Tthe software giant that enables workflow management and the digitization of businesses came back with great results last night. Let’s take a look at ServiceNow’s [NOW] revenue and see if they can tell the good news for the broader software-as-a-service (SaaS) industry.
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ServiceNow revenues in Q4
ServiceNow generated $ 1.6 billion in total revenue for the quarter, which was a 29% year-over-year (YoY) increase, but gross margins dropped slightly from 85% to 82%. The same decrease in margins will be seen for the results of the entire 2021 financial year, but there may be quarter-on-quarter differences that could increase costs, so this shouldn’t cause major concern. It continues to demonstrate its strength in customer retention, with 99% of its 1,359 large customers (companies spending over $ 1 million) renewing service, and on average, quarterly costs are $ 3.8 million.
The company expanded its suite of digital offerings with the launch of ‘ServiceNow Impact’ in January, an AI -powered platform that aims to advance the digitalization of enterprise customers through recommendations and insights.
ServiceNow also reported a positive outlook for the coming year, projecting a 26% growth rate. During the call, CEO Bill McDermott said that “customer demand for the innovative ServiceNow platform is stronger than ever.”
What does this mean for software companies?
This looks great for software businesses, but that doesn’t mean they’re all over performance. Companies reporting results are required to display the same trifecta of attributes displayed by ServiceNow. That is, a strong value proposition, optimistic future guidance, and a sticky business model with low churn.
2022 may puncture some companies in future revenues but past performance is a good indicator of where we can see this industry, and software demand continues to resist the possibilities.
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Disclaimer Past performance is not a reliable indicator of future results.
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