UPDATED 20:02 EST / JANUARY 27 2021

CLOUD

ServiceNow tops earnings expectations with strong subscription revenue growth

Updated:

ServiceNow Inc. reported strong fourth-quarter earnings and revenue and significant customer growth today as it easily beat Wall Street’s expectations.

The company posted a profit before certain costs such as stock compensation of $1.17 per share on revenue of $1.25 billion, up 31% from the same period one year ago. Analysts were looking for earnings of $1.05 per share on revenue of $1.21 billion.

For the full year, ServiceNow reported revenue rose 31%, to $4.52 billion, with net income of $119 million.

ServiceNow sells a cloud automation platform designed to help enterprises automate parts of their business that involve service delivery and other functions. It said its business was seeing a lot of growth thanks to its ability to aid companies in their “digital transformations” as they try to navigate the COVID-19 pandemic.

During the quarter, the company said its subscription revenue grew by 32% from a year ago. Moreover, it added 89 new customers worth at least $1 million in net annual contract value, for a total of 1,093.

Investors showed their appreciation, nudging the company’s stock up 2% in after-hours trading. Update: Investors liked the results even more Thursday, as shares closed up more than 7%.

ServiceNow has expanded far beyond its traditional roots of information technology service management to areas such as human resources, and with the COVID-19 pandemic it’s now reaching into “vaccine management” as it bids to help company employees get back to work. Just this week, it announced a new service for managing vaccination workflows, naming customers including North Carolina’s Department of Health and Human Services.

The company is also looking to add to its platform’s artificial intelligence capabilities. During the last quarter, it acquired a company called Element AI Inc. that specializes in AI research.

In a conference call with analysts, ServiceNow Chief Executive Bill McDermott (pictured) said the company was benefiting from tailwinds including digital transformation, cloud computing and business model innovation that have all intersected “at a perfect moment in time.”

“A paradigm shift is happening worldwide,” McDermott said. “In 2020, for the first time in history, we saw digital transformation spending accelerate despite GDP declining globally. Digital investments are at an all-time high and are expected to continue growing.”

Analyst Holger Mueller of Constellation Research Inc. told SiliconANGLE that the notion that everything is becoming a workflow is fueling rapid growth at ServiceNow.

“It’s not surprising to see that ServiceNow has released another COVID-19 related offering,” Mueller said. “Now all eyes are on the coming quarter to see how it can keep growing more mature product revenues and newer revenue drivers.”

In any case, ServiceNow seems optimistic that it can keep up its pace of growth. For the second quarter, it’s targeting sales of between $1.31 billion and $1.315 billion, just ahead of Wall Street’s forecast of $1.3 billion in revenue.

Photo: World Economic Forum/Flickr

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