ServiceNow lifts annual subscription revenue guidance after income tops estimates

Investing.com -- Shares in ServiceNow (NYSE:NOW ) were slightly higher in premarket US trading on Thursday after the IT management software group unveiled a fourth-quarter subscription revenue forecast that topped Wall Street expectations.

Santa Clara, California-based ServiceNow also increased its full-year subscription revenue outlook, citing demand from new and existing customers.

The company has been rolling out artificial intelligence-fueled offerings to its enterprise clients, many of whom are looking to slash costs by automating IT processes. ServiceNow's customers include telecommunications titan AT&T (NYSE:T ), video conferencing service Zoom Video Communications (NASDAQ:ZM ) and ride-sharing giant Uber Technologies (NYSE:UBER ).

In September, ServiceNow released new AI agents designed to manage tasks autonomously. It plans to make these agents -- which compete with similar products from rivals like Salesforce (NYSE:CRM ) and Microsoft (NASDAQ:MSFT ) -- available in a limited release for IT and customer service applications in November.

For its fourth quarter, ServiceNow said it expects subscription revenue to between $2.875 billion and $2.880 billion. Analysts had anticipated $2.85 billion, according to LSEG data cited by Reuters.

Annual subscription revenues are also seen at $10.655 billion to $10.660 billion, compared to ServiceNow's prior outlook of $10.575 billion to $10.585 billion.

"We think the tailwinds around [generative AI] monetization likely increases into [the calendar year 2025]," analysts at RBC Capital Markets said in a note to clients.

Adjusted earnings per share came in at $3.72 on revenue of $2.79 billion in the third quarter versus Wall Street expectations of $3.45 a share and $2.75 billion, respectively.

Current remaining performance obligations, a gauge of booked revenue over the next 12 months, also climbed by 16% to $9.36 billion.

Analysts at Morgan Stanley flagged that, with shares in ServiceNow having jumped by almost 25% over the past quarter and excitement growing over its AI capabilities, market projections "appeared elevated" heading into the third-quarter results.

"Bottom-line, while ServiceNow remains well positioned to be a primary beneficiary of ramping [generative AI] spend in 2025, investors may have to be a bit more patient,' the Morgan Stanley analysts said.

(Yasin Ebrahim and Reuters contributed reporting.)

 

Source: Investing.com

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