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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 

FORM 10-Q
(Mark One)
Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2022
OR
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission File Number: 001-35580

now-20220930_g1.jpg
SERVICENOW, INC.
(Exact name of Registrant as specified in its charter) 
Delaware20-2056195
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
ServiceNow, Inc.
2225 Lawson Lane
Santa Clara, California 95054
(Address, including zip code, of Registrant’s principal executive offices)

(408) 501-8550
(Registrant’s telephone number, including area code) 

Not Applicable
(Former name, former address and formal fiscal year, if changed since last report.)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common stock, par value $0.001 per shareNOWThe New York Stock Exchange
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes No  
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes No  


Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
Accelerated Filer
Non-Accelerated Filer
Smaller Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No
As of September 30, 2022, there were approximately 202 million shares of the Registrant’s Common Stock outstanding.



TABLE OF CONTENTS

 
Page
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
   
 
 
i

PART I

ITEM 1.     FINANCIAL STATEMENTS

SERVICENOW, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)

September 30, 2022December 31, 2021
Assets(unaudited)
Current assets:
Cash and cash equivalents$1,248 $1,728 
Short-term investments2,708 1,576 
Accounts receivable, net898 1,390 
Current portion of deferred commissions330 303 
Prepaid expenses and other current assets292 223 
Total current assets5,476 5,220 
Deferred commissions, less current portion650 623 
Long-term investments1,517 1,630 
Property and equipment, net914 766 
Operating lease right-of-use assets581 591 
Intangible assets, net234 287 
Goodwill794 777 
Deferred tax assets604 692 
Other assets336 212 
Total assets$11,106 $10,798 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$195 $89 
Accrued expenses and other current liabilities657 850 
Current portion of deferred revenue3,491 3,836 
Current portion of operating lease liabilities89 82 
Current debt, net 92 
Total current liabilities4,432 4,949 
Deferred revenue, less current portion63 63 
Operating lease liabilities, less current portion551 556 
Long-term debt, net1,485 1,484 
Other long-term liabilities52 51 
Total liabilities6,583 7,103 
Commitments and contingencies
Stockholders’ equity:
Common stock  
Additional paid-in capital4,507 3,665 
Accumulated other comprehensive income (loss)(172)34 
Retained earnings (accumulated deficit)188 (4)
Total stockholders’ equity4,523 3,695 
Total liabilities and stockholders’ equity$11,106 $10,798 


See accompanying notes to condensed consolidated financial statements
1

SERVICENOW, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions, except number of shares which are reflected in thousands and per share data)
(unaudited) 
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Revenues:
Subscription$1,742 $1,427 $5,031 $4,050 
Professional services and other89 85 274 232 
Total revenues1,831 1,512 5,305 4,282 
Cost of revenues(1):
Subscription301 264 863 740 
Professional services and other99 86 295 239 
Total cost of revenues400 350 1,158 979 
Gross profit1,431 1,162 4,147 3,303 
Operating expenses(1):
Sales and marketing697 579 2,092 1,660 
Research and development456 358 1,314 1,005 
General and administrative187 151 541 416 
Total operating expenses1,340 1,088 3,947 3,081 
Income from operations91 74 200 222 
Interest expense(8)(7)(20)(21)
Other income, net19 1 36 16 
Income before income taxes102 68 216 217 
Provision for income taxes22 5 41 13 
Net income$80 $63 $175 $204 
Net income per share - basic$0.39 $0.32 $0.87 $1.03 
Net income per share - diluted$0.39 $0.31 $0.86 $1.00 
Weighted-average shares used to compute net income per share - basic202,045 198,600 201,026 197,680 
Weighted-average shares used to compute net income per share - diluted203,121 203,124 203,350 202,729 
Other comprehensive income (loss):
Foreign currency translation adjustments$(51)$(20)$(125)$(37)
Unrealized gain (loss) on investments, net of tax(21)(2)(81)(9)
Other comprehensive income (loss)(72)(22)(206)(46)
Comprehensive income (loss)$8 $41 $(31)$158 
(1)Includes stock-based compensation as follows:
 Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Cost of revenues:
Subscription$41 $33 $116 $95 
Professional services and other$17 $15 51 43 
Operating expenses:
Sales and marketing$119 $101 337 293 
Research and development$127 $102 368 288 
General and administrative$57 $40 166 110 
See accompanying notes to condensed consolidated financial statements
2

SERVICENOW, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in millions, except number of shares which are reflected in thousands)
(unaudited)
Three Months Ended September 30, 2022Three Months Ended September 30, 2021
Common StockAdditional
Paid-in
Capital
Retained Earnings (Accumulated Deficit)Accumulated
Other
Comprehensive Income (Loss)
Total
Stockholders’
Equity
Common StockAdditional
Paid-in
Capital
Retained Earnings (Accumulated Deficit)Accumulated
Other
Comprehensive Income (Loss)
Total
Stockholders’
Equity
 SharesAmountSharesAmount
Balance at beginning of the period201,614 $ $4,186 $108 $(100)$4,194 198,135 $ $3,298 $(93)$70 $3,275 
Common stock issued under employee stock plans751 — 71 — — 71 860 — 71 — — 71 
Taxes paid related to net share settlement of equity awards— — (111)— — (111)— — (142)— — (142)
Stock-based compensation— — 361 — — 361 — — 290 — — 290 
Settlement of 2022 Notes conversion feature— — — — — — — — (25)— — (25)
Benefit from exercise of 2022 Note Hedge— — — — — — — — 24 — — 24 
Other comprehensive income (loss), net of tax— — — — (72)(72)— — — — (22)(22)
Net income— — — 80 — 80 — — — 63 — 63 
Balance at end of the period202,365 $ $4,507 $188 $(172)$4,523 198,995 $ $3,516 $(30)$48 $3,534 
Nine Months Ended September 30, 2022Nine Months Ended September 30, 2021
Common StockAdditional
Paid-in
Capital
Retained Earnings (Accumulated Deficit)Accumulated
Other
Comprehensive Income (Loss)
Total
Stockholders’
Equity
Common StockAdditional
Paid-in
Capital
Retained Earnings (Accumulated Deficit)Accumulated
Other
Comprehensive Income (Loss)
Total
Stockholders’
Equity
 SharesAmountSharesAmount
Balance at beginning of the period199,608 $ $3,665 $(4)$34 $3,695 195,845 $ $2,974 $(234)$94 $2,834 
Cumulative-effect adjustment from adoption of Accounting Standards Update (ASU) 2020-06— — (19)17 — (2)— — — — — — 
Common stock issued under employee stock plans2,154 — 177 — — 177 2,614 — 166 — — 166 
Taxes paid related to net share settlement of equity awards— — (352)— — (352)— — (457)— — (457)
Stock-based compensation— — 1,036 — — 1,036 — — 828 — — 828 
Shares granted related to business combination— — — — — — — — 6 — — 6 
Settlement of 2022 Warrants603 — — — — — 536 — — — — — 
Settlement of 2022 Notes conversion feature— — (233)— — (233)— — (216)— — (216)
Benefit from exercise of 2022 Note Hedge— — 233 — — 233 — — 215 — — 215 
Other comprehensive income (loss), net of tax— — — — (206)(206)— — — — (46)(46)
Net income— — — 175 — 175 — — — 204 — 204 
Balance at end of the period202,365 $ $4,507 $188 $(172)$4,523 198,995 $ $3,516 $(30)$48 $3,534 

See accompanying notes to condensed consolidated financial statements
3

SERVICENOW, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
 Nine Months Ended September 30,
20222021
Cash flows from operating activities:
Net income$175 $204 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization315 346 
Amortization of deferred commissions261 211 
Stock-based compensation1,038 828 
Deferred income taxes(3)(21)
Repayments of convertible senior notes attributable to debt discount (15)
Other9 37 
Changes in operating assets and liabilities, net of effect of business combinations:
Accounts receivable445 219 
Deferred commissions(369)(344)
Prepaid expenses and other assets(73)(78)
Accounts payable116 39 
Deferred revenue(156)47 
Accrued expenses and other liabilities(197)(126)
Net cash provided by operating activities$1,561 $1,347 
Cash flows from investing activities:
Purchases of property and equipment(406)(292)
Business combinations, net of cash acquired(57)(778)
Purchases of investments(2,811)(1,741)
Purchases of non-marketable investments(138)(28)
Sales and maturities of investments1,700 1,579 
Other 3 12 
Net cash used in investing activities$(1,709)$(1,248)
Cash flows from financing activities:
Repayments of convertible senior notes attributable to principal(94)(59)
Proceeds from employee stock plans177 165 
Taxes paid related to net share settlement of equity awards(352)(457)
Net cash used in financing activities$(269)$(351)
Foreign currency effect on cash, cash equivalents and restricted cash(61)(21)
Net change in cash, cash equivalents and restricted cash(478)(273)
Cash, cash equivalents and restricted cash at beginning of period1,732 1,679 
Cash, cash equivalents and restricted cash at end of period$1,254 $1,406 
Cash, cash equivalents and restricted cash at end of period:
Cash and cash equivalents$1,248 $1,400 
Restricted cash included in prepaid expenses and other current assets6 6 
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows$1,254 $1,406 
Supplemental disclosures of other cash flow information:
Interest paid$23 $36 
Income taxes paid, net of refunds$33 $46 
Non-cash investing and financing activities:
Settlement of 2022 Notes conversion feature$233 $216 
Benefit from exercise of 2022 Note Hedge$233 $215 
Property and equipment included in accounts payable, accrued expenses and other liabilities$34 $54 

See accompanying notes to condensed consolidated financial statements
4

SERVICENOW, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
 
Unless the context requires otherwise, references in this report to “ServiceNow,” the “Company,” “we,” “us,” and “our” refer to ServiceNow, Inc. and its consolidated subsidiaries.

(1) Description of the Business

ServiceNow was founded on a simple premise: a better technology platform will help work flow better. We help global enterprises across industries, universities and governments to digitize their workflows. We categorize the workflows we provide into four primary areas: Technology (formerly known as Information Technology), Employee, Customer and Creator. The products under each of our workflows help customers connect work across systems and silos to enable great experiences for people. The Now Platform is uniquely positioned to enable our customers’ digital transformation from non-integrated enterprise technology solutions with manual and disconnected processes and activities, to integrated enterprise technology solutions with automation and connected processes and activities, which increases our customers’ resiliency and security and delivers additional value to their employees and consumers.

(2) Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements and condensed footnotes have been prepared in accordance with the applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements due to the permitted exclusion of certain disclosures for interim reporting. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary under GAAP for fair statement of results for the interim periods presented have been included. As a result of displaying amounts in millions, rounding differences may exist in the consolidated financial statements and footnote tables. The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for other interim periods or future years. The condensed consolidated balance sheet as of December 31, 2021 is derived from audited consolidated financial statements; however, it does not include all of the information and footnotes required by GAAP for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on February 3, 2022.

Principles of Consolidation

The accompanying condensed consolidated financial statements have been prepared in conformity with GAAP, and include our accounts and the accounts of our wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated upon consolidation.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as reported amounts of revenues and expenses during the reporting period. Such management estimates and assumptions include, but are not limited to, standalone selling price for each distinct performance obligation included in customer contracts with multiple performance obligations, the period of benefit for deferred commissions, valuation of intangible assets, the useful life of property and equipment and identifiable intangible assets, stock-based compensation expense and income taxes. Actual results could differ from those estimates. We assessed the impact of COVID-19 on the estimates and assumptions and determined there was no material impact.

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In January 2022, we completed an assessment of the useful life of our data center equipment and determined we should increase the estimated useful life of data center equipment from three years to four years. This change in accounting estimate was effective beginning fiscal year 2022. Based on the carrying amount of data center equipment included in property and equipment, net as of December 31, 2021, the effect of this change in estimate for the three and nine months ended September 30, 2022, was a reduction in depreciation expense of $20 million and $60 million, respectively, and an increase in net income of $18 million and $54 million, or $0.10 and $0.27 per share basic and $0.09 and $0.27 per share diluted, respectively.

Significant Accounting Policies

There were no significant changes to our significant accounting policies disclosed in “Note 2 – Summary of Significant Accounting Policies” of our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on February 3, 2022, other than the change in useful life of our data center equipment, discussed above.

Concentration of Credit Risk and Significant Customers

Credit risk arising from accounts receivable is mitigated to a certain extent due to our large number of customers and their dispersion across various industries and geographies. As of September 30, 2022, we had one customer, a US federal channel partner and systems integrator, that represented 22% of our accounts receivable balance and no customers that individually exceeded 10% of our total revenues in any of the periods presented. As of December 31, 2021, there were no customers that represented more than 10% of our accounts receivable balance. Our customers in Russia represented an immaterial portion of our total consolidated revenues and our accounts receivable balance in each of the periods presented. For purposes of assessing concentration of credit risk and significant customers, a group of customers under common control or customers that are affiliates of each other are regarded as a single customer.

Recently Adopted Accounting Pronouncements

Debt with Conversion Options
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, “Debt–Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging–Contracts in Entity’s Own Equity (Subtopic 815-40)” to simplify the accounting for convertible instruments and contracts on an entity’s own equity. The standard results in our 2022 Notes being accounted for as a single unit of debt and requires the if-converted method to calculate diluted earnings per share calculation. We adopted this standard effective January 1, 2022 using a modified retrospective method, under which the basis of all convertible instruments outstanding at adoption have been adjusted to the amounts that would have been recorded had the new guidance been applied from inception. The previously recorded equity component of the convertible instrument outstanding and amortization of the debt discount and issuance costs classified as equity are reclassified from equity to debt through an adjustment to the opening balance of accumulated deficit as of January 1, 2022, which will result in reduced interest expense in future periods. Adoption of the standard resulted in a decrease to accumulated deficit of $17 million, a decrease to additional paid-in capital of $19 million and an increase to debt, current of $2 million.

Further, we utilized the if-converted method for purposes of diluted net income per share. The impact of the change in methodology to determine diluted net income per share of common stock attributable to common stockholders is immaterial.

Acquired Contract Assets and Contract Liabilities

In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805): Accounting for Acquired Contract Assets and Contract Liabilities,” which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured in accordance with Topic 606, Revenue from Contracts with Customers, as if the acquirer had originated the contracts. The new standard is effective for interim and annual periods beginning after December 15, 2022. Early adoption is permitted, including in an interim period, for any period for which financial statements have not yet been issued. However, adoption in an interim period other than the first fiscal quarter requires an entity to apply the new guidance to all prior business combinations that have occurred since the beginning of the annual period in which the new guidance is adopted. We adopted this standard in the second quarter beginning April 1, 2022. The adoption had no impact to our condensed consolidated financial statements during the nine months ended September 30, 2022.


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(3) Investments
 
Marketable Debt Securities

The following is a summary of our available-for-sale debt securities recorded within short-term and long-term investments on the condensed consolidated balance sheets (in millions):
 September 30, 2022
 Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
Available-for-sale securities:
Commercial paper$595 $ $(3)$592 
Corporate notes and bonds3,361  (66)3,295 
Certificates of deposit169   169 
U.S. government and agency securities88  (1)87 
Mortgage-backed and asset-backed securities100  (18)82 
Total available-for-sale securities$4,313 $ $(88)$4,225 

December 31, 2021
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
Available-for-sale securities:
Commercial paper$528 $ $ $528 
Corporate notes and bonds2,418 1 (7)2,412 
Certificates of deposit28   28 
U.S. government and agency securities140   140 
Mortgage-backed and asset-backed securities100  (2)98 
Total available-for-sale securities$3,214 $1 $(9)$3,206 

As of September 30, 2022, the contractual maturities of our available-for-sale debt securities, excluding those securities classified within cash and cash equivalents on the condensed consolidated balance sheet and mortgage-backed and asset-backed securities that do not have a single maturity, did not exceed 36 months. The fair values of available-for-sale securities, by remaining contractual maturity, are as follows (in millions):
September 30, 2022
Due within 1 year$2,708 
Due in 1 year through 5 years1,435 
Instruments not due in single maturity82 
Total$4,225 

As of September 30, 2022 and December 31, 2021, the fair value of available-for-sale securities in a continuous loss position totaled $4,012 million and $2,416 million, the majority of which has been in a continuous unrealized loss position for less than 12 months.

The decline in fair value below amortized cost basis was not considered other than temporary as it is more likely than not we will hold the securities until maturity or a recovery of the cost basis, and credit-related impairment losses were not material as of September 30, 2022.

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Non-Marketable Equity Investments

As of September 30, 2022 and December 31, 2021, the total amount of non-marketable equity investments in privately-held companies included in other assets on our condensed consolidated balance sheets was $230 million and $99 million, respectively. Our non-marketable equity investments are accounted for using the measurement alternative which measures the investments at cost minus impairment, if any, plus or minus changes resulting from qualifying observable price changes resulting from the issuance of similar or identical securities in an orderly transaction by the same issuer. Determining whether an observed transaction is similar to a security within our portfolio requires judgment based on the rights and preferences of the securities. Recording upward and downward adjustments to the carrying value of our equity securities as a result of observable price changes requires quantitative assessments of the fair value of our securities using various valuation methodologies and involves the use of estimates. We classify these fair value measurements as Level 3 within the fair value hierarchy.

On December 31, 2021, we agreed to purchase $100 million of common and preferred shares of Celonis SE (“Celonis”), a privately-held company that develops and sells process mining software, in exchange for cash. The transaction was completed in March 2022.

(4)  Fair Value Measurements 

The following table presents our fair value hierarchy for our assets measured at fair value on a recurring basis as of September 30, 2022 (in millions): 
Level 1Level 2Total
Cash equivalents:
Money market funds$437 $ $437 
Commercial paper 239 239 
Corporate notes and bonds 21 21 
Deposits187  187 
U.S. government and agency securities 6 6 
Marketable securities:
Commercial paper 592 592 
Corporate notes and bonds 3,295 3,295 
Certificates of deposit 169 169 
Mortgage-backed and asset-backed securities 82 82 
U.S. government and agency securities 87 87 
Total$624 $4,491 $5,115 
 
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The following table presents our fair value hierarchy for our assets measured at fair value on a recurring basis as of December 31, 2021 (in millions): 
Level 1Level 2Total
Cash equivalents:
Money market funds$706 $ $706 
Commercial paper 110 110 
Corporate notes and bonds 28 28 
Certificates of deposit 8 8 
Deposits235  235 
Marketable securities:
Commercial paper 528 528 
Corporate notes and bonds 2,412 2,412 
Certificates of deposit 28 28 
Mortgage-backed and asset-backed securities 98 98 
U.S. government and agency securities 140 140 
Total$941 $3,352 $4,293 
 
We determine the fair value of our security holdings based on pricing from our service providers and market prices from industry-standard independent data providers. Such market prices may be quoted prices in active markets for identical assets (Level 1 inputs) or pricing determined using inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs) or using unobservable inputs that are supported by little or no market activity (Level 3 inputs). Our non-marketable equity investments are not included in the table above and are discussed in Note 3. See Note 8 for the fair value measurement of our derivative contracts and Note 10 for the fair value measurement of our long-term debt, which are also not included in the table above.

(5) Business Combinations

On June 15, 2022, we acquired Hitch Works, Inc., a skills mapping and intelligence company, to help our customers address talent gaps by connecting employee learning and development to workforce planning, for $57 million in a cash transaction. The purchase price was allocated based on the estimated fair value of developed technology intangible asset of $14 million (five-year estimated useful life), deferred tax liabilities of $2 million and goodwill of $45 million, which is not deductible for income tax purposes.

Goodwill is primarily attributed to the value expected from synergies resulting from the Hitch Works, Inc. acquisition. The fair values assigned to tangible and intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions and may be subject to change as additional information is received. The provisional measurements of fair value for income taxes payable and deferred taxes may be subject to change as additional information is received and certain tax returns are finalized. The Company expects to finalize the fair value measurements as soon as practicable, but not later than one year from the acquisition date.

On June 15, 2021, we acquired LightStep, Inc., a leading observability solution provider, for $512 million in a cash transaction. The purchase price was allocated based on the estimated fair value of developed technology intangible asset of $85 million (five-year estimated useful life), customer-related and brand assets of $11 million, net tangible assets of $8 million, deferred tax liabilities of $6 million and goodwill of $413 million, which is not deductible for income tax purposes.

We have included the financial results of business combinations in the consolidated financial statements from the respective dates of acquisition, which were not material. Pro forma revenue and earnings amounts on a combined basis have not been presented as it is impracticable due to the lack of availability of historical financial statements that comply with GAAP.

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(6) Goodwill and Intangible Assets
Goodwill balance consists of the following (in millions):
Carrying Amount
Balance as of December 31, 2021$777 
Goodwill acquired45 
Foreign currency translation adjustments(28)
Balance as of September 30, 2022$794 

Intangible assets consist of the following (in millions):
 September 30, 2022December 31, 2021
Developed technology$414 $415 
Patents69 69 
Other15 14 
Intangible assets, gross498 498 
Less: accumulated amortization(264)(211)
Intangible assets, net$234 $287 

The weighted-average useful life of the acquired developed technology for the nine months ended September 30, 2022 and 2021 was approximately five years. Amortization expense for intangible assets for each of the three months ended September 30, 2022 and 2021 was $20 million , and for the nine months ended September 30, 2022 and 2021 was $60 million and $53 million, respectively.

The following table presents the estimated future amortization expense related to intangible assets held at September 30, 2022 (in millions):
Years Ending December 31,
Remainder of 2022$20 
202374 
202468 
202547 
202617 
Thereafter8 
Total future amortization expense$234 

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(7) Property and Equipment
 
Property and equipment, net consists of the following (in millions):
 September 30, 2022December 31, 2021
Computer equipment$1,456 $1,226 
Computer software77 77 
Leasehold and other improvements218 200 
Furniture and fixtures79 74 
Construction in progress20 14 
Property and equipment, gross1,850 1,591 
Less: Accumulated depreciation(936)(825)
Property and equipment, net$914 $766 

Construction in progress consists primarily of leasehold and other improvements and in-process software development costs. Depreciation expense for the three months ended September 30, 2022 and 2021 was $66 million and $83 million, respectively, and for the nine months ended September 30, 2022 and 2021 was $185 million and $232 million, respectively.

(8) Derivative Contracts

As of September 30, 2022 and December 31, 2021, we had foreign currency forward contracts with total notional values of $487 million and $833 million, respectively, which are not designated as hedging instruments. Our foreign currency forward contracts are classified within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments in active markets, such as currency spot and forward rates. Outstanding foreign currency forward contracts are recorded at gross fair value as prepaid expenses and other current assets as well as accrued expenses and other current liabilities on the condensed consolidated balance sheets. The gross fair value of these foreign currency forward contracts was immaterial as of September 30, 2022 and December 31, 2021.

(9) Deferred Revenue and Performance Obligations

Revenues recognized during the three months ended September 30, 2022 and 2021 from amounts included in deferred revenue as of June 30, 2022 and 2021 were $1.6 billion and $1.3 billion, respectively.

Revenues recognized during the nine months ended September 30, 2022 and 2021 from amounts included in deferred revenue as of December 31, 2021 and 2020 were $3.3 billion and $2.6 billion, respectively.

Remaining Performance Obligations

Transaction price allocated to remaining performance obligations (“RPO”) represents contracted revenue that has not yet been recognized, which includes deferred revenue and non-cancelable amounts that will be invoiced and recognized as revenues in future periods. RPO excludes contracts that are billed in arrears, such as certain time and materials contracts, as we apply the “right to invoice” practical expedient under relevant accounting guidance.

As of September 30, 2022, the total non-cancelable RPO under our contracts with customers was $