ServiceNow’s stock dips despite strong subscription sales, revenue jump as AI products gain hold - WealthInsider

ServiceNow Inc.’s stock retreated 1% in after-hours trading Wednesday, after the company reported a quarterly bounce in revenue on strong subscription sales.

“The gen-AI solutions we put into the marketplace in one quarter outsold any other product we put in the market,” ServiceNow NOW, +1.33% Chief Executive Bill McDermott said in an interview Wednesday.

The software company is riding the momentum of a 27% jump in quarterly subscription sales to $2.37 billion, and an aggressive push into artificial intelligence through partnerships with Nvidia Corp. NVDA, +2.49%, Amazon.com Inc.’s AMZN, +0.54% AWS and others.

ServiceNow posted fiscal fourth-quarter net income of $295 million, or $1.43 a share, compared with net income of $150 million, or 74 cents a share, in the year-ago quarter. Adjusted earnings were $3.14 a share.

Revenue improved 26% to $2.44 billion, from $1.94 billion in the same quarter a year ago.

Analysts surveyed by FactSet had expected, on average, quarterly adjusted net earnings of $2.78 a share on revenue of $2.4 billion. They forecast $2.3 billion in quarterly subscription sales for ServiceNow.

ServiceNow expects fiscal first-quarter subscription sales of between $2.51 billion and $2.515 billion. Analysts are forecasting $2.54 billion.

Shares of ServiceNow have rocketed 70% over the past 12 months, while the broader S&P 500 SPX has improved 21.5%.

Analysts characterized the quarter as exceptional.

“Faster-than-expected generative-AI adoption and key partnerships (Visa V, +0.14%, Ernst & Young) position [ServiceNow] for continued success — especially with its robust RPO (remaining performance obligation) metric and ACV (annual contract value), which now exceeds $10 billion,” Daniel Newman, principal analyst and CEO at the Futurum Group, said in an email.