ServiceNow, the leading IT workflow-management software company, has announced better-than-expected quarterly results and increased its full-year financial guidance. The company's aggressive push to incorporate generative artificial intelligence (AI) across its product line has contributed to its success.
Just one day after Microsoft posted faster-than-anticipated growth in its Azure cloud-computing business, attributed in part to an impressive contribution from AI workloads, ServiceNow released its outstanding September quarter numbers. CEO Bill McDermott expressed his satisfaction with the results, stating, "It really was an excellent quarter." He also highlighted that ServiceNow is now the fastest-growing enterprise software of all time at this stage of development.
Push into Generative AI
ServiceNow's strong performance in the third quarter can be attributed to their foray into generative AI software. McDermott revealed that the company secured numerous multimillion-dollar AI deals during this period. He emphasized that ServiceNow is the first to bring real AI products to the market and has successfully integrated AI into various use cases across its platform.
Transforming Customer Experiences
With the integration of AI, ServiceNow is revolutionizing the experiences of its clients' customers in industries such as retail, healthcare, and insurance. By using AI software for applications like case and chat summarization, as well as assisting customer service agents, ServiceNow aims to simplify the way businesses interact with their customers and take care of their employees.
Monetizing AI Offerings
While monetizing new AI offerings remains a question for enterprise software providers, McDermott is confident that there will be a surge in spending on these products. He anticipates that spending on IT will double from its current annual average of 3.5% to approximately 7%. McDermott believes CEOs are increasingly recognizing the importance of investing in AI software and expects companies to reallocate funds from other areas to prioritize AI initiatives.
ServiceNow reported revenue of $2.288 billion for the quarter, reflecting a 27% increase compared to the previous year and surpassing the Street consensus forecast of $2.274 billion.
ServiceNow's remarkable performance in the third quarter, driven by its focus on generative AI and dedication to transforming customer experiences, positions the company as a frontrunner in the enterprise software market. With an optimistic outlook for increased spending on AI products, ServiceNow continues to impress both investors and industry experts alike.
ServiceNow Beats Expectations with Strong Q3 Results
ServiceNow, a leading cloud services provider, has reported impressive third-quarter results, surpassing both management's expectations and analyst predictions.
Subscription Revenue Growth
ServiceNow's subscription revenue increased by 27% in the quarter, reaching $2.216 billion. This figure exceeded the company's projected range of $2.185 billion to $2.195 billion and the consensus estimate of $2.191 billion.
The company posted adjusted profits of $2.92 per share, outperforming the consensus forecast of $2.56 per share. Under generally accepted accounting principles, ServiceNow earned $1.17 per share. Notably, the non-GAAP operating margin for the quarter stood at 30%, exceeding the company's forecast of 27%.
Strong Performance Obligations Growth
ServiceNow's performance obligations at the end of the quarter reached $7.43 billion, marking a 27% increase compared to the prior year.
Promising Outlook for Q4 and Full Year
For the upcoming December quarter, ServiceNow predicts subscription revenue of $2.32 billion to $2.325 billion, representing a growth rate of 24.5% to 25% and exceeding the previous street forecast of $2.301 billion. Additionally, the company expects a 21% growth in performance obligations for the quarter and a non-GAAP operating margin of 27.5%, slightly higher than the consensus forecast of 27.4%.
For the full year, ServiceNow now projects subscription revenue between $8.635 billion and $8.64 billion, indicating a strong growth rate of 25.5%. The company has raised its guidance from the previous range of $8.58 billion to $8.6 billion. Furthermore, ServiceNow has increased its full year non-GAAP operating margin forecast to 27%, up from 26.5%.
Positive Feedback from CEO
ServiceNow's CEO, McDermott, expressed his satisfaction with the company's performance, stating, "ServiceNow had another remarkable quarter. We've introduced over 5,000 new capabilities this year, including generative AI, catering to our customers' most crucial needs."