Workflow
IT management platform
icon
Search documents
ServiceNow Stock Soars on AI Momentum. Is It Too Late to Buy?
The Motley Foolยท 2025-04-27 08:37
Core Insights - ServiceNow reported strong revenue growth of 18.5% year over year, reaching $3.09 billion, and adjusted earnings per share (EPS) climbed 18.5% to $4.04, surpassing analyst expectations [6] - The company raised its subscription revenue guidance for the full year to between $12.64 billion and $12.68 billion, indicating growth of 19% to 19.5% [10] - The stock has shown significant appreciation over the past decade, increasing more than 1,150% [1] Company Overview - ServiceNow is a software-as-a-subscription (SaaS) company known for its IT management platform, which is widely utilized by IT departments [2] - The company is expanding its offerings into human resources and customer service through workflow automation and digital processing tools [2][3] - Recent acquisitions, including Moveworks and Logik.ai, aim to enhance its customer relationship management (CRM) capabilities [3] AI Integration - ServiceNow is incorporating generative AI and agent-based AI into its platform, with tools like Now Assist providing various AI-driven functionalities [4] - AI solutions were a significant driver of revenue growth in the first quarter, with Pro Plus deals quadrupling year over year [5] Financial Performance - Subscription revenue increased by 19% year over year to $3 billion, while professional services revenue rose 5% to $83 million [7] - The number of large customers with a net annual contract value (ACV) of $20 million or more grew by nearly 40% [7] - Remaining performance obligations (RPO) climbed 25% to $22.1 billion, indicating strong future revenue potential [8] Future Outlook - The company forecasts second-quarter subscription revenue growth between 19% to 19.5% [9] - ServiceNow is well-positioned for growth in a cautious economy, particularly in the federal sector, with a new government transformation suite aimed at enhancing digital transformation [12] - The stock trades at a forward price-to-sales multiple of 14.8 based on 2025 estimates, which is considered reasonable for a high-margin SaaS business [13]