Photo Credit: Gerd Altmann from Pixabay

ITSM leader ServiceNow (NYSE: NOW) recently reported results for a mixed second quarter. Uncertain economic conditions and elongated deal cycles have dampened ServiceNow’s outlook for the year. However, its 99% renewal rate and impressive large deal metrics make it an attractive long-term bet.

ServiceNow’s Financials

For the second quarter, ServiceNow’s revenues grew 25% to $1.752 billion, slightly below analyst estimates of $1.762 billion. Non GAAP EPS was $1.62, ahead of the market’s estimates of $1.55.

By segment, subscription revenues grew 25% to $1.66 billion and professional and other services revenues grew 19% to $94 million. 

The company now has 1,463 total customers with more than $1 million in annual contract value, representing 22% y-o-y growth in customers. It had over 100 customers globally paying over $10 million in annual contract value in Q2 2022.

For the third quarter, ServiceNow forecast subscription revenues to grow 23% to $1.75-$1.755 billion, and slightly below the analyst estimate of $1.787 billion. 

For the fiscal year, it lowered its guidance to subscription revenues of $6.915-$6.925 billion reflecting the current economic headwinds. 

ServiceNow’s Hitch Works Acquisition

In June, ServiceNow acquired Hitch Works, a skills mapping and intelligence company that helps companies address the talent gap. Hitch automatically interprets data across project work, job postings and people profiles, and then makes recommendations for new training courses, internal job posts, or understaffed short-term projects. Its enterprise clients include Allianz, Bosch, and GE Digital. 

Hitch will add a new layer of ML- and AI-powered skills insights to the Now Platform to align existing employee skills to workforce planning. ServiceNow will build Hitch’s capabilities into the Now Platform, beginning with its Employee Workflow solutions. ServiceNow also expects to later expand Hitch’s features across its portfolio for customer service, IT, and developers. 

Hitch was founded by HR industry veteran Kelley Steven-Waiss and is led by CEO Heather Jerrehian, a successful serial entrepreneur and one of the founders of the venture capital firm, How Women Invest. Both leaders are expected to remain with ServiceNow post the acquisition. Hitch had raised an undisclosed amount of seed funding from investors including How Women Invest, Symphony, Alpha Ventures, and Bossanova Investimentos. Terms of the deal were not disclosed. 

ServiceNow’s focus on catering to talent shortage and tight budgets through automation is likely to resonate well in the current market situation.

Its stock is trading at $493.00 with a market capitalization of $99.6 billion. It hit a 52-week high of $707.60 in November last year and a 52-week low of $406.47 in May this year. 

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