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The Zacks Consensus Estimate for second-quarter revenues is currently pegged at $2.61 billion, indicating 21.22% growth from the figure reported in the year-ago quarter.
The consensus mark for earnings is pegged at $2.85 per share, indicating growth of 20.25% from the figure reported in the year-ago quarter. The earnings figure has remained unchanged over the past 30 days.
ServiceNow’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 12.66%.
Let’s see how things are shaping up prior to this announcement.
Factors to Note
ServiceNow expects second-quarter 2024 subscription revenues between $2.525 billion and $2.53 billion, suggesting an improvement in the range of 21.5-22% year over year on a GAAP basis. At constant currency, subscription revenues are expected to grow in the 22% range.
The Zacks Consensus Estimate for second-quarter 2024 subscription revenues is pegged at $2.527 billion, roughly in line with the mid-point of the management’s guidance range.
ServiceNow has been benefiting from strong expansion in clientele as enterprises undergoing digital transformation continue to adopt its workflow solutions. NOW ended the first quarter of 2024 with 1933 total customers with more than $1 million in annual contract value (ACV).
ServiceNow had eight deals greater than $5 million in net new ACV and four deals of more than $10 million. It closed 59 deals greater than $1 million net new ACV. The number of customers contributing more than $20 million or more grew 50% year over year.
In the first quarter of 2024, Generative AI (GenAI) deals continued to gain traction with record-breaking net new ACV for Pro Plus, making it the fastest-selling product in ServiceNow’s history. Gen AI products were in seven of ServiceNow’s top 10 deals, and it closed seven deals worth more than $1 million in ACV in the reported quarter.
The momentum is expected to have continued in the second quarter of 2024.
NOW Shares Underperform Sector, S&P 500
NOW shares have returned 6.4%, underperforming the Zacks Computer & Technology sector’s gain of 19.7% and the S&P 500’s 14.3%.
Year-to-Date Performance Chart
Image Source: Zacks Investment Research
However, ServiceNow stock is not so cheap, as the Value Style Score of D suggests a stretched valuation at this moment.
In terms of the forward 12-month P/S ratio, NOW is trading at 12.71X, higher than the Zacks Computer & Technology sector’s 6.44X and the Zacks IT Services industry’s 7.21X.
P/S Ratio (F12M)
Image Source: Zacks Investment Research
NOW Benefits From a Strong Portfolio
ServiceNow is extensively leveraging AI and machine learning technologies to boost the potency of its solutions. The enhanced capabilities are helping it to rapidly expand its footprint in the insurTech, strategic portfolio management, cloud management, talent development and public sector domains.
NOW’s expanding GenAI capabilities are noteworthy, as its total addressable market is expected to hit $275 billion in 2026.
Through its Washington, D.C. platform update, ServiceNow introduced a host of cutting-edge features aimed at streamlining operations, enhancing productivity and advancing the adoption of GenAI across various sectors.
A strong partner base that includes the likes of Microsoft (MSFT - Free Report) , NVIDIA (NVDA - Free Report) , International Business Machines (IBM - Free Report) , Infosys and Equinix is strengthening NOW’s AI capabilities.
ServiceNow and Microsoft are integrating the new ServiceNow Now Assist and Microsoft Copilot into one seamless enterprise experience.
Leveraging NVIDIA’s Avatar Cloud Engine speech, large language model and animation technologies that bring digital characters to life using GenAI, ServiceNow has unveiled AI avatars.
NOW and IBM are combining the Now Platform with IBM watsonx to boost productivity for mutual customers and partners.
A strong liquidity position with a cash balance of $8.8 billion and robust free cash flow generating ability ($3.3 billion estimated in 2024 compared with $2.7 billion reported in 2023) is noteworthy as it allows NOW to pursue various growth opportunities, including acquisitions.
Estimate Revisions Witnessing Upward Movement
For 2024, ServiceNow expects subscription revenues to be $10.56-$10.575 billion (up $20 million from the previous guidance), which suggests a rise between 21.5% and 22% from 2023 on a GAAP basis. At constant currency, subscription revenues are expected to grow 21.5% over 2023.
The Zacks Consensus Estimate for 2024 revenues is pegged at $10.88 billion, indicating 21.32% growth year over year. The consensus mark for earnings is pegged at $13.51 per share, unchanged over the past 30 days and indicating a 25.32% year-over-year increase.
Estimate Revision
Image Source: Zacks Investment Research
Conclusion
ServiceNow’s robust GenAI portfolio and strong partner base are expected to drive its subscription revenues in the long haul. The Growth Style Score of A is hard to ignore for investors.
ServiceNow currently has a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point in the stock. However, investors who already own the stock may expect the company's growth prospects to be rewarding over the long term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Image: Bigstock
Pre-Q2 Earnings: Is ServiceNow (NOW) a Portfolio Must-Have?
ServiceNow (NOW - Free Report) is scheduled to release its second-quarter 2024 results on Jul 24.
The Zacks Consensus Estimate for second-quarter revenues is currently pegged at $2.61 billion, indicating 21.22% growth from the figure reported in the year-ago quarter.
The consensus mark for earnings is pegged at $2.85 per share, indicating growth of 20.25% from the figure reported in the year-ago quarter. The earnings figure has remained unchanged over the past 30 days.
ServiceNow’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 12.66%.
ServiceNow, Inc. Price and EPS Surprise
ServiceNow, Inc. price-eps-surprise | ServiceNow, Inc. Quote
Let’s see how things are shaping up prior to this announcement.
Factors to Note
ServiceNow expects second-quarter 2024 subscription revenues between $2.525 billion and $2.53 billion, suggesting an improvement in the range of 21.5-22% year over year on a GAAP basis. At constant currency, subscription revenues are expected to grow in the 22% range.
The Zacks Consensus Estimate for second-quarter 2024 subscription revenues is pegged at $2.527 billion, roughly in line with the mid-point of the management’s guidance range.
ServiceNow has been benefiting from strong expansion in clientele as enterprises undergoing digital transformation continue to adopt its workflow solutions. NOW ended the first quarter of 2024 with 1933 total customers with more than $1 million in annual contract value (ACV).
ServiceNow had eight deals greater than $5 million in net new ACV and four deals of more than $10 million. It closed 59 deals greater than $1 million net new ACV. The number of customers contributing more than $20 million or more grew 50% year over year.
In the first quarter of 2024, Generative AI (GenAI) deals continued to gain traction with record-breaking net new ACV for Pro Plus, making it the fastest-selling product in ServiceNow’s history. Gen AI products were in seven of ServiceNow’s top 10 deals, and it closed seven deals worth more than $1 million in ACV in the reported quarter.
The momentum is expected to have continued in the second quarter of 2024.
NOW Shares Underperform Sector, S&P 500
NOW shares have returned 6.4%, underperforming the Zacks Computer & Technology sector’s gain of 19.7% and the S&P 500’s 14.3%.
Year-to-Date Performance Chart
However, ServiceNow stock is not so cheap, as the Value Style Score of D suggests a stretched valuation at this moment.
In terms of the forward 12-month P/S ratio, NOW is trading at 12.71X, higher than the Zacks Computer & Technology sector’s 6.44X and the Zacks IT Services industry’s 7.21X.
P/S Ratio (F12M)
NOW Benefits From a Strong Portfolio
ServiceNow is extensively leveraging AI and machine learning technologies to boost the potency of its solutions. The enhanced capabilities are helping it to rapidly expand its footprint in the insurTech, strategic portfolio management, cloud management, talent development and public sector domains.
NOW’s expanding GenAI capabilities are noteworthy, as its total addressable market is expected to hit $275 billion in 2026.
Through its Washington, D.C. platform update, ServiceNow introduced a host of cutting-edge features aimed at streamlining operations, enhancing productivity and advancing the adoption of GenAI across various sectors.
A strong partner base that includes the likes of Microsoft (MSFT - Free Report) , NVIDIA (NVDA - Free Report) , International Business Machines (IBM - Free Report) , Infosys and Equinix is strengthening NOW’s AI capabilities.
ServiceNow and Microsoft are integrating the new ServiceNow Now Assist and Microsoft Copilot into one seamless enterprise experience.
Leveraging NVIDIA’s Avatar Cloud Engine speech, large language model and animation technologies that bring digital characters to life using GenAI, ServiceNow has unveiled AI avatars.
NOW and IBM are combining the Now Platform with IBM watsonx to boost productivity for mutual customers and partners.
A strong liquidity position with a cash balance of $8.8 billion and robust free cash flow generating ability ($3.3 billion estimated in 2024 compared with $2.7 billion reported in 2023) is noteworthy as it allows NOW to pursue various growth opportunities, including acquisitions.
Estimate Revisions Witnessing Upward Movement
For 2024, ServiceNow expects subscription revenues to be $10.56-$10.575 billion (up $20 million from the previous guidance), which suggests a rise between 21.5% and 22% from 2023 on a GAAP basis. At constant currency, subscription revenues are expected to grow 21.5% over 2023.
The Zacks Consensus Estimate for 2024 revenues is pegged at $10.88 billion, indicating 21.32% growth year over year. The consensus mark for earnings is pegged at $13.51 per share, unchanged over the past 30 days and indicating a 25.32% year-over-year increase.
Estimate Revision
Conclusion
ServiceNow’s robust GenAI portfolio and strong partner base are expected to drive its subscription revenues in the long haul. The Growth Style Score of A is hard to ignore for investors.
ServiceNow currently has a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point in the stock. However, investors who already own the stock may expect the company's growth prospects to be rewarding over the long term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.