Why did ServiceNow growth decelerate (or hold) in 2025?

Direct Answer

ServiceNow didn't really decelerate in 2025 — it *held*, and that's the whole story. Subscription revenue grew ~24% in FY24 (~$10.6B), ~20% in FY25 (~$12.7B), and the FY26 guide is ~$13.0-$13.1B implying ~21% — meaning the back-half re-acceleration was telegraphed before 2025 even closed.

In a year when Salesforce printed high-single-digits, Workday slid to ~16%, and Snowflake had to walk product revenue down twice, NOW staying north of 20% on a $12B base was the SaaS outlier of the year. Four forces pulled growth down (DOGE-led Q3 federal pause, enterprise IT belt-tightening, Pro→Pro Plus pricing-transition friction, EMEA FX), and three propped it up (Now Assist attach acceleration, IRM/CRM cross-sell, mid-market Pro+ adoption).

The honest read: McDermott traded ~3-4 points of headline growth for an AI-native install base he can monetize for the next five years.

The 4 Drag Forces

• Public-Sector Q3 federal spend pause (DOGE-related) — The new administration's procurement freeze and DOGE review hit federal renewals mid-quarter; ServiceNow flagged it on the Q3 call as a one-quarter timing event, not a lost-deal event, but it pulled ~1-2 pts off the headline.
• Enterprise IT budget tightening — CIOs deferred net-new ITSM/ITOM expansion in H1 as they re-baselined for AI spend; deal cycles stretched on transactions over $1M.
• Pro → Pro Plus pricing transition friction — Customers paused Pro renewals to negotiate the Pro Plus uplift bundle (Now Assist included); great for FY26 ARR, ugly for in-quarter bookings velocity.
• FX headwind from EMEA — A stronger dollar through H1 trimmed reported subscription growth by ~100 bps; constant-currency was meaningfully better than reported.

The 3 Lift Forces

• Now Assist attach acceleration — Now Assist deal count and ACV doubled across FY25, becoming the fastest-ramping new product in ServiceNow's history; attach economics carried Q4 net-new ACV.
• IRM + CRM cross-sell wins — Integrated Risk Management and the new CRM/Industry workflows landed multiple eight-figure expansions, broadening the platform beyond ITSM.
• Mid-market Pro+ adoption — The sub-$1B-revenue customer cohort took Pro Plus faster than enterprise did, giving the back-half a clean ARR ramp.

The Quarterly Narrative

• Q1 FY25 — Subscription ~21-22% YoY; in-line beat, but cRPO guide softened on FX and longer enterprise cycles. Tone: "transition year, AI proof points building."
• Q2 FY25 — Subscription ~20-21% YoY; first quarter Now Assist ACV materially showed up in disclosed metrics. Tone: "AI is real, attach is accelerating."
• Q3 FY25 — Subscription ~19-20% YoY; the federal spend pause quarter — McDermott explicitly called out DOGE-related procurement delays, framed as timing, not loss. Stock took a one-day haircut, recovered within two weeks.
• Q4 FY25 — Subscription ~20% YoY; cRPO re-accelerated, Now Assist crossed an internal milestone, FY26 guide came in above the Street.

What Other SaaS Companies Did In 2025

• Salesforce — Subscription growth in the high-single-digits / low-teens; Agentforce narrative carried the multiple, not the print. NOW grew ~2x faster on a comparable base.
• Workday — Subscription growth slipped from low-20s to ~16%; CFO transition + slower HCM cycle.
• Adobe — Digital Media in the low-double-digits; Firefly monetization came in light vs. Expectations.
• Snowflake — Product revenue guided down twice; consumption model exposure to AI-cost-rationalization was the pain point.
• The takeaway — Of the five "$10B+ ARR SaaS platform" names, only ServiceNow held above 20%. That's the entire bull case.

What McDermott Said + What He Didn't Say

• Said: "Now Assist is the fastest-growing new product in our history" — repeatedly, every quarter.
• Said: AI is a *tailwind* to NOW (workflow surface area), not a cannibalization risk. He owns this framing.
• Said on Q3: The federal pause is timing, not demand destruction; pipeline conversion intact.
• Didn't say: He never quoted a hard Now Assist ARR number — only deal counts, attach %, and "fastest-ever" comps. Read that as: ARR is real but smaller than the narrative implies; it's a 2026-27 story.
• Didn't say: He avoided framing 20% as the new floor — that's a deliberate optionality move so 2026 can come in at 21%+ and look like re-acceleration.

Why The Holding-Pattern Matters For 2026-27

• Now Assist attach inflection — FY26 is when Now Assist ACV becomes a disclosed line item; the math from doubled deal counts compounds.
• AI-native customer pull — Customers who took Pro Plus in FY25 are now anchored on the Now platform for the next AI cycle; switching costs went up materially.
• Named-account expansions — The eight-figure IRM/CRM lands of FY25 fund FY26-27 multi-product expansions inside the same logos.
• 2027 setup — If FY26 prints ~21% and FY27 holds ~19-20%, NOW becomes the first SaaS company to sustain 20% growth past $15B subscription ARR. That's a re-rate event.
• The quiet bet — McDermott has effectively bought a 5-year AI monetization runway by trading 2025 headline points for installed-base depth.

Quarterly Scorecard (FY25)

Force Map

Bottom Line

ServiceNow didn't decelerate — it *defended the 20% line* in the worst SaaS budget year since 2009, and McDermott traded a couple of headline points for an AI-native install base that compounds for five years. The FY26 ~21% guide and Now Assist attach curve are the proof. Watch Q3 FY26 — that's where federal comps reset and Now Assist ACV likely becomes a disclosed line.

If it does, this stops being a "hold" story and becomes a re-acceleration story. *(see also: q1608, q1610)*