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The workflow management software company continues to benefit from expanding enterprise IT budgets.
Dreamstime
ServiceNow
posted better-than-expected results for the first quarter, while boosting its outlook for the full year, as the workflow management software company continued to benefit from expanding enterprise IT budgets.
The results follows similarly strong March quarter results from
IBM
(ticker: IBM),
Microsoft
(MSFT), and others.
For the quarter, ServiceNow (ticker: NOW) posted subscription revenue of $1.631 billion, up 26%, and ahead of the company’s forecast range of $1.61 billion to $1.62 billion. Overall revenue in the quarter was $1.72 billion. The company earned $1.73 a share in the quarter on an adjusted basis, ahead of the Street consensus estimate at $1.70 a share.
In late trading Wednesday, ServiceNow shares rallied 7%.
ServiceNow said current remaining performance obligations—a measure of work contracted but not yet completed—were $5.69 billion on a currency adjusted basis, up 30.5% from a year ago, a point better than it had projected. The company had 52 transactions in the quarter that had more than $1 million in net new annual contract value, decelerating from 135 large deals added in the December quarter. The company now has 1,401 customers with annual contract value above $1 million.
For the June quarter, ServiceNow is projecting subscription revenue between $1.67 billion and $1.675 billion, up 29% from a year earlier, with current remaining performance obligation growth of 28%.
For the full year, ServiceNow boosted the bottom end of its previous forecast for subscription revenue, now projecting $7.025 billion to $7.04 billion, compared with a previous range of $7.02 billion to $7.04 billion.
Like Microsoft, which reported better-than-expected results Tuesday, ServiceNow’s business isn’t directly affected by the macro issues now impacting both consumers businesses and enterprise hardware companies. The company doesn’t rely on the global supply chain, it has no exposure to the advertising market, and it isn’t directly affected by rising fuel costs.
“Our company is actually helping companies solve those problems,” CEO Bill McDermott said in an interview. “Our customers know they have to continue to invest in digital transformation. There is no other way to fight inflation. Software is the only deflationary force that exists in the world today.”
Obviously, even ServiceNow would be affected if the world fell into a deep economic downturn. But the CEO says the company’s customers are likely to continue to spend heavily even in a difficult macro environment. McDermott recalls one customer who told him, “If we slow investment in the near term, we’ll lose in the midterm, and we won’t be in business in the long-term.”
Write to Eric J. Savitz at [email protected]
