Photo Credit: Gerd Altmann from Pixabay

The IT Service Management (ITSM) applications market is expected to reach $6.8 billion by 2025, from $6.3 billion in 2020. ServiceNow (NYSE: NOW), one of our picks for 25 Cloud Stocks to BUY for 2022, remained the largest vendor in the space with a 40% market share, followed by Atlassian and LogMeIn. Recently, it reported its fourth-quarter results that continued to outpace market expectations.

ServiceNow’s Financials

For the fourth quarter, ServiceNow’s revenues grew 30% to $1.62 billion, ahead of the market’s forecast 0.8%. EPS of $1.46 was also ahead of the market’s estimates of $1.43.

By segment, subscription revenues grew 30% to $1.5 billion and professional and other services revenues grew 38% to $91 million. Constant currency constant duration subscription billings grew 33% to $2.42 billion, representing the strongest normalized billings growth seen from ServiceNow since 2018. It reported a user base of over 70 million across its solution portfolio. It added 99 customers generating more than $1 million in ACV, growing 25% over the quarter.  

It ended the year with revenues growing 29% to $5.8 billion and an EPS of $6.07.

For the first quarter, ServiceNow forecast subscription revenues of $1.61-$1.615 billion. For the fiscal year, it forecast subscription revenues of $7.02-$7.04 billion. The market expects ServiceNow to deliver revenues of $7.37 billion with an EPS of $7.12 for the year and revenues of $1.7 billion with an EPS of $1.70 for the quarter.

ServiceNow’s Acquisition

Recently, ServiceNow announced the launch of ServiceNow Impact, its solution to assist customers in speeding up the return on their digital transformation investments. The solution combines AI-powered recommendations, expert guidance, premium tech support, and tools. While more and more companies are spending significant resources on digital transformation initiatives globally, they are still seeing material gap in getting expected outcomes from these investments. ServiceNow’s Impact will help close this gap with its personalized recommendations and insights, premium technical support and preventative tools, role-based training and certifications, expert coaching, and prescriptive guidance, all in a premium digital experience.

Earlier last quarter, ServiceNow also announced the acquisition of California-based DotWalk for an undisclosed sum. DotWalk was set up in 2017 to automate testing and application upgrades for the Now Platform. It uses AI regression testing for business processes and creates automated tests. Its tools allow customers to validate application changes without developers writing tests. DotWalk runs natively on ServiceNow’s automated test framework and has helped accelerate ServiceNow upgrades. ServiceNow believes that the integration of DotWalk’s tools will help reduce the cost of ownership of ServiceNow. Customers will be able to save time in testing application changes, and will also be able to free the time of developers to focus on higher-value business activities. Prior to the acquisition, DotWalk was privately held and did not disclose its financials.

Its stock is currently trading at $561.08 with a market capitalization of $111.7 billion. It hit a 52-week high of $707.60 in November last year and a 52-week low of $448.27 in May last year. Now is a terrific entry-point into NOW. Superb company with endless potential for organic and inorganic growth.