ServiceNow emerges as core investors in the federal government’s business

Service now (NOW) reported September quarter earnings that beat analyst estimates while revenue did not materialize amid headwinds from currency exchange rates. NOW stock jumped on the news amid the strength of the federal government’s actions for ServiceNow.


Santa Clara, California-based ServiceNow, reported third-quarter earnings after the market closed on Wednesday.

“ServiceNow’s September results are a welcome change after disappointing results from Microsoft (MSFT) and we expect them to help propel broader programs higher,” Stirling Ooty, an analyst at MoffettNathanson said in a report.

ServiceNow’s Top Earning Estimates

At Wolfe Research, analyst Alex Zukin said in a report, “We believe NOW stocks have reclaimed the title of ‘the safest SaaS (software as a service) asset to own through the end of the year’.”

ServiceNow said third-quarter earnings rose 26% to $1.96 per share on an adjusted basis. Revenue rose 21% to $1.83 billion, the software maker said.

Analysts expected ServiceNow to report earnings of $1.85 per share on revenue of $1.85 billion. A year ago, ServiceNow earned $1.55 per share on sales of $1.51 billion.

“We believe this has been much better than feared, and that execution in the third quarter and strong backlog should give investors relief now is back on track to achieve an average growth rate of 20% surplus over the medium term,” said Derek Wood, an analyst at Cowen. . in a report.

Additionally, ServiceNow said subscription revenue for the period rose 22% to $1.742 billion, beating estimates of $1.75 billion.

NOW stock jumped 14.4% to 419.30 in morning trading in the stock market today.

Inventory is now down 43% this year

The software maker won a $44 million contract from the Department of Veterans Affairs in September. Analysts said the renewal represents the largest award given by ServiceNow from the federal government.

“Management has reiterated that it continues to operate in an uncertain market background similar to what it reported at the end of last quarter,” Deutsche Bank analyst Brad Zelnick said in a report. “However, the implementation has been clearly strong and likely helped by a record quarter in their US federal action which we believe is less economically sensitive.”

As the earnings report approaches, ServiceNow stock is down 43% in 2022.

The enterprise software maker said its remaining performance commitments in the third quarter, or CRPO bookings, rose 18% to $5.87 billion. CRPO reservations are the sum of deferred revenue and order backlog.

Analysts estimated CRPO bookings at $5.96 billion, up 20%.

ServiceNow said it expects subscription revenue for the December quarter to be about $1.836 billion in the middle of the guidance. ServiceNow stock analysts expected subscription revenue to be $1.873 billion. The company expects CRPO growth of 20% versus estimates of 22% growth.

ServiceNow Million Dollar Customers

The company now has 1,530 customers with an annual contract value of more than $1 million, which is 22% year-over-year growth.

The company’s software tracks and manages the services provided by the IT departments. The self-service technology portal gives company employees access to administrative and workflow tools.

Furthermore, ServiceNow has expanded its core business into software for human resources, customer service management, and security.

NOW stock has a relative strength rating of 29 out of the 99 best possible, according to an IBD stock review.

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