ServiceNow's first quarter should alleviate a bevy of emerging concerns in enterprise technology. The company landed multiple Pro Plus AI deals in the quarter and grew its US public sector business by more than 30% amid macroeconomic uncertainty.
For the first quarter, ServiceNow reported earnings of $460 million, or $2.20 a share, on revenue of $3.088 billion. Non-GAAP earnings in the first quarter were $4.04 a share.
Wall Street was looking for earnings of $3.94 a share on revenue of $3.09 billion.
The company has expanded more into CRM and revamped its business model so AI agents are activated on its platform and enterprises pay by consumption. ServiceNow's ground game is also strong as the company shined in manufacturing and healthcare and life sciences.
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In addition, ServiceNow outlined new partnerships along with its results. ServiceNow said it has partnered with Aptiv to provide edge device intelligence across multiple industries. ServiceNow also said it will launch an AI service management suite with Vodafone Business. The company also said it will partner with Devoteam in a bid to land CRM projects in Europe and the Middle East.
CEO Bill McDermott said the company is driving value for customers and playing a big role in transformation projects. CFO Gina Mastantuono said ServiceNow is driving efficiencies via AI and reducing costs. ServiceNow ended the first quarter with 508 customers with annual contract values topping $5 million.
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As for the second quarter outlook, ServiceNow said it was benefiting from a weaker US dollar and it exceeded the high end of its subscription revenue guidance. Nevertheless, it said it “only flowing through part of those benefits” in its outlook to account for economic uncertainty. ServiceNow projected subscription revenue of $3.03 billion to $3.035 billion, up 19% to 19.5%. For 2025, ServiceNow is projecting revenue between $12.64 billion and $12.68 billion, up 18.5% to 19%.
On a conference call, McDermott said:
"While it's true there are some unknowns out there, this is far from the first macro disruption we have encountered. You don't build a defining company by surrendering to uncertainty. You do it by seeing challenges as opportunities. We have zero interest in anything less than outperforming."
He added that customers are focused on taking out costs, modernizing tech stacks and leveraging AI. McDermott also talked up ServiceNow's US government business.
CFO Mastantuono said: "We went through a very rigorous analysis of our business and its exposure to areas that could potentially be impacted by the current geopolitical. Federal is a piece of it and enterprise, of course. What I'll tell you is that demand remains strong. The customers we're talking to are absolutely focused on the future and growth in and cost out. ServiceNow platform remains a deflationary tool that customers are leaning into in times of uncertainty."
Constellation Research analyst Holger Mueller said ServiceNow put up a strong quarter. He said:
"ServiceNow breaks two key milestones, $10 billion projected revenue for the fiscal year and $3 billion in revenue for the quarter. For the longest time it was not clear where future growth will come from, but Bill McDermott and team have expanded their total addressable market going into CRM and HCM. Both markets make sense as they are characterized by unstructured processes and fragmented automation islands. But next quarter will show as ServiceNow is making new enemies."
Other key items:
- "CRM and industry workflows continued its momentum in 16 of our top 20 deals, with nine deals that were over a million core business workflow," said McDermott.
- McDermott said it is expanding its addressable market with CRM and supply chain. "There's not a day that passes when we don't hear from customers who are dissatisfied with the status quo," said McDermott.
- ServiceNow said RaptorDB, the company's next-gen database, saw annual contract value sequential gains and had five deals worth more than $1 million.
The company noted that Paul Smith is resigning as the company’s president of global customer and field operations. He is succeeded by Paul Fipps.
