ServiceNow Bill McDermott beats earnings on currency effects

Hello and welcome to Protocol Enterprise! now: Why ServiceNow beat its already disappointing guidance for the third quarter if you ignore it (question wildly), how Mobileye went on its first day back on the public markets, and the continued power of defaults comes to security .

No one owns, only spends

ServiceNow missed its third-quarter earnings guidance by regular accounting standards, while also lowering its full-year forecast on Wednesday. But like many companies reporting earnings this week, the SaaS giant was susceptible to foreign exchange impacts, and CEO Bill McDermott was pleased with its results.

ServiceNow reported subscription revenues of $1.74 billion for the quarter, slightly below its expected $1.75 billion, while also forecasting $6.87 billion in revenue for the year, down from its previously lowered guidance of $6.92 billion in 2022 revenue.

  • In an interview with Protocol, McDermott explained that when adjusted for constant currency, the company actually exceeded its guidance and Wall Street expectations for subscription revenue, gross revenue, and net income with results of $1.83 billion, $1.51 billion, and $398 million, respectively.
  • “You’re guided by the constant currency, and you’re judged by your constant currency performance, so it’s a lose-lose,” he said.
  • ServiceNow also had the highest operating margin in its history at 26%, which McDermott was quick to point out didn’t adjust for ongoing cash.

ServiceNow cannot control the macroeconomic environment or currency exchange rates, most of these are caused by geopolitical uncertainty in Europe. But the company is still largely focused on the US market, with plans to expand globally in the coming years to reach $11 billion in sales by 2024.

  • McDermott, as usual, was unfazed.
  • “We were built for this moment,” he said. McDermott has no plans to slow down, saying ServiceNow will continue to hire, stay the course with its M&A strategy of tucking-in acquisitions, and double down on organic innovation.

But ServiceNow felt the need to make some changes to achieve its goals.

  • McDermott will replace founder Fred Luddy as chairman of the board of directors, the company said Wednesday. Luddy will remain on the board.
  • “I think it’s a long-term signal of Fred’s commitment to us,” McDermott said.
  • Now, McDermott is thinking about making board appointments to accelerate the company’s future.
  • “We have to take bold steps: Japan, India, certain industry verticals, and there may be operators, considering that we have a very favorable board, that will strengthen us over time, ” he says.

As McDermott tightens his grip on ServiceNow, he will further shape the company in his image.

  • Part of that picture comes from being a consummate salesman who remains optimistic, even when the numbers might suggest otherwise.

— Aisha is counting (email | nervous)

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It is impossible to revive the dead. But Mobileye’s Wednesday IPO shows that the market to list public companies has not yet lost all its important signs.

Mobileye stock had a good first day, rising nearly 40% to close at $28.97. The Intel-controlled company sold about $860 million worth of stock in the IPO and sold an additional $100 million to General Atlantic. It priced the issue at $21, a dollar above the top end of the $18 to $20 a share it had expected to fetch.

Intel CEO Pat Gelsinger was careful not to call Mobileye’s return to the public markets a capital raise at an event earlier this week, describing it instead as a decision designed to move it to market.

Gelsinger’s point is true: The original reason Intel planned the IPO was for financial engineering — to unlock for Wall Street value in its fast-growing autonomous driving unit while the rest of Intel -figures out how to correct years of dysfunction. Two separate stocks, but still one company (Intel still controls Mobileye).

Intel once hoped to bank a valuation of $50 billion but later revised that down to $30 billion before settling on the roughly $20 billion market cap it was actually able to achieve. For context, Intel bought the then-public Mobileye for $15.3 billion in 2017.

— Max A. Cherney (email | nervous)

Better default settings, please

If you caught any of CISA director Jen Easterly’s conference keynotes last week, you may have seen a running emphasis on one particular message: the need for “secure by default” products. technology. The most interesting element of this, to me at least, is his request for vendors to create software and hardware products that are less plagued by vulnerabilities.

The message also relates to multifactor authentication, which Easterly called on vendors to make available as a default option during his keynote at the FIDO Alliance’s Authenticate conference. But Easterly’s call for technology providers during the Mandiant mWISE conference goes beyond MFA.

“We’ve embraced this weird cultural norm where software and technology come out of line full of vulnerabilities,” Easterly told mWISE. “And I think we need to expect more and really demand more from our technology providers.”

The reason, as he said during that conversation, is not just to improve overall security (which of course it will). But more critically, secure by default is important because “we put the burden on the least capable and least informed about the threat to defend themselves, as opposed to [on] technology providers,” he told mWISE.

Ultimately, Easterly indicated that the “call to action for technology vendors to focus more on secure by default” will be a continuous theme in the coming year. It remains to be seen how this message will be received by vendors, particularly for whom “the benefits of unsecured products far outweigh the downsides” — as Easterly’s predecessor, Chris Krebs, said , during this year’s Black Hat.

— Kyle Alspach (email | nervous)

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Thanks for reading — see you tomorrow!

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