ServiceNow Q4 Revenues Grow 29%; Shares Up 11.5%

ServiceNow (NYSE: NOW) shares jumped almost 11.5% during the extended trading session on January 26, after the cloud computing service provider delivered a blowout fourth-quarter results. Driven by robust demand momentum, NOW exceeded the high end of the guidance across all Q4 2021 metrics.

ServiceNow gave investors another reason to cheer as it provided an upbeat outlook for the year, with expected subscription revenues growth of 26%.

Q4 Beat

Q4 adjusted earnings of $1.46 per share grew 24.8% year-over-year, and beat analysts’ expectations of $1.43 per share. The company reported earnings of $1.17 per share for the prior-year period.

Revenues jumped 29% year-over-year to $1.61 billion and exceeded consensus estimates of $1.6 billion. The increase in revenues reflects a surge in Subscription revenues, which increased 29% to $1.52 billion.

During Q4, total closed transactions grew 52% year-over-year to 135 transactions with more than $1 million in net new annual contract value. Further, total customers grew 25% year-over-year to 1,359 total customers.

Revenues Outlook for FY2022

Based on robust Q4 results, management issued the Subscription revenues guidance for FY2022. The company now forecasts Subscription revenues to grow 26% and be in the range of $7.02 billion to $7.04 billion.

For the fiscal first quarter, subscription revenues are projected to grow 25% to be in the range of $1.61 billion to $1.615 billion.

Management Commentary

ServiceNow CEO, Bill McDermott, commented, “We are growing like a fast-moving startup with the profitability of a global market leader.”

Looking ahead into the future, CFO Gina Mastantuono, further added, “The company is firing on all cylinders and we enter 2022 with tremendous momentum. We expect constant currency subscription revenue growth to accelerate year-over-year in Q1, setting us up for another strong year and putting us well on our way to becoming a $15 billion-plus revenue company.”

Wall Street’s Take

Following the Q4 results, Oppenheimer analyst Brian Schwartz reiterated a Buy rating on the stock with a price target of $660 (36.25% upside potential).

Consensus among analysts is a Strong Buy based on 24 Buys and 1 Holds. At the time of writing, the average ServiceNow stock forecast was $716.36, which implies 47.9% upside potential to current levels.

TipRanks’ Smart Score

NOW scores an 8 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.

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