NOW shares surge as ServiceNow earnings beat estimates, investors shrug off revenue loss

NOW shares surge as ServiceNow earnings beat estimates, investors shrug off revenue loss
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service now (NOW) reported September quarter earnings that beat analysts’ estimates, while revenue fell short due to currency exchange rate headwinds. NOW shares rose on the news amid strength in ServiceNow’s federal government business.


Santa Clara, California-based ServiceNow reported third-quarter earnings after the market closed on Wednesday.

“ServiceNow’s September results are a welcome change after disappointing results from Microsoft (MSFT) and hopefully help drive broader software,” Sterling Auty, an analyst at MoffettNathanson, said in a report.

ServiceNow Maximum Earnings Estimates

At Wolfe Research, analyst Alex Zukin said in a report: “We think NOW stock has reclaimed the title of ‘the most secure SaaS (software as a service) asset to own by the end of the year.'”

ServiceNow said third-quarter earnings rose 26% to $1.96 per share on an adjusted basis. Revenue rose 21% to $1.83 billion, the enterprise software maker said.

Analysts had expected ServiceNow to report earnings of $1.85 per share on revenue of $1.85 billion. A year earlier, ServiceNow earned $1.55 a share on sales of $1.51 billion.

“We believe this was a much better print than feared and the third quarter run and strong order book should give investors peace of mind. It is NOW back on track to deliver on its mid-term growth trajectory.” term of more than 20%,” said Derrick Wood, an analyst at Cowen. in a report.

Additionally, ServiceNow said subscription revenue for the period rose 22% to $1.742 billion, below estimates of $1.75 billion.

NOW shares rose 14.4% to 419.30 in morning trading on the stock market today.

NOW shares are down 43% this year

The software maker won a $44 million contract from the Department of Veterans Affairs in September. The renewal represented the largest ServiceNow award from the federal government, analysts said.

“Management reiterated that they continue to operate in an uncertain market environment similar to the one they reported at the end of last quarter,” Deutsche Bank analyst Brad Zelnick said in a report. “However, execution was clearly strong and was likely helped by an all-time record quarter in its US federal business, which we believe is less economically sensitive.”

Heading into the earnings report, ServiceNow shares were down 43% in 2022.

The enterprise software maker said third-quarter current remaining performance obligations, or CRPO reserves, rose 18% to $5.87 billion. CRPO reserves are an aggregate of deferred revenue and order backlog.

Analysts estimated CRPO reserves at $5.96 billion with 20% growth.

ServiceNow said it expects December quarter subscription revenue of about $1.836 billion at the midpoint of guidance. Stock analysts at ServiceNow forecast subscription revenue of $1.873 billion. The company forecasts CRPO growth of 20% vs. 20%. growth estimates of 22%.

ServiceNow Millionaire Customers

The company now has 1,530 customers with more than $1 million in annual contract value, representing 22% year-over-year growth.

The company’s software tracks and manages the services provided by information technology departments. Its self-service technology portal allows company employees to access administrative and workflow tools.

Additionally, ServiceNow has expanded from its core business into software for human resources, customer service management, and security.

NOW stock has a relative strength rating of 29 out of a possible best 99, according to IBD stock check.

Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity, and cloud computing.


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