our network of partners, including resellers, distributors and managed service providers. Increasingly, we and our customers rely on our partners to provide professional services, including custom implementations, and there may be insufficient qualified implementation partners available to meet customer demand. While we provide our partners with training and programs, including accreditations and certifications, these programs may not be effective or utilized consistently by partners. In addition, newNew partners may also require extensive training and/or significant time and resources to become productive. Additionally,Separately, our relationships with partners may require us, along with our partners, to comply with complex regulations, contractual requirements and government procurement rules. Failure to adhere to these requirements could result in the loss of business opportunities, potential liabilities or penalties. For example, our partners could misrepresent to our customers the functionality of our platform or products, fail to perform services tothat meet our customers’ expectations, or violate laws or our corporate policies. Further, changes to our direct go-to-market models may cause friction with our partners. Our partners may also use our platform to develop products and services that compete with our products and services, which could raise IP ownership concerns and strain these partnerships. If we fail to effectively manage and grow our network of partners, our ability to sell our products and efficiently provide our services may be impacted and our business may be harmed.

We provide products and services to governmental and heavily-regulated entities directly and through our partners. We have made,made and may continue to make,make significant investments to support our efforts to sell to those entities. Processes to obtain authorizations and certifications required for us to provide our products and services to those entities often are lengthy and encounter delays, and we may not be able to satisfy, or maintain compliance with, the associated requirements.

Our customers also include non-U.S. governments, to which government procurement risks similar to those present in U.S. government contracting and regulatory compliance also apply, particularly in certain emerging markets where our customer base is less established. Across the globe, we have seen political volatility increase, with rapid changes in governments and increased partisanship affecting many aspects of government, including the ability to approve budgets and make commitments. This can significantly delay or impair a government’s ability to contract for software and services such as ours. We have also seen challenges to successful awards through bid protest procedures in jurisdictions outside the U.S. As our non-U.S. government business grows, we may see an increase in bid protests as part of the standard government procurement legal procedures that exist in many jurisdictions. In addition, compliance with complex regulations and contracting provisions in a variety of jurisdictions can be expensive and consume significant management resources. In certain jurisdictions, our ability to win business may be constrained by political and other factors unrelated to our competitivemarket position in the market.offerings.

Our public sector customers may have contractual, statutory or regulatory rights to terminate current contracts with us or our third-party distributors or resellers for convenience or due to a default, though such risk may be assumed by such third-party distributor or reseller. If a contract is terminated for convenience, we may only be able to collect fees for products or services delivered prior to termination and settlement expenses. If a contract is terminated due to a default, we may be liable for excess costs incurred by the customer for procuring alternative products or servicesservices. orIn addition, we could be precluded from doing further business with governmental entities. Further, we are required to comply with a variety of complex laws, regulations,regulations and contractual provisions relating to the formation, administration,administration or performance of government contracts that give public sector customers substantial rights and remedies, many of which are not typically found in commercial contracts. These laws, regulations and contractual provisions may also includeencompass rights with respect to price protection, refund and setoff, performancethe provision of services in languages other than English, the accuracy of information provided to the government, contractor compliance with supplier diversity policies, constraints on certain business and sales practicespractices, and other obligations that are particular to government contracts. These obligations may apply to us and/or our third-party resellers or distributors whose practices we may not control. Such parties’ non-compliance could create legal, contractual and customer satisfaction issues.

We and governments routinely investigate and audit compliance with contractual and regulatory requirements. For example, as disclosed in Note 1718 “Commitments and Contingencies” in the notes to our consolidated financial statements, the Company informed certain U.S. government agencies of an internal investigation and preliminary findings and is cooperating with, among others, the Department of Justice, which commenced its own investigation into the matters. If it is determined that we or our third-party distributors, resellers or service providers have failed to comply with applicable contractual or regulatory requirements, we may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, cost associated with the triggering of price reduction clauses, fines,fines and suspensions or debarment from future government business, among others, all of which may adversely affect our business. In the United States, our federal business has been concentrated with a small number of third-party distributors, resellers or service providers. If one of those third parties is limited in its ability to do business with the government due to a regulatory or legal issue arising from their own conduct and we are not able to move our business to another third party, our business could be negatively impacted.

Further, we are increasingly doing business in heavily regulated industries, such as financial services, telecommunication, media and television,television and health care. Current and prospective customers in those industries may be required to comply with more stringent regulations to subscribe to and/or implement our services. In addition, regulatory agencies may impose requirements on third-party vendors that we may not meet. Customers in these heavily-regulated industries often have a right to conduct audits of our systems, products and practices,practices and in some cases the regulators of customers in heavily-regulated industries may directly examine vendors that provide outsourced services to such customers. If one or more customers and/or regulators determine that some aspect of our business does not meet regulatory requirements, our ability to continue or expand our business with those customers may be restricted.

As we continue to expand our business internationally, we will inevitably do more business with large private enterprises and the public sector in countries outside of the U.S. Increased business in countries with heightened trade controls and levels of corruption subjects us and our officers and directors to increased scrutiny and potential liability from our business operations.liability. We have an established compliance program, but there is a risk that our employees, partners, vendors, customers and agents, as well as those companies to which we outsource certain of our business operations, could violate our policies and applicable law, exposing us to additional scrutiny and potential liability. We have experienced this in the past and may experience it again in the future. In addition, we are subject to customs laws that may impose tariffs on us, either directly or indirectly. This includes tariffs imposed by the U.S. government and other countries on imports, which we are responsible to pay in certain circumstances. Higher tariffs on imports related to our operations could increase our operating costs. We are also subject to global trade laws that apply to our worldwide operations, including prohibitions or restrictions on conducting business in certain geographies or involving certain counterparties, end-users or end-use cases. As a result of the Russia-Ukraine conflict, for example, the U.S. and other jurisdictions have imposed economic and trade sanctions and export control restrictions against Russia and Belarus, as well as certain persons, assets and interests associated with those countries. If this conflict continues or if serious conflict arises elsewhere, the U.S. and other jurisdictions could impose wider economic and trade sanctions as well as export restrictions, which could impact our business opportunities and operations. Any violation of the U.S. Foreign Corrupt Practices Act of 1977, as amended, the UK Bribery Act, other applicable anti-corruption and anti-bribery laws, or applicable export control or economic and trade sanctions laws by our employees or third-party intermediaries could subject us to significant risks such as adverse media coverage and/or severe criminal or civil sanctions, which could materially adversely affect our reputation and business.

Our customer deals are becoming more complex, which tend to involve longer andlonger, more expensive sales cycles, increased pricing pressurepressure, and implementation and configuration challenges.

•potential financial, credit or regulatory risks associated with acquiredacquiring a business or a part thereof, including risks of delayed, conditioned or denied regulatory clearances and risks relating to customers, suppliers and partners of the acquired business;

•in the case of foreign acquisitions, the challenges associated with integrating operations across different cultures, languages, and legal regimes and any currencycurrency, tax and regulatory risks associated with specific countries;

•data security or privacy risks, compliance requirements,requirements or integration costs from the acquired technology or company;

In addition, the amount or form of consideration we pay for acquisitions could adversely affect our financial condition or stock price. For example, if we finance an acquisition by issuing equity or convertible debt securities or loans, our existing shareholders may be diluted,diluted or we could face constraints related to the terms of those securities or indebtedness.

In the ordinary course of our business, we store, transmit, generate, and process our and our customers’ confidential, proprietary and sensitive data. As our business expands across the globe, the number of employees, contractors, vendors and other third parties remotely accessing our systems continues to grow. Our growing business operations increase our exposure to cyberattacks by a range of actors, who have used and will continue to use assorted tactics, techniques, and procedures, including malicious code, ransomware, social engineering, business email compromises, supply chain attacks, denial of service attacks and similar internet-enabled, fraudulent activity, and the frequency of those attacks have become more common. Additionally, as AI technologies continue to advance, threat actors can leverage these technologies to develop more sophisticated attack methods that are increasingly automated, targeted, coordinated and more difficult to defend against. The proliferation of these technologies could enable less skilled threat actors to initiate attacks and increase the frequency, scale and impact of security incidents. Further, during times of war and other major conflicts, we and our third-party providers may be vulnerable to a heightened risk of geopolitically motivated attacks, including cyberattacks, that could materially disrupt our systems and operations, supply chain and ability to provide our services.

We have identified vulnerabilities in our products and services in the past and expect to continue to do so in the future. WeConsistent with our vulnerability management program, we prioritize security risks and consider their severity and potential impact in determining whether and when to remediate or mitigate them. In addition, we cannot be certain that we will be able to identifyprevent, detect or remediate all vulnerabilitiesvulnerabilities, orand address the vulnerabilities of which we become aware. Therethere have been delays and may continue to be delays in developing patches that can be effectively deployed to address vulnerabilities. Further, security researchers and other entities and individuals have in the past actively searched for, published and/or exploited actual and potential vulnerabilities in our products or services and will likely continue to do so in the future. Also, certain persons, including researchers, have in the past not abided by, and may in the future not abide by, our responsible disclosure program, which has resulted in, and could in the future result in the compromise of our systems or our or our customers’ data. Moreover, the incorporation of third-partythird-party, AI-generated or open-source software code into our or our customers’ systems increases the risk of exploitation of vulnerabilities. We also have inherited and may in the future inherit additional security risks from acquiring or partnering with other companies.

In most instances, our customers are responsible for configuring and determining access levels to the data held in their particular instance for their employees and service providers. While our software is delivered with certain preset configurations, we understand that our customers require flexibility to configure the NowServiceNow AI Platform to their specific business needs. We work closely with our customers to help them evaluate their security configurations, including providing guidance to align configuration settings with their business needs. Yet, in configuring our platform, both our employees and customers have made errors in the past and may do so again in the future. We are aware that, on occasion, both our customers and ServiceNow have configured certain settings on our platform, or retained preset configurations, in ways that may not align with preferred or recommended security levels, which can result in, and has resulted in, information being made more widely accessible than intended. Such misconfigurations can be, and have been, identified publicly, increasing the risk of data being exposed unintentionally. In certain cases, customers may misconfigure their systems and claim that they were not properly informed of the risks to their configuration.

Our data security system and data governance framework, designed to protect our and our customers’ information and prevent data loss, may not be effective at preventingpreventing, detecting, responding to or remediating material breaches caused by intentional or unintentional actions or inactions by employees, contractors or third parties. Techniques used to sabotage or to obtain unauthorized access to systems are constantly evolving and may go undetected until we become aware of a successful attack occurs.attack. Moreover, we have experienced security incidents, which may reoccur in the future, that resulted in unauthorized access to, loss,loss or inadvertent disclosure of confidential, proprietary and sensitive information. We have observed attempts by third parties to induce or deceive our employees, contractors or users to fraudulently obtain access to our or our customers’ data or assets. In addition, our employees have fallen victim to phishing attacks in the past and are likely to again in the future. Further, despite our security measures, employees, contractors and other individuals (some of whom are supported by nation states) have gained, and in the future may gain, access to our systems to search for and exploit actual or potential vulnerabilities in our products or services or inflict other harms, such as deploying malware or stealing data.

An actual or perceived security breach or compromise can have a material effect on ServiceNow’s operations, finances and reputation. The adverse consequences can include accidental or unlawful destruction, loss, alteration, unauthorized disclosure of or access to data; disruptions to our services; diversion of funds; litigation; indemnification and other contractual obligations; regulatory investigations; government fines and penalties; reputational damage; negative publicity; business and operational interruptions; loss of sales, customers,customers and partners; mitigation and remediation expenses; and other material costs and liabilities. In addition, the assessment and response to security incidents, as well as implementation of appropriate safeguards to protect against future incidents, can lead to material economic and operational consequences. These consequences can result regardless of whether the incident is suffered by us, affects our third-party service providers or stems from customers’ action or inaction. Moreover, even if a breach is unrelated to our security programs or practices, it could still cause us reputational harm and require us to undertake significant efforts to assess and respond to the breach, including further protecting our customers from their own vulnerabilities.security risks. There can be no assurance that any limitations of liability provisions in our subscription agreements, terms of use or other agreements would be enforceable or adequate or would otherwise protect us from any such liabilities or damages with respect to any particular claim. In addition, while we maintain insurance coverage to cover potential financial losses, we cannot be certain that such coverage will continue to be available on acceptable terms or in sufficient amounts to cover potential financial losses from a security incident or that an insurer will not deny coverage as to any future claim.

There is increasingly intense competition for talent in the technology industry. Our success depends substantially upon the continued services of our management team, particularly our chief executive officer, chief operating officer and the other members of our executive staff. From time to time in the ordinary course of business, there have been and may continue to be changes in our management team. While we seek to manage these transitions carefully, such changes may result in a loss of institutional knowledge and negatively affect our business.

In the highly competitive technology industry, we face ongoing challenges in attracting and retaining top talent across various roles, such as product development and engineering (particularly with AI and machine learning backgrounds), sales, operations and cybersecurity. These key individual contributors are critical to our success, can command very significant compensation in the market and are actively recruited by our key competitors. Our ability to achieve significant revenue growth may depend on our success in recruiting, training and retaining sufficient qualified personnel to support our growth. We have faced and may continue to face difficulties attracting, hiring and retaining highly-skilled, qualified personnel and may not be able to fill positions in desired geographic areas or at all. Further, as we continue to grow and expand our workforce globally, we may face operational and workplace culture challenges that could negatively impact our ability to maintain the effectiveness of our business execution and the beneficial aspects of our corporate culture. While our work model, where a substantial portion of our employees work partially or fully remote, increased our access to talent, we may not be able to take advantage of a broader talent pool if our competitors offer the same work model or if we continue to rely on our primary operating locations for talent. We are continually evaluating and, as appropriate, enhancing the attractiveness of our compensation packages and benefit programs. As a result, we have experienced and may continue to experience increased costs that may not be offset by either improved productivity or higher sales, potentially resulting in a reduction in our profitability. In addition, we grant equity awards to our employees and sustained declines in our stock price or lower stock price performance relative to our competitors reduces the retention value of such awards, which can impact the attractiveness of our compensation. Many of our employees, including all of our executive officers, are employed “at-will” and may terminate their employment with us at any time. If we fail to attract qualified, new personnel or fail to retain and motivate our current personnel, our business and future growth prospects could be adversely affected.

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.

We are closely monitoring the ongoing conflictsglobal in Russia/Ukraine and the Middle East.conflicts. While thesethose events are stillcontinuing evolvingto evolve and the outcomes remain highly uncertain, we do not believe these conflictsthey will have a material impact on our business and results of operations. However, if the conflicts continuepersist or worsen, leading to greater global economic disruptions and uncertainty, our business and results of operations could be materially impacted. Our customers in these regions represented an immaterial portion of our net assets and total consolidated revenues both as of and for the years ended December 31, 2024 and December 31, 2023.

Additionally, other macroeconomic events, including higher interest rates, global inflation and bank failures,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. Furthermore, the majority of our non-marketable equity investments do not have material relationships with any one financial institution, and therefore, we believe that our exposure to loss as a result of bank failure is immaterial. We will continue to monitor the direct and indirect impact of macroeconomic events on our business and financial results.

Number of customers with ACV greater than $1$5 million. We count the total number of customers with annual contract value (“ACV”) greater than $1$5 million as of the end of the period. We had 2,109,603, 1,885,502, and 1,626420 customers with ACV greater than $1$5 million as of December 31, 2024,2025, 20232024 and 2022,2023, 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 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 $1 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 $1 million. We believe information regarding the total number of customers with ACV greater than $1 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 Now 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, repayments of convertible senior notes attributable to debt discountsettlements 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:

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 settlementssettlements, impairment of assets, severance costs, contract termination costs and business combination and other related costs.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.

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.

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, theroyalty timerates, andtechnology expensemigration to recreate the assetsrates 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.

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, 20242025 and 2023,2024, we maintained a valuation allowance of $220$241 million and $196$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 against our deferred tax assets on a quarterly basis. Refer to Note 1617 “Provision for (Benefit from) Income Taxes,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.

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 yearyears ended December 31, 2025 and 2024 and 79% of our total revenues for each of the yearsyear ended December 31, 2023 and 2022.2023. 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.

Sales and marketing expenses consist primarily of personnel-related expenses directly associated with our sales and marketing staff, including salaries, benefits, bonusesbonuses, stock-based compensation and stock-basedallocated compensation.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.

We expect professional services and other revenues for the year ending December 31, 20252026 to remain relatively flat bothincrease in absolute dollars and remain relatively flat as a percentage of revenue compared to the year ended December 31, 2024.2025.

Cost of subscription revenues increased by $336$627 million for the year ended December 31, 2024,2025, 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 $230$307 million as compared to the prior year. ExpensesDepreciation expense related to infrastructure hardware equipment and expenses associated with software, maintenance, third-party cloud services and other costscosts, towhich together support the expansion of our data center capacity increased by $85$277 million for the year ended December 31, 2024,2025, as compared to the prior year.

Our subscription gross profit percentage was 80% and 82% for each of the years ended December 31, 20242025 and 2023.2024, respectively. We expect our subscription gross profit percentage to decrease slightly for the year endedending December 31, 20252026 compared to the year ended December 31, 2024.2025, 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 $30$69 million for the year ended December 31, 20242025 as compared to the prior year, primarily duedriven toby an increase in partner ecosystem investmentsspend to further help accelerate customer value realization, partially offset by a decrease in fixed personnel-related costs, including stock-based compensation, due to decreased internal headcount.realization.

Our professional services and other gross loss percentage improvedwas to 2%5% for the year ended December 31, 2024,2025, compared to 8%2% in the prior year, and was primarily duedriven by partner ecosystem spend to anfurther increasehelp inaccelerate revenuecustomer andvalue realization increasing at a decreasefaster inrate fixedthan personnel-related costs, including stock-based compensation, as we execute our strategy to shift a portion of professional services to variable spending with strategic third-party partners.revenue. We expect our professional services and other gross loss percentage to increase for the year ending December 31, 20252026 compared to the year ended December 31, 2024.2025.

Sales and marketing expenses increased by $553$534 million for the year ended December 31, 2024,2025, 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 $330$332 million, compared to the prior year. Amortization expenses associated with deferred commissions increased by $90$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 $95$68 million compared to the prior year, primarily due to increased program costs and travel costs for our annual Sales Kickoff and Knowledge user conference.

Research and development expenses (“R&D”) increased by $419$417 million during the year ended December 31, 2024,2025, 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 $350$383 million compared to prior year. Outside services increased by $48 million during the year ended December 31, 2024, compared to the prior year. The remaining increase was primarily due to expenses associated with software, maintenance and other costs to support the expansion of our data center capacity of $27 million for the year ended December 31, 2024, compared to the prior year. These costs were partially offset by a decrease in program spend of $12 million for the year ended December 31, 2024, compared to the prior year.

General and administrative expenses (“G&A”) increased by $73$187 million during the year ended December 31, 2024,2025, compared to the prior year, primarily due to increased headcount resulting in an increase in personnel-related costs,costs excludingincluding stock-based compensation,compensation of $37$39 million and an increase in outside services of $78 million. The remaining increase was primarily due to an increase in othercontract corporatetermination expensescosts of $37 million and outside servicesimpairment of $67assets of $30 million for the year ended December 31, 2024,2025, compared to the prior year. These costs were partially offset by a decrease in stock-based compensation of $36 million for the year ended December 31, 2024, compared to the prior year, primarily due to the requisite service period of certain performance awards being met.

We expect G&A expenses for the year ending December 31, 20252026 to increasedecrease in absolute dollars butand remainto relativelydecrease flatslightly as a percentage of revenue compared to the year ended December 31, 2024,2025, as we continue to see leverage from continued G&A productivity.

Our international operations have provided and will continue to provide a significant portion of our total revenues. Revenues outside North America represented 37% and 36% of total revenues for each of the years ended December 31, 20242025 and 2023, respectively.2024.

Interest income increased during the year ended December 31, 2024,2025, compared to the prior year, primarily driven by an increase in investment income from our managed portfolio resulting from higher average portfolio balances with higher interest rates.balances.

Other expense, net decreased by $11$31 million during the year ended December 31, 2024,2025, compared to the prior year, primarily duedriven toby aunrealized decrease in net lossesgains on equitystrategic 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 (losses) recognized for these foreign currency forward contracts from derivatives not designated as hedging instruments in other expense, net,net wereof immaterial$97 formillion, eachprimarily offset the remeasurement losses of the yearsrelated endedforeign Decembercurrency 31,denominated 2024assets and 2023.liabilities of $113 million for the

Provision for (benefit from) Income Taxes

The income tax provision was $513 million and $313 million for the yearyears ended December 31, 2024.2025 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.

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 Now 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, 2024,2025, 20232024 and 2022.2023. Cash outflows from operations are principally comprised of the salaries, bonuses, commissions, and benefits for our workforce, licenses and services arrangementsarrangements, 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 2025.2026. When assessing sources of liquidity, we also include cash and cash equivalents, short-termmarketable investmentssecurities and long-term investmentsmarketable securities totaling $9.9$10.1 billion as of December 31, 2024.2025.

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 $4.1$7.9 billion as of December 31, 2024,2025, which are due primarily over the next five years. Operating lease obligations totaling $924$1.1 millionbillion are principally associated with leased facilities and have varying maturities with $558$687 million due over the next five years.

We may repurchase our shares of common stock in thethrough open market,market inpurchases, 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.stock and authorized an additional $3.0 billion in repurchases under the program in January 2025. During the year ended December 31, 2024,2025, the Company repurchased 0.810.3 million shares of our common stock for $696$1.8 million.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, 2024,2025, approximately $266$1.4 millionbillion of the originally authorized amount under the share repurchase program remained available for future repurchases. In January 2025,2026, our board of directors authorized an additional $3.0$5.0 billion in repurchases under the shareShare repurchaseRepurchase program. Refer to Note 13 “Stockholders’ Equity” to our consolidated financial statements included in this Annual Report on Form 10-K for additional information.Program.

Our freeoperating 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 equivalentsequivalents, marketable securities and investmentslong-term marketable securities will be sufficient to meet our liquidity needs for at least the next 12 months.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 free 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.

Net cash provided by operating activities was $4.3$5,444 billionmillion for the year ended December 31, 20242025 compared to $3.4$4,267 billionmillion for the prior year. The net increase in operating cash flows was primarily due to higher collections driven by revenue growth.

Net cash used in investing activities for the year ended December 31, 20242025 was $2.5$1,689 billionmillion compared to $2.2$2,501 billionmillion for the prior year. The net increasedecrease in cash used in investing activities was primarily due to a $167$2,603 million increasedecrease in net purchases of investments,marketable asecurities, $158partially offset by an $875 million increase in purchases of property and equipment, a $106 million increase in purchases of non-marketablestrategic investments and a $37$971 million increase in purchases of other intangible assets, partially offset by a $166 million decrease in cash used in business combinations.

Net cash used in financing activities for the year ended December 31, 20242025 was $1,343$2,340 million compared to $803$1,343 million for the prior year. The net increase in cash used in financing activities is primarily due to a $241$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 increasedecrease in business combination related to the second installment payment in the acquisition of G2K Group GmbH and a $158 million increase in repurchases of common stock, offset by a $43$33 million increase in proceeds from employee stock plans.

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, 2024.2025. Refer to Note 1718 “Commitments and Contingencies,Contingencies” and Note 1617 “Provision for (Benefit from) Income Taxes” to our consolidated financial statements included in this Annual Report on Form 10-K for more information.

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. OurThe onecombination platformof architectureServiceNow's providesSecurity theOperations foundationwith forArmis' organizationscyber toasset seamlessly integrate AI, data,intelligence and workflowsVeza's identity governance capabilities delivers end-to-end visibility, risk controls, and create intelligent processes across their enterprise.

As of MarchJune 31,30, 2026, our RPO was $27.7$29.0 billion, of which 46% represented cRPO. RPO and cRPO both increased by 25% and 23%, respectively,21% compared to MarchJune 31,30, 2025. Factors that may cause our RPO to vary from period to period include the following:

•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.

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 630658 and 516533 customers with ACV greater than $5 million as of MarchJune 31,30, 2026 and 2025, 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 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.

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.

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 97% and 98% for the three months ended March 31, 2026 and 2025, respectively. 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.

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 77%75% and 76% of our total revenues for the three and six months ended June 30, 2026, respectively, and 78% of our total revenues for each of the three and six months ended MarchJune 31, 2026 and30, 2025. 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.

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 37%42% and 40% for the three and six months ended June 30, 2026, respectively, and 33% and 34% for the three and six months ended MarchJune 31, 2026 and30, 2025, respectively.

Provision for income taxes consists of federal, state and foreign income taxes. Our income tax provision for the three and six months ended MarchJune 31,30, 2026 is primarily attributable to the mix of earnings and losses in countries with differing statutory tax rates and stock-based compensation shortfalls.shortfalls, Weoffset continueby tothe maintainrelease of 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 Three and Six Months Ended MarchJune 31,30, 2026 and 2025

Subscription revenues increased by $666$764 million and $1,430 million for the three and six months ended MarchJune 31,30, 20262026, respectively, compared to the three and six months ended MarchJune 31,30, 2025, primarily driven by increased purchases by new and existing customers. Included in subscription revenues is $138$149 million and $157$109 million of revenues recognized upfront from the delivery of software associated with self-hosted offerings during the three months ended MarchJune 31,30, 2026 and 2025.2025, respectively, and $287 million and $266 million during the six months ended June 30, 2026 and 2025, respectively.

Our expectations for revenues, cost of revenues and operating expenses for the remainder of 2026 are based on the 31-day30-day average of foreign exchange rates for MarchJune 31,30, 2026.

Professional services and other revenues increased by $16$8 million and $24 million during the three and six months ended MarchJune 31,30, 20262026, respectively, compared to the three and six months ended MarchJune 31,30, 2025, primarily due to an increase in services and trainings provided to new and existing customers.

Cost of subscription revenues increased by $259$405 million and $664 million for the three and six months ended MarchJune 31,30, 20262026, respectively, compared to the three and six months ended MarchJune 31,30, 2025, 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 $114$115 million and $229 million for the three and six months ended MarchJune 31,30, 20262026, respectively, compared to the three and six months ended MarchJune 31,30, 2025. Depreciation expense related to infrastructure hardware equipment and expenses associated with software, maintenance and other costs, which together support the expansion of data center capacity, increased by $60$63 million and $123 million for the three and six months ended MarchJune 31,30, 20262026, respectively, compared to the three and six months ended MarchJune 31,30, 2025. Expenses associated with our contractual commitments with third-party cloud service providers increased by $41$63 million and $104 million for the three and six months ended MarchJune 31,30, 20262026, respectively, compared to the three and six months ended MarchJune 31,30, 2025. In addition, amortization of intangible assets increased by $41$153 million and $194 million for the three and six months ended MarchJune 31,30, 20262026, respectively, compared to the three and six months ended MarchJune 31,30, 2025 as a result of acquisitions.

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 as a percentage of revenue compared to the year ended December 31, 2025.2025 as we provide subscription services to more customers, increase usage within our customer instances and continue to recognize amortization of acquired intangible assets. 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 78%73% and 75% for the three and six months ended MarchJune 31,30, 20262026, respectively, and 80% and 81% for the three and six months ended MarchJune 31,30, 2025.2025, respectively. We expect our subscription gross profit percentage to decrease 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 of intangible assets acquired.

Cost of professional services and other revenues increased by $30$40 million and $70 million for the three and six months ended MarchJune 31,30, 20262026, respectively, compared to the three and six months ended MarchJune 31,30, 2025, primarily driven by increased personnel-related costs and an increase in partner ecosystem spend to further help accelerate customer value realization.

Our professional services and other gross loss percentage was 21%26% for the three months ended MarchJune 31,30, 2026 compared to 8%a gross profit percentage of 3% for the three months ended MarchJune 31,30, 2025,2025. Our professional services and other gross loss percentage was 24% for the six months ended June 30, 2026 compared to 2% for the six months ended June 30, 2025. Our professional services and other gross loss percentage was primarily driven by personnel-related costs and 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 as we continue to accelerate customer value realization and support our customers in gaining the maximum value of our latest offerings.

Sales and marketing expenses increased by $162$244 million and $406 million for the three and six months ended MarchJune 31,30, 20262026, respectively, compared to the three and six months ended MarchJune 31,30, 2025, primarily due to increased headcount resulting in an increase in personnel-related costs including stock-based compensation and overhead expenses of $73$138 million and $211 million for the three and six months ended MarchJune 31,30, 20262026, respectively, compared to the three and six months ended MarchJune 31,30, 2025. Amortization expenses associated with deferred commissions increased by $23$21 million and $44 million for the three and six months ended MarchJune 31,30, 20262026, respectively, compared to the three and six months ended MarchJune 31,30, 2025, primarily 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 $33$29 million and $62 million for the three and six months ended June 30, 2026, respectively, compared to the three and six months ended June 30, 2025, primarily due to increased program costs and travel costs for our annual Knowledge user conference. In addition, amortization of intangible assets increased by $41 million and $56 million for the three and six months ended June 30, 2026, respectively, compared to the three and six months ended June 30, 2025 as a result of acquisitions.

Research and development expenses (“R&D”) increased by $120$181 million and $301 million for the three and six months ended MarchJune 31,30, 20262026, respectively, compared to the three and six months ended MarchJune 31,30, 2025, primarily due to increased headcount, resulting in an increase in personnel-related costs including stock-based compensation and overhead expenses of $116 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025.

General and administrative expenses (“G&A”) increased by $59$98 million and $157 million for the three and six months ended MarchJune 31,30, 20262026, respectively, compared to the three and six months ended MarchJune 31,30, 2025, primarily due to an increase in outside services of $35$61 million and $96 million, largely related to acquisitions,recent acquisitions. Personnel-related costs including stock-based compensation increased $56 million and $66 million for the three and six months ended June 30, 2026, respectively, compared to the three and six months ended June 30, 2025. These increases were partially offset by an increaseimpairment of assets of $30 million that was recorded in personnel-relatedthe costs.three and six months ended June 30, 2025.

Stock-based compensation increased by $88$156 million and $244 million for the three and six months ended MarchJune 31,30, 20262026, respectively, compared to the three and six months ended MarchJune 31,30, 2025, primarily due to additional grants to current and new employees and stock-based awards granted in connection with acquisitions.

Stock-based compensation is inherently difficult to forecast due to fluctuations in our stock price. Based upon our stock price as of MarchJune 31,30, 2026, 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.

Our international operations have provided and will continue to provide a significant portion of our total revenues. Revenues outside North America represented 37% for each of the three and 36%six months ended June 30, 2026 and 38% and 37% for the three and six months ended MarchJune 31, 2026 and30, 2025, respectively.

Because we primarily transact in certain 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 three and six months ended MarchJune 31,30, 2026.2026 compared to the three and six months ended June 30, 2025. For entities reporting in currencies other than the U.S. Dollar, if we had translated our results for the threesix months ended MarchJune 31,30, 2026 at the exchange rates in effect for the threesix months ended MarchJune 31,30, 2025 rather than the actual exchange rates in effect during the period, our reported subscription revenues would have been $108$138 million lower, excluding the impact of our cash flow hedging program. The impact from foreign currency movements were not material to subscription revenues for the three months ended MarchJune 31,30, 20262026, comparedor to the three months ended March 31, 2025 was not material for professional services and other revenues.revenues for the three and six months ended June 30, 2026.

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 three and six months ended MarchJune 31,30, 2026.

Interest income decreased by $27$46 million and $73 million for the three and six months ended MarchJune 31,30, 20262026, respectively, compared to the three and six months ended MarchJune 31,30, 2025, primarily driven by a decrease in investment income from our managed portfolio resulting from lower average portfolio balances and lower interest rates.

Other income (expense), net increased by $93$209 million and $302 million for the three and six months ended MarchJune 31,30, 2026 compared to the three and six months ended MarchJune 31,30, 2025, primarily driven by unrealized gains on strategic investments.investments, partially offset by higher interest expense resulting from the issuance of senior notes, commercial paper and senior unsecured term loan.

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. TheFor each of the three and six months ended June 30, 2026, the gains (losses) recognized for these foreign currency forward contracts in other income (expense), net were immaterialimmaterial. For the three and six months ended June 30, 2025, the gains recognized for eachforeign currency forward contracts from derivatives not designated as hedging instruments in other income (expense), net of $86 million and $120 million, offset the remeasurement losses of the threerelated monthsforeign endedcurrency Marchdenominated 31, 2026assets and 2025.liabilities of $87 million and $125 million, respectively.

Our income tax provision was $204$140 million and $344 million for the three and six months ended MarchJune 31,30, 20262026, respectively, and was primarily attributable to the mix of earnings and losses in countries with differing statutory tax rates and stock-based compensation shortfalls.shortfalls, offset by the release of a valuation allowance on certain California deferred tax assets. Our income tax provision was $95$86 million and $181 million for the three and six months ended MarchJune 31,30, 20252025, respectively, and 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. We may continue to see fluctuations in our effective tax rate and tax obligations as we further integrate Armis into our corporate structure and intercompany relationships.

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 three and six months ended MarchJune 31,30, 2026. 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.

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% over the last three years. 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 $7.9$6.7 billion as of MarchJune 31,30, 2026. Our unsecured revolving credit facility and our commercial paper program also serve as sources of liquidity. Refer to the “Debt” section below for more details.

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 MarchJune 31,30, 2026, our outstanding payment obligations to suppliers participating in the SCF program totaled $29$28 million. These obligations are included in accounts payable in our condensed consolidated balance sheets, and all activity related to these obligations is presented within operating activities in the condensed consolidated statements of cash flows.

On January 30, 2026, we entered into an ASR agreement with a financial institution to repurchase an aggregate of $2.0 billion of our common stock as part of the Share Repurchase Program. During the three months ended March 31, 2026, the Company completed the ASR transaction with 18.5 million shares of common stock repurchased at an average price of $107.97 per share, which was determined based on the volume weighted averageweighted-average price over the term of the ASR, less an agreed upon discount. Repurchased shares are recognized as treasury stock and held for future issuance.

During the threesix months ended MarchJune 31,30, 2026, the Company repurchased an additional 1.6 million shares of our common stock for $225 million in open market transactions. There were no share repurchases during the three months ended June 30, 2026. As of MarchJune 31,30, 2026, approximately $4.2 billion of the authorized amount under the Share Repurchase Program remained available for future repurchases.

We have also issued long-term debt to finance our business. In May 2026, we issued five series of fixed-rate senior unsecured notes with an aggregate principal amount of $4.0 billion (collectively, the “Notes”) with maturities starting in May 2028 and extending through May 2056. In August 2020, we issued 1.40% fixed ratefixed-rate ten-year notes with an aggregate principal amount of $1.5 billion due on September 1, 2030 (the “2030 Notes”).2030.

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, together with our available financing facilities,securities will be sufficient to meet our liquidity needs for at least the next 12 months. See Note 19 “Subsequent Events” for debt financing associated with the acquisition of Armis Security Ltd. 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.

Net cash used in investing activities was $451$7,105 million for the threesix months ended MarchJune 31,30, 2026 compared to $217$640 million for the threesix months ended MarchJune 31,30, 2025. The net increase in cash used in investing activities was primarily due to a $1,307$8,700 million increase in cash used in business combinations and a $117$40 million increase in purchases of strategic investmentsinvestments, partially offset by a $1,109$1,896 million decrease in purchases of marketable securities, a $247 million increase in sales and maturities of marketable securities and a $64$140 million decrease in purchases of property and equipment.

Net cash usedprovided inby financing activities was $2,236$3,638 million for the threesix months ended MarchJune 31,30, 2026 compared to $398net cash used of $944 million for the threesix months ended MarchJune 31,30, 2025. The net increase in cash usedprovided inby financing activities is primarily due to an increase in repurchasesproceeds of common$3,944 stockmillion from the issuance of $1,927the million,Notes, offsetnet byof discount and issuance costs, net proceeds from commercial paper of $3,534 million and a decrease in taxes paid related to net share settlement of equity awards of $89$157 million.million, partially offset by an increase in repurchases of common stock of $1,566 million and $1,472 million of repayments of commercial paper.