We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
ServiceNow (NOW) Q2 Earnings Beat Estimates, Revenues Up Y/Y
Read MoreHide Full Article
ServiceNow (NOW - Free Report) reported second-quarter 2024 adjusted earnings of $3.13 per share, which beat the Zacks Consensus Estimate by 9.82% and jumped 32.1% year over year.
Revenues of $2.63 billion beat the consensus mark by 0.79% and increased 22.2% year over year. At constant currency (cc), revenues increased 22.5% year over year to $2.637 billion.
Subscription revenues improved 23% year over year, both on a reported and cc basis, to $2.54 billion, beating the high-end of the management’s guidance by 100 basis points (bps).
Professional services and other revenues increased 13% year over year on a reported and 13.5% on a cc basis to $85 million.
At the end of the second quarter, the current remaining performance obligations (cRPO) were $8.78 billion, up 22% year over year on a reported and 22.5% on a cc basis and 200 bps higher than management’s guidance. Remaining performance obligations, on a constant currency basis, rose 31.5% year over year to $18.6 billion.
ServiceNow, Inc. Price, Consensus and EPS Surprise
ServiceNow had 1,988 total customers with more than $1 million in annual contract value (ACV) at the end of the reported quarter, which represents 15% year-over-year growth in customers.
In the reported quarter, the company had 14 deals greater than $5 million in net new ACV and four deals of more than $10 million. It closed 88 deals greater than $1 million net new ACV. Number of customers contributing more than $20 million or more grew nearly 40% year over year.
In terms of key businesses, ITOM, ITSM and Security and Risk won 10, nine and eight deals, respectively. Customer workflows, Employee Workflows and Creator won 14, 12 and 10 deals of more than 1 million, respectively.
Generative AI deals continued to gain traction with net new ACV for Now Assist, which doubled sequentially and was part of 11 deals worth more than $1 million in the reported quarter.
Industry-wise, the U.S. federal witnessed a more than 50% year-over-year jump in net new ACV, along with manufacturing as well as energy and utilities. Healthcare & Life Sciences and Retail and Hospitality grew roughly 30% year over year.
NOW Stock Rides on Strong Partner Base
ServiceNow’s AI strategy is riding on an expanding partner base that includes the likes of Microsoft (MSFT - Free Report) , International Business Machines (IBM - Free Report) , NVIDIA (NVDA - Free Report) , Genesys, Fujitsu, Equinix and Infosys.
During the reported quarter, NOW and Microsoft announced a Now Assist and Copilot integration for a seamless enterprise experience, while ServiceNow and IBM introduced a Now platform and IBM watsonx integration.
Moreover, leveraging NVIDIA’s Avatar Cloud Engine speech, large language model and animation technologies that bring digital characters to life using generative AI (GenAI), ServiceNow unveiled AI avatars.
ServiceNow is expanding its partner base with the addition of Boomi. The collaboration will offer Boomi’s APIM solution to its customers to strengthen NOW’s suite of intelligent automation solutions.
ServiceNow also announced an investment in Prodapt, a leading provider of digital and network services for the telecom and technology industries. This is expected to expand NOW’s footprint in the telecom and technology sector.
Furthermore, it completed the acquisition of Raytion to enhance GenAI???powered search and knowledge management capabilities on the Now Platform.
Operating Details
In the second quarter, the non-GAAP gross margin was 82.6%, up 60 bps on a year-over-year basis.
Subscription gross margin was 84.8%, up 20 bps year over year. Professional services and other gross margins were 16.5% compared with 10.7% reported in the year-ago quarter.
Total operating expenses were $1.84 billion in the reported quarter, up 17.5% year over year. As a percentage of revenues, operating expenses decreased 280 bps on a year-over-year basis.
ServiceNow’s non-GAAP operating margin expanded 210 bps on a year-over-year basis to 27.4%, 150 bps above management’s guidance, driven by strong top-line growth and disciplined spending.
Balance Sheet & Cash Flow
As of Jun 30, 2024, the company had cash and cash equivalents and short-term investments of $5.41 billion compared with $5.11 billion as of Mar 31, 2024.
During the reported quarter, cash from operations was $620 million compared with $1.34 billion in the previous quarter.
ServiceNow generated a free cash flow of $359 million in the reported quarter, down from $1.23 billion reported in the prior quarter.
Guidance
For third-quarter 2024, subscription revenues are projected between $2.66 billion and $2.67 billion, suggesting an improvement in the range of 20-20.5% year over year on a GAAP basis. At cc, subscription revenues are expected to grow in the 20.5% range.
cRPO is expected to grow 22% year over year on a non-GAAP basis and 22% on a GAAP basis.
ServiceNow expects the non-GAAP operating margin to be 29.5% in the current quarter.
ServiceNow expects the non-GAAP subscription gross margin to be 84.5% and the non-GAAP operating margin to be 29.5% (up from the previous guidance of 29%). Moreover, the free cash flow margin is still expected to be 31%.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
ServiceNow (NOW) Q2 Earnings Beat Estimates, Revenues Up Y/Y
ServiceNow (NOW - Free Report) reported second-quarter 2024 adjusted earnings of $3.13 per share, which beat the Zacks Consensus Estimate by 9.82% and jumped 32.1% year over year.
Revenues of $2.63 billion beat the consensus mark by 0.79% and increased 22.2% year over year. At constant currency (cc), revenues increased 22.5% year over year to $2.637 billion.
Subscription revenues improved 23% year over year, both on a reported and cc basis, to $2.54 billion, beating the high-end of the management’s guidance by 100 basis points (bps).
Professional services and other revenues increased 13% year over year on a reported and 13.5% on a cc basis to $85 million.
At the end of the second quarter, the current remaining performance obligations (cRPO) were $8.78 billion, up 22% year over year on a reported and 22.5% on a cc basis and 200 bps higher than management’s guidance. Remaining performance obligations, on a constant currency basis, rose 31.5% year over year to $18.6 billion.
ServiceNow, Inc. Price, Consensus and EPS Surprise
ServiceNow, Inc. price-consensus-eps-surprise-chart | ServiceNow, Inc. Quote
ServiceNow had 1,988 total customers with more than $1 million in annual contract value (ACV) at the end of the reported quarter, which represents 15% year-over-year growth in customers.
In the reported quarter, the company had 14 deals greater than $5 million in net new ACV and four deals of more than $10 million. It closed 88 deals greater than $1 million net new ACV. Number of customers contributing more than $20 million or more grew nearly 40% year over year.
In terms of key businesses, ITOM, ITSM and Security and Risk won 10, nine and eight deals, respectively. Customer workflows, Employee Workflows and Creator won 14, 12 and 10 deals of more than 1 million, respectively.
Generative AI deals continued to gain traction with net new ACV for Now Assist, which doubled sequentially and was part of 11 deals worth more than $1 million in the reported quarter.
Industry-wise, the U.S. federal witnessed a more than 50% year-over-year jump in net new ACV, along with manufacturing as well as energy and utilities. Healthcare & Life Sciences and Retail and Hospitality grew roughly 30% year over year.
NOW Stock Rides on Strong Partner Base
ServiceNow’s AI strategy is riding on an expanding partner base that includes the likes of Microsoft (MSFT - Free Report) , International Business Machines (IBM - Free Report) , NVIDIA (NVDA - Free Report) , Genesys, Fujitsu, Equinix and Infosys.
During the reported quarter, NOW and Microsoft announced a Now Assist and Copilot integration for a seamless enterprise experience, while ServiceNow and IBM introduced a Now platform and IBM watsonx integration.
Moreover, leveraging NVIDIA’s Avatar Cloud Engine speech, large language model and animation technologies that bring digital characters to life using generative AI (GenAI), ServiceNow unveiled AI avatars.
ServiceNow is expanding its partner base with the addition of Boomi. The collaboration will offer Boomi’s APIM solution to its customers to strengthen NOW’s suite of intelligent automation solutions.
ServiceNow also announced an investment in Prodapt, a leading provider of digital and network services for the telecom and technology industries. This is expected to expand NOW’s footprint in the telecom and technology sector.
Furthermore, it completed the acquisition of Raytion to enhance GenAI???powered search and knowledge management capabilities on the Now Platform.
Operating Details
In the second quarter, the non-GAAP gross margin was 82.6%, up 60 bps on a year-over-year basis.
Subscription gross margin was 84.8%, up 20 bps year over year. Professional services and other gross margins were 16.5% compared with 10.7% reported in the year-ago quarter.
Total operating expenses were $1.84 billion in the reported quarter, up 17.5% year over year. As a percentage of revenues, operating expenses decreased 280 bps on a year-over-year basis.
ServiceNow’s non-GAAP operating margin expanded 210 bps on a year-over-year basis to 27.4%, 150 bps above management’s guidance, driven by strong top-line growth and disciplined spending.
Balance Sheet & Cash Flow
As of Jun 30, 2024, the company had cash and cash equivalents and short-term investments of $5.41 billion compared with $5.11 billion as of Mar 31, 2024.
During the reported quarter, cash from operations was $620 million compared with $1.34 billion in the previous quarter.
ServiceNow generated a free cash flow of $359 million in the reported quarter, down from $1.23 billion reported in the prior quarter.
Guidance
For third-quarter 2024, subscription revenues are projected between $2.66 billion and $2.67 billion, suggesting an improvement in the range of 20-20.5% year over year on a GAAP basis. At cc, subscription revenues are expected to grow in the 20.5% range.
cRPO is expected to grow 22% year over year on a non-GAAP basis and 22% on a GAAP basis.
ServiceNow expects the non-GAAP operating margin to be 29.5% in the current quarter.
For 2024, this Zacks Rank #3 (Hold) company expects subscription revenues to be $10.575-$10.585 billion, which suggests a rise of 22% from 2023, both on a GAAP and non-GAAP basis. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
ServiceNow expects the non-GAAP subscription gross margin to be 84.5% and the non-GAAP operating margin to be 29.5% (up from the previous guidance of 29%). Moreover, the free cash flow margin is still expected to be 31%.