ServiceNow Inc. (NYSE:NOW)

Solvency ratios demonstrate a consistent strengthening of the company’s financial position between 2021 and 2025. A clear trend of decreasing leverage and increasing coverage ratios is observed across the period. This suggests a reduced reliance on debt financing and an improved ability to meet its financial obligations.

Debt Ratios

Debt to equity, debt to capital, and debt to assets ratios all exhibit a declining trend. The debt to equity ratio decreased from 0.43 in 2021 to 0.12 in 2025. Similarly, debt to capital decreased from 0.30 to 0.10 over the same period. The debt to assets ratio also followed this pattern, moving from 0.15 to 0.06. Inclusion of operating lease liabilities results in higher ratios, but these also demonstrate consistent declines, indicating a reduction in overall debt burden regardless of accounting treatment.

Leverage Ratio

The financial leverage ratio decreased steadily from 2.92 in 2021 to 2.01 in 2025. This indicates a diminishing proportion of assets financed by debt, further supporting the observation of decreasing leverage.

Coverage Ratios

Significant improvements are evident in the coverage ratios. The interest coverage ratio increased dramatically, rising from 9.89 in 2021 to 99.30 in 2025. This signifies a substantially enhanced ability to cover interest expenses with earnings. The fixed charge coverage ratio also shows a strong upward trend, increasing from 2.95 to 14.30 over the same period, demonstrating a greater capacity to meet all fixed financial obligations.

In summary, the observed trends across all reported solvency ratios indicate a strengthening financial structure, reduced risk profile, and improved capacity to service debt obligations. The consistent declines in debt ratios coupled with the substantial increases in coverage ratios suggest a positive trajectory for the company’s long-term financial health.

The debt to equity ratio demonstrates a consistent downward trend over the five-year period. This indicates a strengthening financial position with decreasing reliance on debt financing relative to equity.

Debt to Equity Ratio Trend

In 2021, the debt to equity ratio was 0.43. This decreased to 0.30 in 2022, representing a significant reduction in leverage. The decline continued to 0.20 in 2023 and further to 0.15 in 2024. By 2025, the ratio reached 0.12, the lowest value observed within the analyzed timeframe.

Total debt remained relatively stable across the period, fluctuating minimally around US$1.5 billion. Conversely, stockholders’ equity experienced substantial growth, increasing from US$3.695 billion in 2021 to US$12.964 billion in 2025. This expansion of equity is the primary driver of the observed decrease in the debt to equity ratio.

Debt Stability

Total debt exhibited minimal variation, ranging from US$1,486 million to US$1,576 million. This suggests a consistent approach to debt management, with no significant increases or decreases in borrowing.

Equity Growth

Stockholders’ equity increased substantially year over year. The most significant growth occurred between 2022 and 2025, indicating strong profitability and/or successful equity issuance.

The decreasing debt to equity ratio suggests a reduced financial risk profile. The company appears to be increasingly funded by equity rather than debt, which generally implies greater financial flexibility and lower vulnerability to economic downturns.

The debt to equity ratio, including operating lease liability, demonstrates a consistent downward trend over the five-year period. Total debt remained relatively stable, fluctuating between US$2,214 million and US$2,403 million, while stockholders’ equity experienced substantial growth.

Debt to Equity Ratio Trend

The ratio decreased from 0.60 in 2021 to 0.19 in 2025. This indicates a strengthening financial position, as the proportion of debt financing relative to equity financing has diminished significantly.

Total Debt

Total debt exhibited minimal change between 2021 and 2024, remaining within a narrow range. A slight increase to US$2,403 million is observed in 2025, but remains comparable to prior levels.

Stockholders’ Equity

Stockholders’ equity increased substantially throughout the period, rising from US$3,695 million in 2021 to US$12,964 million in 2025. This growth is the primary driver of the declining debt to equity ratio.

The consistent reduction in the debt to equity ratio suggests a decreasing reliance on debt financing and an increasing reliance on equity. This trend could be indicative of improved profitability, successful equity offerings, or retained earnings contributing to equity growth. The company appears to be becoming less leveraged over time.

The Debt to Capital ratio demonstrates a consistent downward trend over the five-year period. This indicates a decreasing reliance on debt financing relative to the company’s total capital structure.

Total Debt

Total debt remained relatively stable, fluctuating minimally between US$1,486 million and US$1,576 million throughout the observed period. The slight increase in 2021 was followed by consistent values in subsequent years.

Total Capital

Total capital exhibited substantial growth, increasing from US$5,271 million in 2021 to US$14,455 million in 2025. This growth accelerated over time, with the largest increases occurring between 2023 and 2025.

Debt to Capital Ratio

The Debt to Capital ratio decreased steadily from 0.30 in 2021 to 0.10 in 2025. This decline reflects the faster rate of growth in total capital compared to total debt. The ratio’s reduction suggests improved financial leverage and a stronger capital base.

The consistent decrease in the Debt to Capital ratio suggests the company is becoming less financially risky, as it is funding a greater proportion of its assets with equity rather than debt. This trend could be viewed favorably by investors and creditors.

The debt to capital ratio, inclusive of operating lease liabilities, demonstrates a consistent decline over the five-year period. Total debt, including operating lease liability, exhibits a modest increase overall, while total capital, inclusive of operating lease liability, shows substantial growth. This divergence drives the observed trend in the debt to capital ratio.

Debt to Capital Ratio Trend

The ratio decreased from 0.37 in 2021 to 0.16 in 2025. This indicates a strengthening financial position with a decreasing reliance on debt financing relative to the company’s capital base.

Total Debt (including operating lease liability)

Total debt remained relatively stable between 2021 and 2023, fluctuating around US$2.2 billion. A slight increase is observed in 2024, followed by a further increase to US$2.403 billion in 2025. The growth in debt appears moderate compared to the growth in total capital.

Total Capital (including operating lease liability)

Total capital experienced significant growth throughout the period. It increased from US$5.909 billion in 2021 to US$15.367 billion in 2025. This substantial expansion of the capital base is the primary driver behind the declining debt to capital ratio.

The consistent reduction in the debt to capital ratio suggests improved solvency and a lower risk profile. The company appears to be effectively increasing its capital base while managing its debt levels, resulting in a more financially stable structure.

The Debt to Assets ratio demonstrates a consistent downward trend over the five-year period. This indicates a decreasing reliance on debt financing relative to the company’s total asset base.

Debt to Assets Ratio Trend

In 2021, the Debt to Assets ratio stood at 0.15. This ratio decreased to 0.11 in 2022, representing a notable reduction in leverage. The decline continued in subsequent years, reaching 0.09 in 2023, 0.07 in 2024, and further decreasing to 0.06 in 2025.

While Total Debt remained relatively stable across the observed period, fluctuating only slightly between US$1,486 million and US$1,576 million, Total Assets experienced substantial growth. This growth in assets is the primary driver of the declining Debt to Assets ratio.

Total Debt

Total debt exhibited minimal variation, beginning at US$1,576 million in 2021 and concluding at US$1,491 million in 2025. The highest value was recorded in 2021, while the lowest was in 2025.

Total Assets

Total assets increased significantly throughout the period, rising from US$10,798 million in 2021 to US$26,038 million in 2025. This represents a more than doubling of the asset base over the five years.

The consistent decrease in the Debt to Assets ratio, coupled with stable debt levels and growing assets, suggests improving solvency and a strengthening financial position. The company appears to be effectively financing its asset growth through retained earnings and/or equity rather than increased debt.

The debt to assets ratio, including operating lease liability, demonstrates a consistent downward trend over the five-year period. Total debt remained relatively stable, fluctuating between US$2,214 million and US$2,403 million, while total assets experienced substantial growth.

Debt to Assets Ratio Trend

The ratio decreased from 0.21 in 2021 to 0.09 in 2025. This indicates a decreasing reliance on debt financing relative to the company’s asset base.

The initial decrease from 0.21 to 0.17 between 2021 and 2022 suggests an improvement in the company’s financial leverage. The subsequent decline to 0.13 in 2023 and further to 0.11 in 2024 indicates a continued strengthening of the balance sheet. The final decrease to 0.09 in 2025 confirms this trend.

Asset Growth

Total assets increased significantly, from US$10,798 million in 2021 to US$26,038 million in 2025. This substantial asset growth is the primary driver of the declining debt to assets ratio, as debt levels remained comparatively consistent.

The consistent reduction in the debt to assets ratio suggests improved solvency and a lower risk profile. The company appears to be effectively utilizing assets to generate value while maintaining a manageable level of debt. The relatively stable debt level, coupled with increasing assets, points to a strengthening financial position.

An analysis of the provided financial information reveals a consistent decrease in financial leverage over the five-year period from December 31, 2021, to December 31, 2025. This trend is accompanied by substantial growth in both total assets and stockholders’ equity.

Financial Leverage

The financial leverage ratio decreased steadily from 2.92 in 2021 to 2.01 in 2025. This indicates a diminishing reliance on debt financing relative to equity. The rate of decrease slowed over time, with the largest reduction occurring between 2021 and 2022 (a decrease of 0.28), and the smallest between 2024 and 2025 (a decrease of 0.11).

Total Assets

Total assets experienced significant growth throughout the period, increasing from US$10,798 million in 2021 to US$26,038 million in 2025. This represents a more than doubling of asset value over the five years, suggesting substantial business expansion.

Stockholders’ Equity

Stockholders’ equity also demonstrated strong growth, rising from US$3,695 million in 2021 to US$12,964 million in 2025. This increase in equity contributes to the observed decline in financial leverage, as it provides a larger equity base to finance assets.

The combined effect of increasing equity and growing assets, coupled with the decreasing financial leverage ratio, suggests the company is becoming increasingly financially stable and less dependent on debt. The consistent downward trend in financial leverage, while decelerating, indicates a continued commitment to strengthening the company’s capital structure.

The analysis reveals a consistently strengthening ability to meet interest obligations over the observed period. Earnings before interest and tax (EBIT) increased substantially, while interest expense remained relatively stable, resulting in a dramatic improvement in interest coverage.

Earnings before Interest and Tax (EBIT)

EBIT demonstrated a significant upward trend, increasing from US$277 million in 2021 to US$2,284 million in 2025. This represents a more than eightfold increase over the five-year period, indicating substantial growth in operational profitability.

Interest Expense

Interest expense remained remarkably consistent, fluctuating minimally between US$28 million in 2021 and US$23 million in 2024 and 2025. This stability suggests a controlled debt structure and consistent borrowing costs.

Interest Coverage

The interest coverage ratio exhibited a pronounced and positive trajectory. Starting at 9.89 in 2021, it rose to 99.30 in 2025. This indicates a growing capacity to cover interest payments with available earnings. The ratio more than doubled from 2021 to 2022, and continued to increase at an accelerating rate through 2025. This suggests a decreasing risk associated with debt financing.

The combination of rising EBIT and stable interest expense has resulted in a robust and improving interest coverage position. This trend suggests a strengthening financial position and reduced vulnerability to changes in interest rates or declines in profitability.

The company demonstrates a consistently strengthening ability to meet its fixed financial obligations over the five-year period. This is evidenced by a substantial and positive trend in fixed charge coverage. Earnings before fixed charges and taxes have increased significantly, while fixed charges have remained relatively stable, contributing to the improved coverage ratio.

Earnings Before Fixed Charges and Tax

Earnings before fixed charges and tax increased from US$377 million in 2021 to US$2,431 million in 2025. This represents a compound annual growth rate of approximately 44.8%. The growth was particularly pronounced between 2022 and 2023, and continued at a strong pace through 2025.

Fixed Charges

Fixed charges experienced a modest increase from US$128 million in 2021 to US$170 million in 2025. The increase was gradual, with relatively small changes observed between 2022 and 2024. This suggests a controlled approach to increasing fixed financial commitments.

Fixed Charge Coverage

The fixed charge coverage ratio increased dramatically from 2.95 in 2021 to 14.30 in 2025. This indicates a significantly improved capacity to cover fixed charges with earnings. The ratio more than doubled between 2021 and 2022, and continued to rise sharply in subsequent years. A ratio of 14.30 suggests a very comfortable margin of safety regarding fixed charge obligations.

The combination of increasing earnings and stable fixed charges has resulted in a robust and improving solvency position. The trend suggests decreasing financial risk associated with fixed obligations.