ServiceNow (NOW, Financial) reported first-quarter revenues reaching $3.09 billion, in line with market expectations. The company continues to establish itself as a leading force in enterprise-grade AI solutions, providing robust tools that enable businesses to adapt swiftly to the rapidly evolving market landscape.
According to ServiceNow's leadership, the company's platform is playing a crucial role in supporting CEOs by offering the necessary speed and agility to navigate today's complex business environment. This strategic focus on transformative solutions is helping to drive value not just for customers but also for shareholders.
ServiceNow remains committed to maintaining its status as a key player in the digital transformation sector, setting a high bar with its performance and the strategic deployment of advanced AI technologies.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 40 analysts, the average target price for ServiceNow Inc (NOW, Financial) is $1,023.69 with a high estimate of $1,300.00 and a low estimate of $716.00. The average target implies an upside of 25.96% from the current price of $812.70. More detailed estimate data can be found on the ServiceNow Inc (NOW) Forecast page.
Based on the consensus recommendation from 47 brokerage firms, ServiceNow Inc's (NOW, Financial) average brokerage recommendation is currently 1.9, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for ServiceNow Inc (NOW, Financial) in one year is $1056.38, suggesting a upside of 29.98% from the current price of $812.7. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the ServiceNow Inc (NOW) Summary page.
Key Business Developments
Release Date: January 29, 2025
- Subscription Revenue: $2.866 billion in Q4, 21% year-over-year growth in constant currency.
- Remaining Performance Obligations (RPO): Approximately $22.3 billion, 26% year-over-year constant currency growth.
- Current RPO: $10.27 billion, 22% year-over-year constant currency growth.
- Operating Margin: 29.5% for Q4, up 200 basis points year over year.
- Free Cash Flow Margin: 47.5% for Q4; 31.5% for full year 2024, up 100 basis points year over year.
- Total Free Cash Flow: $3.5 billion for 2024.
- Cash and Investments: $10 billion at year-end.
- Renewal Rate: 98% in Q4.
- Large Deals: 170 deals greater than $1 million in net new ACV in Q4, including 19 deals over $5 million and 3 deals over $20 million.
- Customer Base: Approximately 8,400 customers, with 2,109 generating over $1 million in ACV.
- Share Repurchase Program: Approximately 293,000 shares repurchased in Q4, with $266 million remaining of the original $1.5 billion authorization.
- 2025 Subscription Revenue Guidance: Between $12.635 billion and $12.675 billion, 20% year-over-year growth at the midpoint.
- 2025 Operating Margin Guidance: 30.5%, up 100 basis points year over year.
- 2025 Free Cash Flow Margin Guidance: 32%.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- ServiceNow Inc (NOW, Financial) reported a strong Q4 2024, exceeding expectations with a subscription revenue growth of 21% and CRPO growth of 22%.
- The company has a robust balance sheet with $10 billion in cash and investments, supporting its growth initiatives.
- ServiceNow Inc (NOW) is experiencing significant growth in its AI offerings, with a 150% quarter-over-quarter increase in deals for its Pro Plus AI solutions.
- The company continues to expand its enterprise platform, securing 19 deals greater than $5 million in net new ACV and landing its largest new logo deal ever.
- ServiceNow Inc (NOW) is recognized as a leader in the 2024 Gartner Magic Quadrant for CRM Customer Engagement Center and the Forrester Wave for task-centric automation software.
Negative Points
- The company anticipates a more back-end weighted deal linearity in 2025 for federal business due to the change in the presidential administration.
- ServiceNow Inc (NOW) is facing FX headwinds, impacting its subscription revenue and CRPO growth outlook.
- The transition to a hybrid consumption and subscription model may take time to build up on the consumption side, potentially affecting near-term revenue growth.
- Despite strong growth, the company acknowledges the need for continued innovation and investment in AI to maintain its competitive edge.
- There is a risk associated with the rapid commoditization of AI models, which could impact ServiceNow Inc (NOW)'s differentiation in the market.
