ServiceNow Inc. today reported second-quarter revenue of $1.41 billion, well above analysts’ estimates of $1.36 billion and up 32% year-over-year.

Profit of $1.42 per share also exceeded the $1.21 consensus.

The results were driven by 27% growth in subscription revenues, to $1.33 billion when adjusted for constant currency. Current remaining performance obligations, which is contract revenue that will be recognized as revenue over the next 12 months, rose 31%, to $4.7 billion.

The company said it now has 1,201 total customers paying more than $1 million annually, up 25% year-over-year, with 62 paying more than $10 million. “The pipeline is incredibly robust,” said Chief Executive Bill McDermott.

ServiceNow raised its guidance for the full year, saying it now expects to bring in about $5.53 billion in subscription revenue, up 29%. It also said margins will rise from 23.5% to 24.5%. “Our team delivered an outstanding quarter, significantly exceeding the high end of our guidance,” McDermott said.

“We saw strong demand across all regions and workflows,” said Chief Financial Officer Gina Mastantuono. “We are well on our way to becoming a $15 billion-plus revenue company.”

The accelerated growth was a relief to investors who had sent the stock sharply lower after last quarter’s earnings announcement when ServiceNow surprised them with a decline in the growth rate of high-spending customers. The stock rose less than 1% after-hours today.

“This market has high expectations, so when there is any hiccup it responds accordingly,” said Thomas Murphy, a senior director at Gartner Inc.

From its base in information technology service management, ServiceNow has been steadily expanding its footprint into workflow management. It has also expanded its target customer base to include human resources, customer service management and IT security.

Most recently, it announced new capabilities in manufacturing and healthcare and acquired DevOps observability company Lightstep Inc. to expand its monitoring capabilities for cloud-native applications. It also recently unveiled new capabilities to support distributed work environments as businesses reopen.

Lightstep fills a gap around observability and the ability to load information into their IT asset management and IT operations management world, said Murphy. “It opens a new sales model for them that may, over time, enable them to better consider how to deal with mid-market or less mature organizations.”

The strategy appears to be working as 18 of the largest 20 deals the company closed in the quarter included three or more products, Mastantuono said. However, she noted that 16 of the top 20 deals also included ITSM.

“IT is still the mothership and it is often the land-and-expand starting point,” Murphy said. “The move to group into IT/employee/customer/creator workflows simplifies go-to-market for them and makes it easier to onboard new talent in sales as well as to create understandable messages for the C-suite.”

McDermott said he foresees economic recovery proceeding at the fastest pace in 80 years “and we are in a leading position to capitalize on this unprecedented tailwind,” he said. “The world’s biggest challenges are ServiceNow’s biggest opportunities from vaccine management to hybrid work.”

“Reopening creates tremendous opportunity,” said Murphy. “While they have been able to sell effectively, I believe that getting face-to-face, especially in large and complex deals, will strengthen their ability to sell.”

In raising its price target to $650 compared to its current $590 price, Mizuho Securities USA LLC analysts wrote, “We reiterate our expectation of continued high growth over the course of the next few years, aided by robust demand for workflow automation, strong cross-sell opportunities and deeper penetration into newer markets.”

Photo: ServiceNow