Should You Buy, Sell or Hold ServiceNow Stock Before Q1 Earnings?

Core Viewpoint - ServiceNow is expected to report strong first-quarter 2025 results, with significant revenue and earnings growth driven by subscription services and AI advancements [1][3][4]. Revenue and Earnings Estimates - The Zacks Consensus Estimate for first-quarter revenues is $3.08 billion, reflecting an 18.37% increase year-over-year [1]. - The consensus estimate for earnings is $3.79 per share, indicating an 11.14% growth from the previous year [1]. - Subscription revenues are projected between $2.995 billion and $3 billion, suggesting an 18.5-19% year-over-year improvement [3]. Subscription Revenue Growth - The Zacks Consensus Estimate for subscription revenues is $2.997 billion, indicating an 18.8% year-over-year growth [4]. - ServiceNow's new Yokohama platform is expected to enhance productivity and streamline workflows, contributing to subscription revenue growth [4][16]. Customer Growth and AI Integration - ServiceNow ended Q4 2024 with 2,109 customers, representing a 14% year-over-year increase in customers with over $1 million in annual contract value [5]. - The company is leveraging AI and machine learning technologies to enhance its solutions, which is expected to attract more clients [16]. Market Performance - ServiceNow shares have declined 27.1% year-to-date, underperforming the Zacks Computer & Technology sector and the Computers – IT Services industry [6][9]. - Despite the decline, ServiceNow shares returned 7% on a trailing 12-month basis, outperforming the sector's return of 2.8% [9]. Strategic Partnerships - ServiceNow has expanded partnerships with major companies like Google Cloud, NVIDIA, and DXC Technology to enhance its offerings and market reach [17][18][19]. - The collaboration with NVIDIA focuses on integrating advanced AI capabilities into ServiceNow's platform [18]. Challenges and Concerns - The company anticipates a $175 million unfavorable forex impact for 2025, which may affect subscription revenue growth [20]. - Tariff-related issues and a challenging macroeconomic environment are also expected to impact the federal business [9][20]. Conclusion - ServiceNow's strong AI portfolio and partnerships are expected to drive long-term subscription revenue growth, despite facing forex challenges and a stretched valuation [21].