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ServiceNow Reports (NYSE:NOW) Q4 In Line With Estimates, Stock Soars On Strong Guidance


Radek Strnad /
2022/01/26 4:39 pm EST
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Enterprise workflow software maker ServiceNow (NYSE:NOW) reported results in line with analyst expectations in Q4 FY2021 quarter, with revenue up 29% year on year to $1.61 billion. ServiceNow made a GAAP profit of $26 million, improving on its profit of $16.6 million, in the same quarter last year.

Is now the time to buy ServiceNow? Access our full analysis of the earnings results here, it's free.

ServiceNow (NOW) Q4 FY2021 Highlights:

  • Revenue: $1.61 billion vs analyst estimates of $1.6 billion (small beat)
  • EPS (non-GAAP): $1.46 vs analyst estimates of $1.43 (2.09% beat)
  • Subscription revenue guidance for Q1 2022 is $1.61 billion at the midpoint
  • Management's subscription revenue guidance for upcoming financial year 2022 is $7.03 billion at the midpoint, predicting 26% growth
  • Free cash flow of $744 million, up from $226 million in previous quarter
  • Customers: 1,359 customers paying more than $1m annually
  • Gross Margin (GAAP): 76.7%, down from 77.6% same quarter last year

“We once again reported results that significantly beat the high end of expectations," said ServiceNow President and CEO Bill McDermott.

Founded by Fred Luddy who wrote the code for the initial prototype on a single flight from San Francisco to London, ServiceNow (NYSE:NOW) offers software as a service platform that helps companies become more efficient by allowing them to automate workflows across IT, HR and Customer Service.

Sales Growth

As you can see below, ServiceNow's revenue growth has been very strong over the last year, growing from quarterly revenue of $1.25 billion, to $1.61 billion.

ServiceNow Total Revenue

This quarter, ServiceNow's quarterly revenue was once again up a very solid 29% year on year. Quarter on quarter the revenue increased by $102 million in Q4, which was in line with Q3 2021. This steady quarter-on-quarter growth shows the company is able to maintain its steady growth trajectory.

Analysts covering the company are expecting the revenues to grow 25.2% over the next twelve months, although estimates are likely to change post earnings.

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Large Customers Growth

You can see below that at the end of the quarter ServiceNow reported 1,359 enterprise customers paying more than $1m annually, an increase of 93 on last quarter. That is quite a bit more contract wins than last quarter and quite a bit above what we have typically seen lately, demonstrating that the business itself has good sales momentum. We've no doubt shareholders will take this as an indication that the company's go-to-market strategy is working very well.

ServiceNow customers paying more than $1m annually

Key Takeaways from ServiceNow's Q4 Results

Sporting a market capitalization of $98.5 billion, more than $3.3 billion in cash and with positive free cash flow over the last twelve months, we're confident that ServiceNow has the resources it needs to pursue a high growth business strategy.

We were very impressed how strongly ServiceNow accelerated the rate of new contract wins this quarter. And we were also glad to see good revenue growth. Overall, this quarter's results seemed pretty positive and shareholders can feel optimistic. The company is up 9.01% on the results and currently trades at $527 per share.

Should you invest in ServiceNow right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.