ServiceNow Inc., the information technology workflow management company, posted better-than-expected third-quarter financial results today, sending its stock higher in extended trading.

The company reported a net income of $242 million for the quarter, with earnings before certain costs such as stock compensation coming to $2.92 per share. Analysts were looking for a profit of just $2.56 per share, so it was a solid earnings beat. ServiceNow also reported revenue of $2.28 billion, up by an impressive 27% from a year earlier and ahead of the analyst’s consensus estimate of $2.27 billion.

Typically, ServiceNow offers guidance focused on subscription revenue rather than total sales, and it beat expectations there too. It reported subscription sales of $2.25 billion, also up 27%, ahead of its own forecast of $2.185 billion to $2.195 billion and also ahead of Wall Street’s consensus of $2.19 billion.

The company’s current remaining performance obligations at the end of the quarter were $7.43 billion, also up 27% from the prior year. RPO is a key forward-looking metric that offers visibility into future revenue, representing the total value of contracted products and services yet to be delivered to customers.

Investors cheered the results, as the company’s stock gained more than 4% in the extended trading session. That came after the stock declined 4% in the regular session.

ServiceNow Chief Executive Bill McDermott (pictured) said the company once again delivered to expectations, adding to a long streak of stronger-than-expected quarters. “We’ve released more than 5,000 new capabilities this year, including generative AI for the use cases that matter most to our customers,” he added.

The company has indeed been very aggressive in pushing new generative artificial intelligence capabilities across its product portfolio as it races to help customers take advantage of the hottest trend in the technology industry today. Last month, it announced a new version of its flagship Now workflow platform that comes with generative AI features to improve security and governance.

It also rolled out a number of generative AI agents known as the Now Assist family. Those bots are integrated with ServiceNow’s IT Service Management, Customer Services Management, Human Resources Services Delivery and Workflow Creator modules, and optimized for accuracy and data privacy, the company said at the time.

“It’s a tailwind for growth,” McDermott told Barron’s in an interview. “We were first to market with real products and we’ve built AI into use cases across our platform.”

The CEO reeled off a list of examples of the ways customers are using generative AI within its workflow platform, including case and chat summarization and customer service agent assistants, he said.

In recent months, questions have been asked of enterprise software companies about how they’re going to make money from their new generative AI products and services. Such questions are relevant because it’s well-known that the most powerful AI models can be incredibly expensive to create and run. But McDermott expressed confidence that enterprises are going to increase their spending on AI products.

“CEOs are waking up to the fact that not to move on this could be a real problem for them,” McDermott said, adding that they may even cut spending in other areas to ensure they can invest in AI.

Looking ahead to the fourth quarter, ServiceNow offered another optimistic forecast, saying it expects subscription revenue of between $2.32 billion and $2.325 billion, ahead of Wall Street’s forecast of $2.3 billion. In addition, ServiceNow sees its current RPO growing by 21%.

The company also raised its full-year forecast. It sees subscription revenue of $8.635 billion to $8.64 billion, which represents growth of 25.5% at the midpoint. Three months earlier, it had called for $8.58 billion to $8.6 billion in full year subscription revenue.

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