ServiceNow Inc.’s stock gained significantly. in after-hours trading today despite the company posting mixed financial results for its third quarter. It beat expectations on earnings but missed revenue and offered lower guidance, but its stock jumped more than 12% in the hours after the report.
In a statement, ServiceNow reported earnings before certain expenses such as stock compensation of $1.96 per share, up from $1.55 a year earlier. Revenue jumped 21% to $1.83 billion. Under that, ServiceNow reported net income of $80 million. Wall Street was looking for earnings of just $1.85 per share on higher revenue of $1.85 billion.
The company also reported subscription revenue of $1.74 billion in the quarter, up 22% from a year earlier.
For the fourth quarter, ServiceNow said it expects subscription revenue to come in at about $1.83 billion to $1.84 billion. That was below Wall Street’s forecast of $1.87 billion in subscription revenue. The company also lowered its full-year subscription revenue guidance to $6.87 billion, down from an earlier target of $6.92 billion.
ServiceNow Chairman and Chief Executive Bill McDermott (pictured) praised the company’s performance, saying it once again beat its top and bottom line goals. “Enterprises are leading the generational shift from architectures built in the last century to platforms engineered for this one,” said the CEO. “Through dramatically improved experiences for customers, employees, and creators, ServiceNow is becoming the strategic center of gravity for digital transformation. Our focus on creating value is unmatched.”
ServiceNow is a leading player in the workflow automation software space. Its platform is used by enterprise information technology teams to monitor and manage the services they provide. It also offers administrative and workflow management tools, and in recent times it has expanded into adjacent areas such as human resources, customer service management and IT security.
The company has been successful over the past few years, helping to popularize the workflow concept. It has set itself the ambitious target of generating more than $16 billion in annual revenue by 2026.
It remains to be seen if ServiceNow will reach the goal but it can take confidence from some positive growth numbers. In its report, it announced that current outstanding performance obligations, which are contract revenue to be recognized over the next 12 months, reached $5.87 billion, an increase of 18% compared to last year. In addition, the company said it now has more than 1,530 customers generating at least $1 million in annual revenue, up 22%. Meanwhile, its number of customers paying more than $10 million a year increased by an impressive 60%.
ServiceNow has had a busy quarter on the product front, announcing a major refresh of its core workflow automation platform with the release of Now Platform Tokyo. It also strengthened its observability platform Lightstep with the addition of Unified Query Language to enable observability-as-code. Lightstep will likely get some additional new capabilities soon, following ServiceNow’s acquisition of a startup called Era Software Inc.
ServiceNow Chief Financial Officer Gina Mastantuono said the company’s strong performance in the quarter is a testament to the strong execution of its team. “We continue to see a solid pipeline and maintain our investments in growth leases as the opportunity in front of us remains enormous,” he said. “Our business is resilient, our teams are delivering, and we’re as confident as ever about being the definitive enterprise software company of the 21st century.”