Analysis of Investments
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- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Common Stock Valuation Ratios
- Dividend Discount Model (DDM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Net Profit Margin since 2012
- Current Ratio since 2012
- Price to Operating Profit (P/OP) since 2012
- Price to Book Value (P/BV) since 2012
- Price to Sales (P/S) since 2012
- Aggregate Accruals
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Adjustment to Net Income (Loss): Mark to Market Available-for-sale Securities
ServiceNow Inc., adjustment to net income
US$ in millions
| 12 months ended: | Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | |
|---|---|---|---|---|---|---|
| Net income (as reported) | ||||||
| Add: Unrealized gains (losses) on marketable securities, net of tax | ||||||
| Net income (adjusted) |
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
Reported net income demonstrates a significant increase from 2021 to 2023, followed by a decrease in 2024, and a subsequent increase in 2025. Adjusted net income mirrors this trend, though the magnitude of the fluctuations is less pronounced. The difference between reported and adjusted net income suggests the presence of mark-to-market adjustments related to available-for-sale securities.
- Trend in Reported Net Income
- Reported net income increased from US$230 million in 2021 to US$325 million in 2022, representing a growth of approximately 41%. A substantial increase is then observed in 2023, reaching US$1,731 million. This is followed by a decrease to US$1,425 million in 2024, and a recovery to US$1,748 million in 2025.
- Trend in Adjusted Net Income
- Adjusted net income increased from US$211 million in 2021 to US$259 million in 2022, a growth of approximately 23%. Similar to reported net income, adjusted net income experiences a significant increase in 2023, reaching US$1,769 million. A decrease to US$1,437 million is noted in 2024, followed by an increase to US$1,775 million in 2025.
- Impact of Adjustments
- The difference between reported and adjusted net income is US$19 million in 2021, US$66 million in 2022, US$38 million in 2023, US$12 million in 2024, and US$3 million in 2025. This indicates that adjustments related to mark-to-market valuation of available-for-sale securities reduced reported net income in each year. The magnitude of this reduction decreased significantly from 2021 to 2025, suggesting a diminishing impact from these adjustments.
- Magnitude of Adjustment Changes
- The largest adjustment occurred in 2022, with a US$66 million difference between reported and adjusted net income. The adjustment decreased substantially in 2023, and continued to decrease in 2024 and 2025, approaching minimal impact by the end of the period. This suggests a stabilization of the value of available-for-sale securities or a reduction in the size of the portfolio subject to mark-to-market adjustments.
Overall, the adjustments to net income, stemming from mark-to-market valuation of available-for-sale securities, have a decreasing influence on the final net income figure over the observed period. While present in each year, the impact of these adjustments diminishes considerably, indicating a potential shift in investment strategy or market conditions affecting the valuation of these securities.
Adjusted Profitability Ratios: Mark to Market Available-for-sale Securities (Summary)
ServiceNow Inc., adjusted profitability ratios
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
The period under review demonstrates significant fluctuations in profitability ratios, particularly between 2021-2023, followed by a period of stabilization. Reported profitability metrics generally exceed adjusted figures, indicating the impact of mark-to-market adjustments on available-for-sale securities. A notable increase in profitability is observed in 2023, followed by a slight decline in 2024 and 2025.
- Net Profit Margin
- Both reported and adjusted net profit margins exhibited a modest increase from 3.90% and 3.58% in 2021 to 4.49% and 3.57% in 2022, respectively. A substantial surge occurred in 2023, with reported and adjusted margins reaching 19.30% and 19.72%. These margins then decreased to 12.97% and 13.08% in 2024, and stabilized slightly at 13.16% and 13.37% in 2025. The difference between reported and adjusted margins remained relatively consistent throughout the period.
- Return on Equity (ROE)
- Reported ROE mirrored the trend in net profit margin, increasing from 6.22% in 2021 to 6.46% in 2022. The most significant increase was observed in 2023, reaching 22.69%, before declining to 14.83% in 2024 and further to 13.48% in 2025. Adjusted ROE followed a similar pattern, moving from 5.71% to 5.15%, then to 23.19%, 14.95%, and finally 13.69%. The gap between reported and adjusted ROE remained relatively stable.
- Return on Assets (ROA)
- Reported ROA increased from 2.13% in 2021 to 2.44% in 2022, then experienced a substantial increase to 9.96% in 2023. This was followed by a decrease to 6.99% in 2024 and a slight further decline to 6.71% in 2025. Adjusted ROA exhibited a similar trend, rising from 1.95% in 2021 and 2022, to 10.17% in 2023, and then decreasing to 7.05% in 2024 and 6.82% in 2025. The difference between reported and adjusted ROA remained consistent.
The substantial increases in all profitability ratios in 2023, followed by declines in 2024 and stabilization in 2025, suggest a significant event or change in accounting treatment impacting the valuation of available-for-sale securities. The consistent difference between reported and adjusted figures highlights the material effect of these mark-to-market adjustments on overall profitability metrics.
ServiceNow Inc., Profitability Ratios: Reported vs. Adjusted
Adjusted Net Profit Margin
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
2025 Calculations
1 Net profit margin = 100 × Net income ÷ Revenues
= 100 × ÷ =
2 Adjusted net profit margin = 100 × Adjusted net income ÷ Revenues
= 100 × ÷ =
The period under review demonstrates significant fluctuations in net income and, consequently, net profit margins. While both reported and adjusted net income show an overall upward trajectory from 2021 to 2025, the growth is not linear and exhibits substantial variation, particularly between 2022 and 2023.
- Reported Net Profit Margin
- The reported net profit margin began at 3.90% in 2021, increasing to 4.49% in 2022. A substantial increase was then observed in 2023, reaching 19.30%. This was followed by a decline to 12.97% in 2024 and a slight recovery to 13.16% in 2025. The volatility suggests sensitivity to underlying revenue and cost structures.
- Adjusted Net Profit Margin
- The adjusted net profit margin followed a similar pattern to the reported margin. Starting at 3.58% in 2021, it rose to 3.57% in 2022, indicating minimal change. A significant increase occurred in 2023, reaching 19.72%. Similar to the reported margin, 2024 saw a decrease to 13.08%, followed by a modest increase to 13.37% in 2025. The adjusted margin consistently remains slightly below the reported margin each year.
The divergence between reported and adjusted net income, while present each year, remains relatively small in absolute terms. The adjustments made to net income do not appear to drastically alter the overall profitability picture. The substantial increases observed in both margins in 2023, followed by declines in 2024, warrant further investigation to understand the underlying drivers of these changes. The stabilization of margins in 2025 suggests a potential leveling off after the prior year’s volatility.
- Overall Trend
- Despite the fluctuations, a general upward trend in both reported and adjusted net profit margins is evident when comparing 2021 to 2025. However, the significant year-over-year changes highlight the importance of examining the components of net income to understand the factors influencing profitability.
Adjusted Return on Equity (ROE)
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
2025 Calculations
1 ROE = 100 × Net income ÷ Stockholders’ equity
= 100 × ÷ =
2 Adjusted ROE = 100 × Adjusted net income ÷ Stockholders’ equity
= 100 × ÷ =
The period under review demonstrates significant fluctuations in reported and adjusted net income, which consequently impacts return on equity (ROE) metrics. While both reported and adjusted net income show an upward trajectory overall, the rate of increase varies considerably year to year. This analysis focuses on the trends observed in the reported and adjusted ROE figures.
- Reported ROE
- Reported ROE begins at 6.22% in 2021 and increases to 6.46% in 2022, indicating a modest improvement. A substantial increase is then observed in 2023, reaching 22.69%. However, this is followed by a decline in 2024 to 14.83% and a further decrease in 2025 to 13.48%. The 2023 peak is significantly higher than the other years examined, suggesting a particularly profitable year for the company based on reported figures. The subsequent declines suggest a normalization of profitability or changes in equity structure.
- Adjusted ROE
- Adjusted ROE mirrors the trend of reported ROE, though with slightly different magnitudes. It starts at 5.71% in 2021 and decreases to 5.15% in 2022. A strong increase is then noted in 2023, reaching 23.19%. Similar to reported ROE, 2024 and 2025 show declines, with adjusted ROE falling to 14.95% and 13.69% respectively. The adjusted ROE consistently remains slightly higher than the reported ROE across all years, indicating that adjustments to net income generally result in a more favorable equity return.
- Relationship between Reported and Adjusted ROE
- The difference between reported and adjusted ROE remains relatively small throughout the period. This suggests that the adjustments made to net income are not drastically altering the overall profitability picture. The consistent positive difference indicates that the adjustments typically account for items that, when excluded from reported net income, reveal a stronger underlying performance. The parallel trends observed in both metrics suggest that the factors driving changes in profitability are impacting both reported and adjusted figures.
- Overall Trend
- The period begins with low, relatively stable ROE values in 2021 and 2022. A significant surge in profitability occurs in 2023, followed by a decline in both reported and adjusted ROE in the subsequent two years. This pattern suggests that the company experienced a period of exceptional growth in 2023, which was not sustained in 2024 and 2025. Further investigation into the factors driving the 2023 performance and the subsequent decline would be beneficial.
Adjusted Return on Assets (ROA)
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
2025 Calculations
1 ROA = 100 × Net income ÷ Total assets
= 100 × ÷ =
2 Adjusted ROA = 100 × Adjusted net income ÷ Total assets
= 100 × ÷ =
The period under review demonstrates significant fluctuations in reported and adjusted net income, which correspondingly impact reported and adjusted return on assets. A notable increase in both reported and adjusted net income occurs between 2022 and 2023, followed by a decrease in 2024, and a subsequent increase in 2025. This pattern is reflected in the ROA figures.
- Reported Net Income & ROA
- Reported net income increased from US$230 million in 2021 to US$325 million in 2022, representing a growth of approximately 41.3%. A substantial increase is then observed in 2023, reaching US$1,731 million, before decreasing to US$1,425 million in 2024. Reported net income rises again in 2025 to US$1,748 million. This income trend is mirrored in the reported ROA, which increased from 2.13% in 2021 to 2.44% in 2022. The most significant increase in reported ROA occurs between 2022 and 2023, reaching 9.96%. A decline is then seen in 2024 to 6.99%, followed by a slight decrease to 6.71% in 2025.
- Adjusted Net Income & ROA
- Adjusted net income follows a similar trajectory to reported net income, moving from US$211 million in 2021 to US$259 million in 2022 (approximately 22.7% growth). A substantial increase is observed in 2023, reaching US$1,769 million, followed by a decrease to US$1,437 million in 2024, and a subsequent increase to US$1,775 million in 2025. The adjusted ROA exhibits a comparable pattern, increasing from 1.95% in 2021 and 2022 to 10.17% in 2023, decreasing to 7.05% in 2024, and then decreasing slightly to 6.82% in 2025.
- Relationship between Reported and Adjusted ROA
- The adjusted ROA consistently remains slightly below the reported ROA across all observed periods. The difference between the two metrics is relatively small, suggesting that the adjustments made to net income have a moderate impact on the overall ROA calculation. The trends observed in both reported and adjusted ROA are highly correlated, indicating that the underlying drivers of profitability are similar regardless of the accounting adjustments applied.
- Overall Trend
- A clear pattern emerges of growth between 2021 and 2023, followed by a contraction in 2024, and a recovery in 2025. The ROA figures suggest that the company’s efficiency in generating profits from its assets has improved significantly between 2021 and 2023, but experienced a decline in 2024 before stabilizing in 2025. The consistency between reported and adjusted ROA suggests that the core profitability trends are robust.