ServiceNow tops $2B revenue barrier and raises its annual forecast

Enterprise software company ServiceNow Inc. delivered strong first-quarter financial results today, surpassing the $2 billion quarterly revenue barrier for the first time and raising its full-year guidance for subscription sales.

The company reported net income of $150 million, up from a profit of just $75 million one year earlier. Earnings, adjusted for costs such as stock compensation, came to $2.38 per share, while revenue jumped 22% from a year earlier to $2.097 billion.

Wall Street had been looking for earnings of just $2.04 per share on revenue of $2.08 billion, so the results were a solid beat.

ServiceNow officials also said they expect subscription revenue to increase by more than 23% for the full fiscal year, to as much as $8.52 billion. That’s notably higher than its previous guidance range of between $8.44 billion and $8.5 billion, and above analysts’ estimates.

For the current quarter, ServiceNow said it’s forecasting subscription revenue of $2.04 billion, a number that also just exceeds Wall Street’s forecast.

ServiceNow Chairman and Chief Executive Bill McDermott (pictured) said the company delivered a powerful combination of growth and profitability. “C‑level decision makers are actively making enterprise platform investments that deliver significant business impact,” he added. “Whether it’s cost‑takeout or innovation to drive growth, ServiceNow is the intelligent platform for end‑to‑end digital transformation.”

ServiceNow is a leading player in the workflow automation software market, selling applications that help companies to organize and automate their personnel, customer service and information technology operations. The company was founded back in 2003, but formally pivoted to become an enterprise software firm in 2014. So it has managed to break the $2 billion revenue barrier in less than nine years, making it the fastest enterprise software firm to achieve that milestone, McDermott told MarketWatch in an interview.

“We are the platform for end-to-end digital transformation,” he said. “We have hit a new gear.”

ServiceNow’s strong results are likely to be received as a sign of optimism in a software industry that has been shaken by lower demand for technology in recent quarters. Companies have been scaling back their investments in software in recent months as they brace themselves for the prospect of a global recession.

Last year, McDermott became one of the first executives of a big software firm to admit that customers were showing reluctance to commit to fresh purchases. Despite that, his company has apparently weathered the storm better than most. Just three months earlier, McDermott swore that the company would not be making any job cuts this year, unlike many of its industry peers. Today, he reiterated that promise, saying he regards it as a “solemn oath.”

Instead of cutting costs, ServiceNow has actually been spending quite a bit of money this year, notably through its investment arm ServiceNow Ventures. In the quarter just gone, it led fresh funding rounds in startups such as OneSignal Inc., creator of a customer engagement platform, as well as observability firm Nobl9 Inc. and data security provider Immuta Inc.

The company also found time to launch a major update to its workflow automation platform. The ServiceNow Utah release announced last month added multiple new features around artificial intelligence and cybersecurity, including a new AI-powered search tool for support teams.

Despite ServiceNow’s strong showing today, the investor reaction was mixed. ServiceNow’s stock initially gained around 2% in extended trading, before reversing to a 2% decline. The stock had gained almost 3% during the regular trading session.

Photo: SAP SE