ServiceNow posts strong earnings beat as it promises no layoffs in 2023


Workflow automation giant ServiceNow Inc. delivered solid fourth-quarter financial results today, beating Wall Street’s forecasts on earnings and offering a confident outlook for the remainder of the year.

The company also pledged to avoid making any layoffs, despite widespread job losses elsewhere in the industry.

For the quarter just gone, ServiceNow reported earnings before certain costs such as stock compensation of $2.28 per share on revenue of $1.94 billion, up 20% from the same period one year earlier and above its own guidance range of $1.834 billion to $1.839 billion. Wall Street had been targeting earnings of just $2.02 per share on similar revenue.

ServiceNow also reported subscription revenue of $1.86 billion, up 22% and slightly above the Street’s view of $1.84 billion. All told, ServiceNow reported a net profit of 74 cents per share, or $150 million, for the quarter.

ServiceNow Chairman and Chief Executive Officer Bill McDermott (pictured) said his company continues to perform beyond expectations. “Our Q4 surge in new business shows that the secular tailwinds of digitization aren’t going anywhere,” he said. “We are driving net-new innovation, fast growth and operating leverage. The world works with ServiceNow as the end-to-end platform for digital transformation.”

The company has established itself as a leading player in the workflow automation software market. It sells a variety of applications that companies use to organize and automate personnel, customer service and information technology operations.

Last summer, ServiceNow was actually one of the first cloud software companies in the business to warn that it was seeing customers become more reluctant to make purchases. However, McDermott told Bloomberg that since making that statement, ServiceNow has continued to hire staff and has achieved better sales coverage across industries.

He promised “absolutely no layoffs in 2023,” saying that any customer anxiety it saw last year has now evaporated, and that some companies are even scaling back on their commitments with other vendors to ensure their needs are met with ServiceNow.

In an interview with Barron’s, McDermott explained that ServiceNow has benefited from some companies that have made layoffs, as they’re increasingly using its tools to manage their business operations with fewer staff. “Customers know they have to do more with less,” McDermott said.

That may explain ServiceNow’s confident outlook for the year ahead. For the first quarter fiscal 2023, the company said it’s projecting subscription revenue of between $1.99 billion and $2 billion, which would amount to growth of between 22% and 22.5%. Wall Street was looking for sales of $1.95 billion.

For the full year, ServiceNow is projecting subscription revenue of $8.44 billion to $8.5 billion, comfortably ahead of Wall Street’s consensus estimate of $8.34 billion.

Despite the confident outlook, investors appeared somewhat less than convinced, as ServiceNow’s stock fell 3% in extended trading, wiping out a small gain it had made during the regular session.

Photo: SAP

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