MW ServiceNow's stock pops as earnings beat quiets 'DOGE' fears

By Emily Bary

Some worried ServiceNow's federal business would be under pressure from 'DOGE' cuts. But CEO Bill McDermott says the company is benefitting from the efficiency push.

ServiceNow Inc. brushed off fears about "DOGE" cutbacks and an uncertain macroeconomic environment on Wednesday, as the software giant posted big growth in its government business and boosted its outlook for the full year.

The stock was rising 7% in after-hours trading Wednesday.

Given ServiceNow's (NOW) large amount of business with the federal government, some on Wall Street were concerned about potential pressure after Elon Musk's so-called Department of Governmental Efficiency slashed government jobs and spending. But ServiceNow Chief Executive Bill McDermott said his company was "built for" an efficiency drive like this, since it is "in the process of taking billions in costs out of the government."

"People worried about how software companies would perform in the public sector," McDermott told MarketWatch. ServiceNow, he said, is actually in a good spot because it's "always been about efficiency and effectiveness."

See also: Software stocks have sold off on 'DOGE' fears and more. Is it time to get back into the sector?

The company is benefiting as agencies replace costly legacy systems with streamlined processes from ServiceNow, according to McDermott. "In this moment, we're one of the rare companies that will grow 30% year over year in the public sector."

Overall, ServiceNow posted $3.005 billion in subscription revenue, just above the $2.998 billion that analysts tracked by FactSet were expecting. ServiceNow also reported $10.31 billion in current remaining performance obligations, which correspond to contract revenue that will get recognized in the next 12 months. Analysts were modeling $10.11 billion there.

The company logged $4.04 in adjusted earnings per share, above the $3.41 recorded a year before and well above the FactSet consensus of $3.83.

ServiceNow currently expects $12.640 billion to $12.680 billion in full-year subscription revenue, whereas its prior forecast called for $12.635 billion to $12.675 billion.

"While other companies aren't even guiding, we're raising," McDermott told MarketWatch.

The new guidance corresponds to expectations for 19.5% growth in constant-currency subscription revenue. Before, it was for 19.5% to 20% growth, but the dollar has weakened.

For the second quarter, ServiceNow projects $3.030 billion to $3.035 billion in revenue, whereas analysts were looking for $3.018 billion.

McDermott added that artificial intelligence has been a big business driver. The company integrates its offerings across the technology stack, bringing data into a model that gets elevated to a workflow layer. From there, ServiceNow plays into the trend of agentic AI by helping customers automate tasks in parallel with those processes. McDermott also said customers are responding to the company's ability to implement systems quickly.

-Emily Bary

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

(END) Dow Jones Newswires

April 23, 2025 16:27 ET (20:27 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.