Preview|NOW 4Q25: Solid Results Driven by Year-End Budget Flush, But would it Matter?
LLMs’ Enterprise Business not Hurting SaaS, Yet
We spoke with 3 top ServiceNow (NOW) channel partners. 4Q25 performance was generally robust, bolstered by a more pronounced year-end budget flush than in previous years despite some reported misses due to contract delays in the public sector. While the preliminary outlook for 1Q26 and full-year 2026 remains healthy and Now Assist penetration is rising, customer feedback does not yet indicate a significant acceleration in adoption. Partners generally expect collaborations with LLMs to drive incremental business this year, with minimal short-term impact on NOW’s core budget. We remain cautious on the application SaaS sector as we lack a clear catalyst to reverse the current bearish market narrative.
4Q25 solid led by budget flush, 2026 outlook overall solid
North American Channel Partner A
2025 Performance: NOW practice reached approximately US$400M (85% services, 15% resell), up 21.5%yoy, beat expectation of 20.8%.
4Q25 Growth: In line at 21.2%–21.3%yoy,
Budget Flush: The year-end budget flush contributed 1.75%–2% to growth (vs. the historical average of 1.5%–1.7%).
Macro headwinds in 1H25 caused customers to back-load spending into 4Q.
The budget flush began in mid-4Q rather than the typical mid-3Q start; this delay is expected to become the “new normal” amid macro uncertainty.
Similar trends were observed in the ERP and SCM SaaS segments.
Product Demand: Investment in workflow management and automation remains strong, particularly in ITSM and CSM modules. Demand for low-code/no-code solutions is also active.
Federal Sector: Trends similar to 3Q; the civilian sector saw a 4%–7%qoq decline, while the non-civilian (Defense) sector maintained healthy growth.
2026 Outlook: 1H26 targets are set at 20.6%–21.5%, a slight downward revision from three months ago. Notably, this guidance does not yet include potential incremental upside from Now Assist.
