ServiceNow emerges as investors take interest in federal government business

ServiceNow emerges as investors take interest in federal government business

ServiceNow (NOW) reported earnings for the September quarter that beat analysts’ estimates, while revenue faltered amid exchange rate headwinds. NOW shares jumped on the news amid the strength of the federal government’s ServiceNow business.


ServiceNow, based in Santa Clara, Calif., released its third-quarter results after the market closed on Wednesday.

“September’s ServiceNow results are a welcome change from the disappointing results of Microsoft (MSFT) and we expect them to help advance broader software,” MoffettNathanson analyst Sterling Auty said in a report.

ServiceNow Revenue Best Estimates

At Wolfe Research, analyst Alex Zukin said in a report, “We believe NOW stock has reclaimed the title of ‘safest SaaS (software as a service) asset to hold through 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 impression than feared and the execution and strength of the Q3 order book should reassure investors. NOW is back on track to reach its trajectory medium-term growth of more than 20%,” said Cowen analyst Derrick Wood. in a report.

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

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

NOW the stock was 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 federal award given to ServiceNow, analysts said.

“Management reiterated that it continues to operate in an uncertain market environment similar to what it announced at the end of last quarter,” Deutsche Bank analyst Brad Zelnick said in a statement. “However, execution was clearly strong and likely helped by an all-time record quarter in their US federal businesses which we believe are 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 reservations, rose 18% to $5.87 billion. CRPO reservations are an aggregate of deferred revenue and backlog.

Analysts estimated CRPO bookings at $5.96 billion on 20% growth.

ServiceNow said it expects subscription revenue of about $1.836 billion for the December quarter amid the forecast. ServiceNow stock analysts forecast subscription revenue of $1.873 billion. The company forecasts CRPO growth of 20% versus an estimated growth of 22%.

ServiceNow Million Dollar Customers

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

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

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

The NOW stock holds a relative strength rating of 29 out of the best possible 99, according to the IBD stock balance sheet.

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


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