ServiceNow Stock Soars. Why Earnings Are a Positive for Tech Spending. -- Barrons.com

Dow Jones
04-24

By Angela Palumbo

ServiceNow on Wednesday reported better-than-expected financial results and forecast more subscription revenue than Wall Street had penciled in, saying demand is strong despite an uncertain economic outlook.

The company, which focuses on enterprise software, posted first-quarter adjusted earnings $4.04 a share from revenue of $3.09 billion. Analysts surveyed by FactSet were expecting EPS of $3.83 on revenue of $3.08 billion. In the same period last year, earnings were $3.41 a share while revenue was $2.6 billion.

Subscription revenue was $3 billion, in line with Wall Street estimates and a 19% increase from the previous year.

"Q1 was a quarter of continued relentless execution in a dynamic market, " CFO Gina Mastantuono told Barron's.

ServiceNow also said it expects second-quarter subscription revenues to be between $3.03 billion and $3.04 billion, which is just above the $3.02 billion analysts expected. For the year, subscription revenues are expected to be between $12.6 billion and $12.7 billion, compared with Wall Street estimates of $12.6 billion.

As of March 31, current remaining performance obligations, tracking work under contract that will be recognized as revenue in the next 12 months, was $10.3 billion, a 22% increase from the prior year.

Shares of ServiceNow were up 10% in Thursday morning trading.

As companies release their latest quarterly results, investors are focused on what managements have to say about the outlook, which is no surprise given how President Donald Trump's tariffs have shaken up the global economy. Investors want to know if companies are able to weather the storm.

When asked about why the company provided strong guidance given the uncertainty, Mastantuono said that she's "very confident in our ability to navigate these rapidly evolving times," adding that signals about demand from business leaders she's spoken to remain strong.

"The leaders I talk to are very focused on the future," she said. "They're mindful of the environment, but they absolutely can't hold back on investing for their future."

ServiceNow earnings came one day after the German software company SAP reported its latest financial results. SAP not only posted better-than-expected earnings, but also reiterated its full-year guidance.

The fact that both companies reported strong results is welcome news to tech investors following several weeks of market volatility.

Write to Angela Palumbo at angela.palumbo@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

 

(END) Dow Jones Newswires

April 24, 2025 09:23 ET (13:23 GMT)

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