Investment Rating - The report assigns an "Outperform" rating to ServiceNow (NOW.N) for the first time [19] Core Views - ServiceNow is a global leader in workflow automation, actively exploring AI integration to unlock growth opportunities [15] - The company has a strong partnership with NVIDIA, co-developing native AI agents on the Now Platform [75] - ServiceNow's latest platform update, Xanadu, significantly expands AI capabilities and integrates with Microsoft Copilot [26] - The company has raised its full-year 2024 guidance, expecting subscription revenue of $10.655-10.66 billion, up 23% YoY [54] Financial Performance - Q3 2024 revenue reached $2.797 billion, up 22% YoY, with subscription revenue of $2.715 billion, exceeding guidance by 2 percentage points [29] - Non-GAAP operating margin exceeded 31%, surpassing guidance by 1.5 percentage points [29] - FY2024 Q3 gross margin was 79.12%, up 0.29 percentage points YoY, with net margin at 15.45%, up 4.87 percentage points YoY [34] - Remaining Performance Obligations (RPO) reached $19.5 billion in Q3 2024, up 36% YoY, while Current RPO (CRPO) was $9.36 billion, up 26% YoY [27] AI Integration and Platform Development - ServiceNow launched Now Assist, a generative AI solution that enhances productivity across IT, customer service, HR, and development workflows [25] - The Xanadu platform update introduced over 350 new AI features, including automated data visualization and email response generation [26] - Now Assist for Creator converts natural language into high-quality code suggestions, enabling faster application development [25] - The company has integrated Microsoft Copilot into its platform, allowing users to automate internal processes seamlessly [26] Market Opportunity and Growth - The global technical services market is expected to grow from $24.9 billion in 2023 to $123.5 billion by 2030, representing a CAGR of 17.4% [86] - ServiceNow's subscription revenue is projected to grow at a CAGR of 22% from 2024 to 2026, reaching $16.134 billion by 2026 [64] - The company's AI solutions are rapidly expanding across industries, with significant growth in technology, media, telecom, retail, and hospitality sectors [27] Valuation - The report uses a PS-based valuation method, assigning ServiceNow a 2025 PS multiple of 19-20x, implying a market cap range of $256.18-269.66 billion [66][67] - Comparable companies include CrowdStrike, Salesforce, The Trade Desk, and Cloudflare, with an average 2025 PS of 20x [66]

Group 1: Momentum Investing Overview - Momentum investing involves following a stock's recent trend, with the aim of buying high and selling higher, capitalizing on established price movements [1] - The Zacks Momentum Style Score helps investors identify effective metrics for assessing stock momentum [2] Group 2: ServiceNow (NOW) Analysis - ServiceNow currently holds a Momentum Style Score of B and a Zacks Rank of 2 (Buy), indicating strong potential for outperformance [3][4] - Over the past week, ServiceNow shares increased by 7.14%, while the Zacks Computers - IT Services industry remained flat [7] - In the last month, ServiceNow's shares rose by 10.45%, outperforming the industry's 4.28% [7] - Over the past quarter, ServiceNow shares have risen by 24.93%, and by 68.79% over the last year, compared to the S&P 500's increases of 8.43% and 31.8%, respectively [8] Group 3: Trading Volume and Earnings Outlook - The average 20-day trading volume for ServiceNow is 1,207,265 shares, indicating a bullish sign with rising stock prices [9] - In terms of earnings estimates, 11 estimates have been revised upwards in the last two months, increasing the consensus estimate from $13.81 to $13.87 [11] - For the next fiscal year, 7 estimates have moved upwards while 5 have been revised downwards [11] - Overall, ServiceNow is positioned as a 2 (Buy) stock with a Momentum Score of B, making it a strong candidate for near-term investment [12]

Core Viewpoint - ServiceNow's stock has appreciated significantly, driven by its expanding Generative AI portfolio, strong partner collaborations, and increasing clientele, outperforming the broader market and industry benchmarks [1][2]. Group 1: Stock Performance - ServiceNow shares have increased by 60.3% over the past 12 months, compared to 34.7% for the Zacks Computer & Technology sector and 20% for the Zacks Computers – IT Services industry [1]. - The stock is currently trading above both the 50-day and 200-day moving averages, indicating a bullish trend [2][3]. Group 2: Generative AI and Clientele Expansion - ServiceNow is leveraging AI and machine learning to enhance its solutions, with its total addressable market projected to reach $275 billion by 2026 [8]. - The recent Xanadu update introduces AI-powered solutions across various sectors, including telecom, financial services, and public sector [8][9]. - The integration of Agentic AI is expected to enhance productivity and issue resolution for Customer Service Management and IT Service Management [10]. - ServiceNow plans to add over 150 GenAI innovations to its platform, including AI governance features to ensure secure AI practices [11]. - As of Q3 2024, ServiceNow had 2,020 customers with annual contract values exceeding $1 million, with significant growth in high-value contracts [11][12]. Group 3: Strategic Partnerships - ServiceNow has expanded its collaboration with Amazon Web Services to enhance AI-driven business transformation [13]. - The partnership with Microsoft aims to modernize business processes through the integration of Microsoft Copilot and ServiceNow AI agents [14]. - Additional partnerships with companies like Visa, Snowflake, and IBM are expected to further enhance ServiceNow's market share [15]. Group 4: Financial Guidance and Performance - For 2024, ServiceNow expects subscription revenues between $10.655 billion and $10.66 billion, reflecting a 23% increase from 2023 [16]. - Projected subscription revenues for Q4 2024 are between $2.875 billion and $2.88 billion, indicating a year-over-year growth of 21.5-22% [17]. - The Zacks Consensus Estimate for 2024 earnings is $13.87 per share, representing a 28.66% year-over-year increase [18]. Group 5: Liquidity and Valuation - ServiceNow reported a cash balance of $5.295 billion as of September 30, 2024, with a free cash flow of $471 million in Q3 2024 [20]. - The company expects a free cash flow margin of 31% for 2024, allowing for growth opportunities such as acquisitions and share repurchases [21]. - ServiceNow's stock is trading at a premium valuation, with a forward Price/Sales ratio of 18.08X, significantly higher than the sector average [22][24].

Core Viewpoint - Varonis Systems, Inc. has expanded its data security coverage to include ServiceNow, enhancing its ability to discover, classify, and resolve data risks within the platform [1][4]. Group 1: Company Developments - The integration with ServiceNow allows Varonis to continuously discover and classify critical data, addressing issues related to data risk and overexposure [1]. - Varonis has recently added Google Cloud and Databricks to its coverage portfolio, along with automated remediation capabilities for Salesforce, demonstrating its commitment to reducing cloud data security risks [4]. - Varonis provides a unified view into data across various environments, enabling IT and security teams to improve their cloud data security posture [3][6]. Group 2: Industry Context - ServiceNow's platform is a prime target for attackers due to its handling of business-critical data and extensive customization options, which can lead to misconfigured access controls [2]. - Varonis aims to simplify the security of sensitive data within ServiceNow, offering a centralized management solution for posture and policies across all SaaS applications and cloud services [5]. - The company emphasizes the importance of a comprehensive approach to data security, as piecemeal solutions can create vulnerabilities that attackers may exploit [5].

Core Insights - Tech Mahindra has announced the integration with ServiceNow to launch the One E2E Platform, aimed at enhancing operational efficiency and competitiveness for enterprises by incorporating GenAI capabilities into critical business processes [1][2] - The collaboration focuses on joint go-to-market strategies to accelerate digital transformation across various industries, including communications, manufacturing, BFSI, and healthcare [2][4] Company Initiatives - Tech Mahindra plans to double its ServiceNow certifications within 12 months through a learning initiative that provides free certification to its workforce, ensuring they are prepared for future challenges [3] - The partnership aims to leverage Tech Mahindra's domain expertise and ServiceNow's capabilities to deliver advanced solutions that optimize network operations and enhance customer experiences [2][4] Industry Impact - The One E2E Platform will integrate advanced analytics, GenAI, and automation to facilitate operational efficiencies, thereby driving business growth for global enterprises [2][5] - Ahlstrom, a client of Tech Mahindra, has successfully utilized the ServiceNow offerings to optimize workflows and enhance service delivery, showcasing the effectiveness of the partnership [4][5]

Summary of ServiceNow, Inc. Conference Call Company Overview - **Company**: ServiceNow, Inc. (NYSE: NOW) - **Date**: December 11, 2024 - **Participants**: Gina Mastantuono (CFO), Raimo Lenschow (Barclays) Key Points Industry Insights - **Post-Election Sentiment**: There is a notable increase in small business sentiment, reported as the highest in three years, indicating a positive shift in the economic environment [5][7] - **IT Spending Outlook**: Expectations for IT spending into 2025 are stronger than the previous year, with CIO surveys reflecting a more favorable spending environment [7][8] Company Performance - **Pipeline Generation**: ServiceNow's pipeline generation has been strong, particularly through customer events and forums, leading to optimism for Q4 and 2025 [10][11] - **AI Investment**: ServiceNow has been investing in AI for years, with the Pro Plus SKUs being the fastest-growing product introduction in the company's history, indicating strong monetization potential [14][15] Product and Pricing Strategy - **Pro Plus SKU Performance**: The Pro Plus SKU has shown a pricing uplift of around 30%, with significant customer engagement, including 44 customers paying over $1 million [15][19] - **Value Proposition**: ServiceNow emphasizes a value-driven pricing model, where the majority of value generated goes to customers, maintaining a strong pricing strategy without over-discounting [20][21] Market Opportunities - **Expansion into New Markets**: ServiceNow is focusing on expanding its presence in various sectors, including federal, public sector, and international markets, with a strong emphasis on digitization and efficiency [35][36] - **Industry-Specific Solutions**: The company is developing tailored solutions for specific industries, enhancing its ability to address unique customer needs [34] Financial Discipline - **Growth and Profitability Balance**: ServiceNow maintains a disciplined approach to growth and profitability, leveraging its platform's inherent efficiencies to drive margins while expanding [40][41] - **Sales and Marketing Strategy**: The company plans to continue investing in sales and marketing headcount to capitalize on market opportunities, demonstrating agility in its hiring model [45][46] M&A Strategy - **M&A Considerations**: ServiceNow remains open to strategic acquisitions that drive customer value, but the focus is primarily on organic growth, with high hurdles for larger acquisitions [48][49] Conclusion - **Overall Outlook**: ServiceNow expresses cautious optimism for the upcoming year, driven by strong pipeline generation, effective pricing strategies, and a commitment to innovation and customer value [8][15][49]

Summary of ServiceNow, Inc. Conference Call Company Overview - **Company**: ServiceNow, Inc. (NYSE: NOW) - **Event**: Wells Fargo 8th Annual TMT Summit Conference - **Date**: December 4, 2024 - **Participants**: Gina Mastantuono (CFO), Michael Turrin (Wells Fargo Securities) Key Points Financial Performance - **Q3 Performance**: ServiceNow reported strong execution, beating both top-line and bottom-line guidance significantly [4][9] - **ROI Focus**: The company emphasized its ability to deliver quick ROI, often within weeks or months, which is crucial in the current macroeconomic environment [4][5] - **Federal Sector**: Q3 was highlighted as a strong quarter for federal contracts, exceeding internal expectations [9] Product Development and AI - **Gen-AI Growth**: The Gen-AI product line is the fastest-growing new product launch in ServiceNow's history, with 44 customers purchasing over $1 million worth of products [6][7] - **Price Uplift**: The company has seen a realized price uplift of 30% on Gen-AI products, aligning with initial expectations [7][39] - **Customer Workflows**: Customer workflows grew over 50% year-on-year, indicating strong demand [7] Market Outlook - **Cautious Optimism**: There is cautious optimism regarding IT spending in 2025, with expectations of a doubling pace in IT spend and a 15% growth in software spending [11] - **AI Implementation**: Conversations with C-suite executives are shifting from experimentation with AI to real implementation, focusing on productivity and efficiency gains [12][13] Strategic Focus Areas - **Federal Government**: ServiceNow sees significant opportunities in the federal sector, especially as agencies seek to enhance productivity and efficiency [18][19] - **International Growth**: The company is underpenetrated in international markets and sees this as a major growth opportunity [66] Technology and Innovation - **Raptor DB**: The transition to Raptor DB is expected to enhance performance significantly, with analytics performance improving by over 27 times [48] - **Data Management**: ServiceNow aims to streamline data sprawl through its workflow data fabric, allowing customers to manage data across various platforms without changing their data strategy [51] M&A Strategy - **Tuck-in Acquisitions**: ServiceNow has focused on smaller tuck-in acquisitions to drive innovation without relying on large-scale M&A for revenue growth [53][56] Leadership and Culture - **New Leadership**: The new executive, Amit, is seen as a strong cultural fit and is expected to drive value through his experience in AI and data strategy [58][60] Margin Expansion - **Financial Model**: ServiceNow maintains a balanced financial model with inherent leverage in R&D and go-to-market strategies, allowing for margin expansion while investing in growth [62][64] Future Outlook - **Long-term Vision**: The company emphasizes the importance of not overestimating short-term capabilities while recognizing the potential for significant advancements in the mid to long term, particularly in an AI-infused enterprise [66][67] Additional Insights - **Customer Engagement**: The company is actively engaging with customers to discuss AI strategies, which is catalyzing conversations even outside renewal periods [44] - **Agentic AI**: The introduction of Agentic AI is expected to significantly impact customer service operations, providing opportunities for efficiency gains [32][35] This summary encapsulates the key insights and strategic directions discussed during the conference call, highlighting ServiceNow's strong performance, innovative product offerings, and optimistic outlook for future growth.

Summary of ServiceNow, Inc. Conference Call Company Overview - **Company**: ServiceNow, Inc. (NYSE: NOW) - **Event**: UBS Global Technology and AI Conference - **Date**: December 3, 2024 - **Participants**: Gina Mastantuono (CFO), Karl Keirstead (UBS) Key Points Industry and Market Environment - The overall macro environment in Q3 was described as stable, with no significant disruptions noted in the software sector [6] - There is a strong focus on value and return on investment (ROI) among clients, indicating a cautious but positive sentiment in the market [7] Financial Performance - ServiceNow's stock price surpassed $1,000, reflecting strong market performance and investor confidence [5] - The company reported good quarterly results, aligning with the positive trends observed across the software industry [6] Investor Sentiment - The packed attendance at the conference suggests strong interest and confidence in ServiceNow's performance and outlook [1][2] - The tone of the discussion indicated that the company is perceived to be performing well, contributing to a positive atmosphere among investors [6] Additional Insights - The CFO expressed optimism about the company's performance, suggesting that the results were satisfactory and indicative of a healthy business environment [2][6] - The conversation highlighted the importance of maintaining focus on delivering value to clients, which is crucial for sustaining growth in the current economic climate [7]

Core Insights - ServiceNow's stock has surged over 280% since its pandemic low, with a 57% increase over the past year, currently priced around $1,050 per share, leading to speculation about a potential stock split [1] - The company targets full-year 2024 subscription revenue between $10.655 billion and $10.66 billion, with Q4 guidance set between $2.875 billion and $2.88 billion [2] - In Q3 FY2024, ServiceNow reported subscription revenue of $2.715 billion, reflecting a 23% year-over-year gain, aligning with historical performance [3] Stock Split Considerations - Stock splits can make shares more accessible to a broader range of investors, potentially increasing trading volume and attracting smaller investors [4][5] - A stock split may have a positive psychological impact, making the stock feel less expensive and could lead to increased institutional investment [6] Growth Drivers - ServiceNow's growth is driven by its focus on AI-powered workflow automation, highlighted by the Xanadu release and the Workflow Data Fabric [7] - Strategic partnerships with companies like NVIDIA and Siemens are expanding ServiceNow's ecosystem and enhancing tailored solutions for specific industries [8] - Global expansion efforts, including investments in the UK and new data centers in Italy, demonstrate a commitment to capturing a larger share of the international market [8] Competitive Landscape - ServiceNow faces intense competition from established players like Salesforce and Oracle, necessitating continuous innovation to maintain its competitive edge [9] Valuation Metrics - ServiceNow has a trailing P/E ratio of 163.72 and a forward P/E of 148.90, indicating a premium valuation relative to earnings [10] - The price-to-sales ratio stands at 20.73, reflecting high market expectations for future performance [11] Insider Activity - Observed insider selling activity may signal concerns about the stock's near-term prospects, warranting careful observation [12] Investment Decision Factors - The decision to invest in ServiceNow involves balancing its growth potential against its elevated valuation, with the possibility of a stock split adding complexity [13] - Long-term success will depend on the company's execution, AI strategy evolution, and ability to maintain competitive advantages [14]

Group 1 - ServiceNow is part of the Computer and Technology sector, which includes 619 individual stocks and holds a Zacks Sector Rank of 2 [2] - The Zacks Rank system emphasizes earnings estimates and revisions, with ServiceNow currently holding a Zacks Rank of 2 (Buy) [3] - The Zacks Consensus Estimate for ServiceNow's full-year earnings has increased by 4.2% in the past quarter, indicating improved analyst sentiment [3] Group 2 - ServiceNow has returned 47.4% year-to-date, outperforming the average gain of 28.1% for the Computer and Technology sector [4] - ServiceNow belongs to the Computers - IT Services industry, which has 40 stocks and is currently ranked 39 in the Zacks Industry Rank, with an average gain of 16% this year [5] - Investors should continue to monitor ServiceNow as it is expected to maintain strong performance in the Computer and Technology sector [6]