UPDATED 18:40 EDT / JANUARY 29 2020

CLOUD

ServiceNow stock jumps 8% on stronger-than-expected earnings

Wrapping up its first quarter under new Chief Executive Officer Bill McDermott, ServiceNow today posted results that beat expectations on both profit and revenue.

The company reported fourth quarter earnings of 96 cents per share on revenue of $951.8 million, up 33% from the same period a year ago. That handily beat Wall Street’s forecast of earnings of 87 cents per share on revenue of $941.2 million.

ServiceNow sells a cloud automation platform for companies looking to automate parts of their business that involve service delivery. Examples include a customer-facing service that provides technical support to users or an internal service that provides company laptops to new employees.

The company has enjoyed strong growth in recent years and the latest results suggest that it has been able to shrug off any disruption that might have been caused by its recent change of leadership. The company announced that former SAP SE boss McDermott (pictured) was taking over the reins as its new CEO in October, replacing John Donahoe, who has moved to Nike Inc.

Donahoe himself had only held the job two years after replacing previous boss Frank Slootman in 2017.

McDermott told investors that the company’s subscription billings came to $1.29 billion for the quarter, up 36% from a year ago. Subscription revenue was up 35% to $899 million, while the company ended the quarter with 892 customers with over $1 million in annual contract value, up 32%.

That was music to the ears of ServiceNow’s investors, as the company’s stock jumped 8% in after-hours trading.

“ServiceNow beat the high end of guidance for Q4, ending the year very strong,” McDermott said in a statement. “In Q4, we saw record deals and broad expansion of the Now Platform. ServiceNow is orchestrating what every company wants — workflows that create great experiences.”

Constellation Research Inc. analyst Holger Mueller told SiliconANGLE that ServiceNow’s rapid growth was thanks to the company expanding its case and ticket automation core into new application areas and new verticals.

“The longer-term question is, will it expand into adjacent automation areas, and if so, when?” Mueller said. “The good news is that with Bill McDermott at the helm, it now has a CEO who knows and understands both enterprise resource planning and related automation areas, so that will help.”

Despite a promise by McDermott to be “very careful” when it comes to new acquisitions, ServiceNow acquired two startups this month alone. On Tuesday it announced its intent to acquire Passage AI Inc., a startup that specializes in chatbot development, for an undisclosed price. A week before, it bought a company called Loom Systems Ltd., which sells an infrastructure monitoring platform that uses AI to detect technical issues.

ServiceNow said the plan is to bake Passage AI into its service delivery platform’s customer support tools, while Loom Systems’ technology will be used to enhance its platform’s IT monitoring and technical support delivery capabilities.

Photo: SAP

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