Cloud Stocks: ServiceNow Firing On All Cylinders But One: Startup ISVs

Photo Credit: Tomasz Miko?ajczyk from Pixabay

Despite the COVID-19 crisis, ServiceNow (NYSE: NOW) continues to outpace all market expectations. It is doubling down on tying up with other technology partners to provide solutions needed to accelerate the digital transformation of organizations.

ServiceNow’s Financials

For the fourth quarter of the year, ServiceNow’s revenues grew 31.33% to $1.25 billion, ahead of the market’s forecast of $1.21 billion. EPS of $1.17 was also slightly ahead of the market’s estimates of $1.05.

This was an exceptional quarter for ServiceNow as it saw impressive growth in its subscription billings. Subscription revenues grew 38% to $1.828 billion, ahead of its earlier estimate of $1.61-$1.63 billion and ahead of the market’s forecast by 10%. This was the biggest growth ServiceNow has registered in its subscription billings in the last 12 quarters. Professional and other services revenues grew 26% to $66 million.

During the quarter, it closed 89 transactions with more than $1 million in net new annual contract value (ACV). It now has 1,093 total customers with more than $1 million in ACV, up by 23% over the year.

For the full year, ServiceNow announced revenues of $4.519 billion and an EPS of $0.59.

ServiceNow expects subscription revenues of $1.275-$1.28 billion for the first quarter and subscription billings of $1.31-$1.315 billion. For the full year, it expects subscription revenues of $5.48-$5.5 billion and subscription billings of $6.205-$6.225 billion. The market expects ServiceNow to deliver total revenues of $5.59 billion with an EPS of $5.42 for the year and revenues of $1.29 billion with an EPS of $1.23 for the first quarter.

ServiceNow’s Acquisition

ServiceNow has recently announced the acquisition of Canada-based Element AI. Founded in 2016 by Anne Martel, Gabriel Duford, Jean-Francois Gagne, Jean-Sebastian Cournoyer, Nicolas Chapados, Philippe Beaudoin, and Yoshua Bengio, Element AI democratizes AI with non-predatory and fully collaborative models to commercialize research. The acquisition will allow ServiceNow to create an AI Innovation Hub in Canada, accelerating customer-focused AI innovation in the Now Platform. The acquisition will also deepen ServiceNow’s commitment to the Canadian market.

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Disclosure: All investors should make their own assessments based on their own research, informed interpretations and risk appetite. This article expresses my own opinions based on my own ...

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