ServiceNow Inc. raised its full-year outlook for the second time this year after posting strong financial results that came in ahead of expectations today, yet its stock fell more than 3% in extended trading.

The results were delivered as the work automation software provider detailed two new generative artificial intelligence products and an alliance with Nvidia Corp. and Accenture Plc. to help enterprises develop their own generative AI tools.

The company reported a net profit of $1.04 billion, with earnings before certain costs such as stock compensation coming to $2.37 per share, beating Wall Street’s forecast of $2.05. Revenue for the period came to $2.15 billion, up 23% from a year earlier and ahead of the $12.13 billion analyst consensus estimate.

ServiceNow also reported subscription revenue of $2.075 billion, up 25% from a year earlier and ahead of Wall Street’s forecast of $2.034 billion. Meanwhile, the company said it had current performance obligations of $7.2 billion at the end of the quarter, up 25%. Its earlier guidance had called for that metric to increase by just 23%.

ServiceNow Chairman and Chief Executive Bill McDermott (pictured) said the company’s strong results were helped by its push into AI software, with the company seeing “unprecedented demand” for its organic innovation. “We’re in a powerful new AI world where imagination is the only limit,” he added. “ServiceNow is already seeing our own significant productivity increases with the generative AI solutions we’re releasing to the market, which will rapidly accelerate breakthrough innovation for our customers.”

In an interview with Barron’s, McDermott stated his belief that AI will impact “every department in every company in every industry.” He added: “It’s the biggest inflection in the history of information technology.”

Holger Mueller of Constellation Research Inc. said ServiceNow deserves a lot of kudos as one of the few, if not the only, big enterprise technology provider, to maintain key performance indicators such as revenue and profit growing at over 20% this year.

“It’s a strong testament that ServiceNow under Bill McDermott is doing something right,” Mueller added. “And it’s a showcase of ServiceNow’s horizontal and vertical portfolio expansion. The challenge now is for the company to keep this level of performance up for the rest of the year.”

Founded in 2003, ServiceNow is a leading player in the workflow automation software market, selling applications that help companies to organize and automate their personnel, customer service and information technology operations. Those offerings can clearly benefit from an infusion of AI, and the company has been busier than most in that respect. Having launched its “Generative AI controller,” which serves as the foundation of all of its generative AI technology, earlier this year, ServiceNow followed up with its first batch of tools in June.

Today, the company expanded its lineup of generative AI tools. It unveiled new features for Now Assist including Case Summarization, which uses generative AI to distill key information automatically across information technology, human resources and customer service use cases, and Text-to-Code, which converts natural language text prompts into executable code for the company’s Now Platform.

Meanwhile, ServiceNow’s new AI Lighthouse initiative, offered through an alliance with Nvidia and Accenture, will help its customers fast-track the development and adoption of enterprise generative AI technologies.

McDermott said ServiceNow’s new generative AI tools are free to use, but the company will launch more feature-packed Pro+ versions later this year to monetize the offerings.

Looking ahead, ServiceNow is forecasting subscription revenue of between $2.185 billion and $2.195 billion for the third quarter, ahead of Wall Street’s forecast of $2.144 billion. In addition, ServiceNow raised its full-year subscription revenue forecast for the second time this year, saying it’s now targeting between $8.58 billion and $8.6 billion. That’s up from an earlier range of between $8.47 billion and $8.52 billion.

Prior to today’s decline, ServiceNow’s stock had gained more than 49% in the year to date.

Photo: SAP SE