Yahoo Finance ServiceNow Lifts Annual Forecast in Optimistic Sign for Tech
(Bloomberg) -- ServiceNow Inc. raised its annual sales forecast, delivering an optimistic signal for a software industry that has been shaken by customers’ slowing demand for technology over recent quarters.
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Subscription revenue will jump more than 23% to as much as $8.52 billion this year, the company said Wednesday in a statement. The forecast is a slight increase from ServiceNow’s January guidance and topped analysts’ average estimate. For the current period ending in June, subscription revenue will be about $2.04 billion, also narrowly exceeding estimates.
ServiceNow’s forecast adds to a series of positive results this week from the tech industry. Microsoft Corp. reported resilient corporate cloud-computing demand Tuesday while Alphabet Inc.’s Google generated better-than-expected advertising sales and said its cloud unit reported a profit for the first time. In an interview, ServiceNow Chief Executive Officer Bill McDermott said all these companies offer various platforms that customers are using to consolidate their technology needs. The vast majority of ServiceNow’s largest deals this quarter included five or more software products, he added.
ServiceNow sells applications that help companies organize and automate their personnel, customer service and information technology operations. The results reflect a continued turnaround from about a year ago when McDermott became one of the first software executive to say that customers were reluctant to commit to purchases.
The Santa Clara, California-based company said first-quarter subscription revenue increased 24% to $2.02 billion. Analysts, on average, projected $2 billion, according to data compiled by Bloomberg. Currency fluctuations dampened growth by three percentage points, but currency impacts should end this year and may even turn to a small tailwind, McDermott said.
Anytime a company exceeds analysts’ expectations in this uncertain economic situation is positive news, Anurag Rana, a Bloomberg Intelligence analyst, said in Bloomberg Television interview. “If they can manage to grow over 20% in such a bad environment, that’s pretty good.”
The shares gained about 2% in extended trading after closing at $454.03 in New York. The stock has rallied 17% this year.
Total revenue jumped 22% to $2.1 billion in the period ended March 31. Profit, excluding some items, was $2.37 a share, topping analysts’ average estimate of $2.05. Diverging from other large tech firms, ServiceNow earlier committed to no job cuts in 2023. McDermott said the company is sticking with that pledge, calling it a “solemn oath.”
Separately, ServiceNow said Deborah Black, vice president of engineering at Netflix Inc., will join the company’s board. Former US Army Chief Information Officer Raj Iyer was named head of ServiceNow’s global public sector business.
(Updates with analyst comment in sixth paragraph.)
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