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ServiceNow (NOW) reported September-quarter earnings that topped analyst estimates while revenue missed amid headwinds from currency exchange rates. NOW stock surged on the news amid strength in ServiceNow’s federal government business.
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Santa Clara, Calif-based ServiceNow reported third-quarter earnings after the market close on Wednesday.
“ServiceNow’s September results are a welcome change after the disappointing results from Microsoft (MSFT) and we expect them to help drive broader software higher,” said Sterling Auty, analyst at MoffettNathanson in a report.
ServiceNow Earnings Top Estimates
At Wolfe Research, analyst Alex Zukin said in a report: “We believe NOW stock has reclaimed the title of ‘safest SaaS (software-as-a-service) asset to own into year-end’.”
ServiceNow said earnings climbed 26% to $1.96 per share on an adjusted basis. Revenue rose 21% to $1.83 billion, the enterprise software maker said.
Analysts expected ServiceNow to report earnings of $1.85 a share on revenue of $1.85 billion. A year earlier, ServiceNow earned $1.55 a share on sales of $1.51 billion.
“We think this was a much better than feared print and that the Q3 execution and backlog strength should give investors comfort NOW is back on track to deliver against its mid-20%-plus medium-term growth trajectory,” said Cowen analyst Derrick Wood in a report.
In addition, ServiceNow said subscription revenue for the period rose 22% to $1.742 billion, missing estimates of $1.75 billion.
NOW stock jumped 13.4% to close at 415.67 on the stock market today.
NOW Stock Was Down 43% This Year
The software maker won a $44 million contract from the Department of Veterans Affairs in September. The renewal represented ServiceNow’s largest award from the federal government, analysts said.
“Management reiterated that they continue to operate in an uncertain market backdrop similar to what they reported at the end of last quarter,” said Deutsche Bank analyst Brad Zelnick in a report. “However, execution was clearly solid and likely helped by an all-time record quarter in their U.S. federal business which we believe is less economically sensitive.”
Heading into the earnings report, ServiceNow stock had declined 43% in 2022.
The enterprise software maker said third-quarter current remaining performance obligations, or CRPO bookings, rose 18% to $5.87 billion. CRPO bookings are an aggregate of deferred revenue and order backlog.
Analysts estimated CRPO bookings of $5.96 billion on 20% growth.
ServiceNow said it expects December-quarter subscription revenue of about $1.836 billion at the midpoint of guidance. ServiceNow stock analysts predicted subscription revenue of $1.873 billion. The company forecast CRPO growth of 20% vs. estimates for 22% growth.
ServiceNow’s Million-Dollar Customers
The company now has 1,530 customers with more than $1 million in annual contract value, representing 22% year-over-year growth.
The company’s software tracks and manages services provided by information-technology departments. Its self-service tech portal enables company employees to access administrative and workflow tools.
Further, ServiceNow has expanded from its core business into software for human resources, customer service management and security.
NOW stock holds a Relative Strength Rating of 29 out of a best-possible 99, according to IBD Stock checkup.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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