NOW Shares Pop as ServiceNow Earnings Top Estimates, Investors Miss Earnings

NOW Shares Pop as ServiceNow Earnings Top Estimates, Investors Miss Earnings
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Service now (NOW) reported revenue that beat analysts’ estimates in the September quarter, while missing out on currency-driven gains. NOW shares rose on news that ServiceNow’s federal government business is getting a boost.


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

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

ServiceNow Earnings Best Estimates

Alex Zukin, an analyst at Wolfe Research, said in a report: “We believe NOW stock has reclaimed its title as a ‘safe 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. The enterprise software maker said revenue rose 21% to $1.83 billion.

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

Cowen analyst Derrick Wood said, “We think it was better than the scary print, and the 3Q performance and trailing strength should give investors comfort. NOW, the average is back on track versus the medium-term growth trajectory of more than 20%.” in the report.

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

NOW shares rose 14.4% to 419.30 in morning trading 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 upgrade represents ServiceNow’s largest award from the federal government, analysts said.

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

Looking at the earnings report, ServiceNow stock is down 43% in 2022.

The enterprise software maker said its current remaining performance obligations, or CRPO, orders rose 18% to $5.87 billion for the third quarter. CRPO bookings are deferred revenue and booking accruals.

Analysts estimated CRPO orders rose 20% to $5.96 billion.

ServiceNow said management expects subscription revenue for the mid-December quarter to be about $1.836 billion. ServiceNow stock analysts forecast subscription revenue of $1.873 billion. The company forecasts 20% growth in CRPO. It predicts a 22% increase.

ServiceNow’s Million Dollar Customers

The company currently has 1,530 customers with an annual contract value of more than $1 million, a 22% year-over-year increase.

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

In addition, ServiceNow expanded from its core business to software for human resources, customer service management and security.

NOW shares have a relative strength rating of 29 out of the best possible 99. 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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