ServiceNow's free cash flow adds back some cash costs
The company's quarterly reconciliation shows why a reported free-cash-flow figure can differ from operating cash minus equipment spending.
A cash-flow label does not tell you everything about how a company calculates it. ServiceNow's latest earnings release gives investors a useful example: its free-cash-flow measure removes certain cash costs from the comparison.
ServiceNow (NYSE: NOW) reported $822 million of non-GAAP free cash flow in its October 28 results. The reconciliation covers the three months ended September 30, 2026, and is unaudited.
Follow the three lines
The calculation starts with $839 million of GAAP operating cash flow. It subtracts $91 million of property-and-equipment purchases, then adds back $74 million of business-combination and other related costs. All amounts are in US dollars.
Without that addback, the simple operating-cash-minus-equipment subtotal is $748 million. Adding $74 million produces the company's $822 million measure. That arithmetic explains the gap; it does not mean the excluded cash expenditure never happened.
ServiceNow's definition says its measure adds back cash outflows for legal settlements and business-combination and related costs, including compensation expense. The quarterly reconciliation identifies the business-combination and related-cost adjustment. The definition and the actual quarter's adjustment should be read together.
Compare definitions before comparing companies
A reader using only operating cash less equipment purchases would be answering a different question from the company's adjusted measure. Both can be useful, provided the adjustment stays visible and the labels remain clear.
The next research question is what those excluded costs represent and whether similar spending appears in later periods. This release's reconciliation alone cannot establish that the costs will disappear or recur. Nor is the adjusted figure a measure of unrestricted cash in the bank.
For an investment comparison, start with the reported operating cash flow, identify the investment deduction, and list every cash-cost addback. That makes it easier to compare businesses using consistent assumptions instead of relying on a shared label.