In the fast-paced world of technology, few companies have garnered as much attention and investor interest as ServiceNow. As a leading provider of cloud-based workflow solutions, ServiceNow is vital in streamlining operations and enhancing productivity for businesses worldwide. ServiceNow reported $2.15 billion in revenue for the company's second-quarter (ending June 2023) earnings report on July 26, 2023.
Revenue of $2.15 billion represents an increase of 22.7% year-over-year or an EPS of $2.37 vs. $1.62 a year ago. The market EPS expectation was $2.05, so ServiceNow beat that at +15.61%. The Zacks Consensus Estimate had ServiceNow earning $2.13 billion, representing a +0.99% gain.
Several numbers, figures, takeaways, and quotes from the earning call are below.
The subscription revenues showed an impressive growth of 25% year-over-year (adjusted for constant currency). These revenues amount to a staggering $2.075 billion, which is a testament to the success and popularity of this service.
ServiceNow's total revenues have shown impressive growth, with a 23% year-over-year increase (22.5% adjusted for constant currency). These revenues amounted to a significant $2.150 billion, highlighting the success and popularity of the company's offerings.
The company's remaining performance obligations have experienced significant growth, with a 25% year-over-year increase (24% adjusted for constant currency). The total value of these obligations is a substantial $7.20 billion, indicating the continued success and popularity of the company's products and services.
ServiceNow has seen an impressive increase in net new ACV for transactions over $1 million, with a 30% year-over-year growth. A total of 70 transactions have been recorded.
Forty-five customers generated over $20 million in ACV, reflecting a 55% year-over-year increase. This achievement showcases the company's ability to attract and retain high-value customers.
What They Said
According to ServiceNow CFO Gina Mastantuono, the company is increasing its subscription revenue outlook by $95 million at the midpoint, which puts it in a range of $8.58 billion to $8.6 billion. This outlook represents a notable year-over-year growth of 24.5% to 25% or 24% on a constant currency basis.
During the analyst call, McDermott emphasized that although ServiceNow has already been experiencing steady growth in recent years, the implementation of Generative AI is now taking this growth to the next level. He said:
"Our platform experts, who have worked for the greatest brands and technology, believe this moment is as transformative, if not even more so, than the Internet or even the iPhone. But they're careful to remind me it's all about delivering enterprise-grade, domain-specific large language models, which is the core of ServiceNow's AI strategy. These models will improve the accuracy of results, leveraging a customer's enterprise data in alignment with their business rules while maintaining the highest ethical standards for data privacy.
ServiceNow is infusing generative AI into all of our workflow offerings. We're going even further by expanding our generative AI capabilities with case summarization and text-to-code, text-to-flow, and text-to-new-application-development.
Our customers are so excited for greater ROI and customer service, better employee self-service experiences, and a substantial boost in developer productivity. They are ready to invest to drive these outcomes. And based on the immense value our customers will realize from our generative AI innovation, we have a clear strategy for monetization."
Last week's earnings call confirms what those of us in the ServiceNow community already know - that their customers are passionate about the technology and that the value they are experiencing is real and transformative. As businesses continue to prioritize digital transformation, especially at enterprise scale, ServiceNow is the best technology and partner to run nearly every aspect of your company efficiently and put you in a position to take advantage of advances in AI.