ServiceNow Inc. (NYSE:NOW)

The profitability metrics demonstrate a consistent upward trend over the observed period, with some fluctuations, particularly in the net profit margin and return on equity. Gross profit margin exhibited steady, incremental improvement throughout the period, while operating and net profit margins experienced more significant gains, especially from early 2023 through late 2024. Return on equity and return on assets followed similar trajectories, indicating increasing efficiency in utilizing shareholder equity and total assets to generate profits.

Gross Profit Margin

The gross profit margin showed a consistent, albeit gradual, increase from 77.26% in March 2022 to 79.24% in September 2024. A slight decline was observed in subsequent quarters, ending at 77.53% in December 2025. This suggests a sustained ability to manage production costs relative to revenue, with a minor erosion of that advantage in the most recent quarter.

Operating Profit Margin

The operating profit margin experienced substantial growth, rising from 3.95% in March 2022 to a peak of 13.85% in September 2025. The increase was particularly pronounced between March 2023 and September 2024, indicating improved operational efficiency and cost control. A slight decrease to 13.74% was noted in December 2025, but the overall trend remains strongly positive.

Net Profit Margin

The net profit margin demonstrated the most significant volatility. It increased dramatically from 3.56% in March 2022 to 19.30% in December 2023, driven by a substantial jump in June 2023 to 17.76%. However, a considerable decrease occurred in March 2024, falling to 11.51%, before recovering to 13.16% by December 2025. This suggests the presence of non-operating factors influencing net income, or potentially one-time gains or losses impacting the results.

Return on Equity (ROE)

ROE mirrored the trend of the net profit margin, increasing from 5.58% in March 2022 to 22.69% in December 2023. A subsequent decline to 13.48% in December 2025 was observed, aligning with the net profit margin’s fluctuations. This indicates a strong correlation between profitability and shareholder equity utilization.

Return on Assets (ROA)

ROA also exhibited a positive trend, increasing from 2.03% in March 2022 to 10.51% in September 2023. While it decreased to 6.71% in December 2025, it remained higher than the initial value, demonstrating improved asset utilization efficiency. The ROA trend generally followed the net profit margin and ROE, but with less pronounced fluctuations.

In summary, the company experienced significant improvements in profitability and efficiency across all measured ratios. While the net profit margin, ROE, and ROA experienced a decline in the latter part of the period, they remained at levels substantially higher than those observed at the beginning of the analyzed timeframe. The consistent growth in gross and operating profit margins suggests a strong underlying business model and effective cost management.

The gross profit margin demonstrates a generally positive trend over the observed period, with some fluctuations. Initially, the margin exhibits a modest increase, followed by a period of relative stability, and then a more pronounced upward movement before leveling off and experiencing a slight decline towards the end of the period.

Initial Trend (Mar 31, 2022 – Dec 31, 2022)

From March 31, 2022, to December 31, 2022, the gross profit margin increased steadily from 77.26% to 78.29%. This indicates improving efficiency in managing the cost of goods sold relative to revenue during this timeframe. The increases, while consistent, were incremental.

Stabilization and Peak (Mar 31, 2023 – Sep 30, 2023)

The margin continued to rise, reaching 78.59% by September 30, 2023, but the rate of increase slowed. The period between March 31, 2023, and September 30, 2023, shows a stabilization around the 78.5% level, suggesting that the initial gains in efficiency were becoming more difficult to achieve.

Recent Fluctuations (Dec 31, 2023 – Dec 31, 2025)

Following the peak, the gross profit margin experienced some volatility. A slight decrease to 79.18% was observed by December 31, 2023, followed by a further decline to 77.53% by December 31, 2025. This suggests potential pressures on cost of goods sold or pricing strategies in the later part of the period. The margin reached a high of 79.24% in September 2024 before beginning its descent.

Overall, the gross profit margin remained consistently high throughout the analyzed period, generally above 77%. The recent downward trend warrants further investigation to determine the underlying causes and potential impact on future profitability. The company maintained a strong ability to convert revenue into gross profit, although the most recent quarters suggest a potential erosion of that advantage.

Magnitude of Change

The overall change in gross profit margin from the beginning to the end of the period was a decrease of approximately 0.73 percentage points (from 77.26% to 77.53%). While not substantial, this shift could be significant depending on the scale of revenues.

The observed trends suggest a mature business with established cost controls, but also one potentially facing increasing competitive pressures or input cost increases that are beginning to impact profitability.

The operating profit margin demonstrates a consistent upward trend over the observed period, beginning in March 2022 and continuing through September 2025. This indicates improving operational efficiency and profitability. Initial values were relatively low, but have increased substantially over time.

Initial Period (Mar 31, 2022 – Dec 31, 2022)

The operating profit margin began at 3.95% and exhibited volatility, reaching a low of 3.30% in June 2022 before recovering to 4.90% by December 2022. This suggests some initial fluctuations in operational performance during this timeframe.

Growth Phase (Mar 31, 2023 – Dec 31, 2023)

A clear upward trajectory is evident from March 2023 through December 2023. The operating profit margin increased from 5.41% to 8.49%, indicating successful implementation of cost control measures or increased pricing power. The rate of increase accelerated during this period.

Continued Expansion (Mar 31, 2024 – Sep 30, 2025)

The upward trend continued, with the operating profit margin reaching 10.02% in March 2024 and peaking at 13.85% in September 2025. This sustained growth suggests a strengthening competitive position and effective operational management. A slight decrease to 13.74% is observed in December 2025, but the margin remains at a high level.

Relationship to Revenue

The increase in operating profit margin is supported by consistent revenue growth throughout the period. While revenue increased from US$1,722 million to US$3,568 million, the operating income grew at a faster rate, driving the margin expansion. This indicates that the company is not only increasing sales but also becoming more efficient in generating profit from those sales.

Overall, the operating profit margin demonstrates a strong and positive trend, suggesting improved profitability and operational effectiveness. The company appears to be successfully scaling its operations while maintaining or improving its efficiency.

The net profit margin exhibited a notable upward trend over the observed period, punctuated by some quarterly fluctuations. Initially, the margin demonstrated relative stability in the first three quarters of 2022, ranging between 2.79% and 4.49%. A significant increase began in the first quarter of 2023, continuing through the third quarter of that year, reaching a peak of 19.30% in December 2023.

Overall Trend

From March 2022 to December 2023, the net profit margin increased substantially. This suggests improved operational efficiency, effective cost management, or a shift towards higher-margin products or services. The rate of increase slowed in 2024 and 2025.

2023 Performance

The year 2023 was characterized by exceptional growth in net profit margin. The substantial increase from 5.25% in March to 19.30% in December indicates a significant positive change in the company’s profitability. The unusually high margin in June 2023 (17.76%) warrants further investigation to understand the underlying drivers.

2024-2025 Performance

Following the peak in December 2023, the net profit margin experienced a decline in the first half of 2024, dropping to 11.51% in March. It recovered somewhat in the subsequent quarters, stabilizing around the 12%-14% range through the end of 2025. While still considerably higher than the margins observed in 2022, this represents a moderation from the exceptional performance of 2023. The margin in December 2025 was 13.16%.

The observed fluctuations suggest that the net profit margin is sensitive to changes in revenue and cost structures. While the overall trend is positive, the recent stabilization and slight decline from the 2023 peak indicate that maintaining high profitability may require continued focus on cost control and revenue optimization.

Return on Equity (ROE) exhibited a notable upward trend over the analyzed period, though with considerable quarterly fluctuations. Initial values were relatively modest, increasing significantly in the latter half of 2022 and continuing into 2023 before stabilizing and experiencing a slight decline towards the end of the period.

Initial Period (Mar 31, 2022 – Dec 31, 2022)

ROE began at 5.58% in March 2022, decreased to 4.39% in June 2022, and showed a slight increase to 4.44% in September 2022. A substantial increase was then observed in December 2022, reaching 6.46%. This initial period demonstrates moderate and somewhat inconsistent performance.

Significant Growth (Mar 31, 2023 – Sep 30, 2023)

A period of rapid growth commenced in March 2023, with ROE reaching 7.14%. This growth accelerated dramatically in June 2023, peaking at 20.56%, followed by 22.08% in September 2023. This substantial increase suggests a significant improvement in profitability relative to equity.

Stabilization and Decline (Dec 31, 2023 – Dec 31, 2025)

Following the peak, ROE remained high, at 22.69% in December 2023 and 23.78% in March 2024. However, a considerable decrease was observed in June 2024, falling to 13.22%. ROE then experienced a gradual increase through December 2025, reaching 13.48%, but remained below the levels seen in the prior year. This suggests a potential stabilization at a lower, though still positive, level.

Net Income and Stockholders’ Equity Relationship

The increase in ROE from 2022 to 2023 correlates with both increases in net income and stockholders’ equity. The substantial jump in net income during the June 2023 quarter appears to be a primary driver of the ROE surge. While stockholders’ equity consistently increased throughout the period, the rate of increase did not always align with the fluctuations in net income, indicating that changes in net income had a more pronounced effect on ROE.

Overall, the analyzed period demonstrates a company that significantly improved its return on equity, followed by a period of stabilization and a moderate decline. The fluctuations highlight the sensitivity of ROE to changes in net income and the importance of monitoring both profitability and equity levels.

The Return on Assets (ROA) exhibited a generally increasing trend over the observed period, though with notable fluctuations. Initial values were relatively modest, increasing significantly in the latter half of 2023 before stabilizing and experiencing a slight decline towards the end of the period.

Initial Period (Mar 31, 2022 – Dec 31, 2022)

ROA began at 2.03% and demonstrated some volatility, reaching a low of 1.66% in June 2022 before recovering to 2.44% by December 2022. This suggests a moderate level of profitability relative to the asset base during this timeframe.

Significant Increase (Mar 31, 2023 – Sep 30, 2023)

A substantial increase in ROA is observed starting in March 2023, peaking at 10.51% in September 2023. This surge is primarily attributable to a significant increase in net income, particularly in the June 2023 quarter, while asset growth was more moderate. This period represents a marked improvement in the efficiency with which assets are being utilized to generate profit.

Stabilization and Decline (Dec 31, 2023 – Dec 31, 2025)

Following the peak, ROA experienced a slight decline, fluctuating between approximately 6.71% and 9.54% before settling at 6.71% in December 2025. While remaining at a comparatively high level compared to the initial period, this suggests a potential stabilization or slight decrease in the efficiency of asset utilization. The increase in total assets appears to be growing at a faster rate than net income during this period, contributing to the decline.

Quarterly Variations

ROA consistently showed quarterly variations, indicating seasonal or cyclical influences on profitability. For example, a dip is observed in June 2024, followed by a recovery in September 2024. These fluctuations warrant further investigation to understand the underlying drivers.

Overall, the ROA demonstrates a positive trajectory, particularly when considering the substantial improvement observed in 2023. However, the recent stabilization and slight decline suggest a need for continued monitoring to ensure sustained profitability relative to the company’s asset base.