ServiceNow (NYSE:NOW) delivered better-than-expected fourth-quarter financial results, led by solid growth in its subscription revenue and momentum in its generative artificial intelligence (AI) solutions. However, NOW stock fell over 1% in after-hours on Wednesday due to the lower-than-expected Q1 subscription revenue outlook.
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ServiceNow provides a cloud-based platform and generative AI solutions that facilitate workflow automation and digital transformation.
ServiceNow expects to report subscription revenue in the range of $2.51 billion to $2.52 billion in the first quarter. The guidance appears a bit conservative given the solid demand for its offerings and the increase in customer base, with more than $1 million in annual contract value (ACV). Further, the company’s subscription revenue forecast is slightly lower than the Street’s expectations of $2.54 billion.
While the company’s Q1 2024 subscription revenue guidance fell short of expectations, let’s look at its Q4 performance.
ServiceNow – Q4 Performance
ServiceNow delivered total revenues of $2.44 billion in the fourth quarter, up 26% year-over-year. Moreover, it exceeded analysts’ expectations of $2.4 billion. Its subscription revenues were $2.37 billion, up 27% year-over-year. Further, the company witnessed 168 transactions of over $1 million in net new ACV in Q4 2023, representing a year-over-year growth of about 33%.
Thanks to the higher sales, ServiceNow delivered adjusted EPS of $3.11, which surpassed the Street’s forecast of $2.78. Further, it compared favorably with EPS of $2.28 in the prior-year quarter.
Is ServiceNow a Buy or Sell?
Following the company’s Q4 results, three analysts reiterated the Buy recommendation on ServiceNow stock. Overall, NOW stock has a Strong Buy consensus rating based on 26 Buys and one Hold recommendation.
ServiceNow stock has gained over 70% in one year. Given the substantial appreciation in its value, analysts’ price target of $790.15 implies a limited upside potential of 3.5% from current levels.
