ServiceNow shares rose sharply in after-hours trading after the company reported better-than-expected first-quarter results and issued a higher revenue forecast than Wall Street had expected.
The company said it saw strong demand despite the current economic uncertainty and reported earnings before certain costs, such as stock compensation, of $4.04 per share. Revenue for the period was $3.09 billion, up more than 18% from a year earlier.
The results exceeded Wall Street expectations, which were $3.83 per share in earnings and $3.09 billion in revenue. In addition, the company generated $3 billion in subscription revenue, which was in line with analysts’ estimates.
Many shareholders were surprised by the company’s strong performance. There were concerns that ServiceNow would come under pressure from Elon Musk’s so-called Department of Governmental Efficiency, which focuses on reducing government spending, given the size of the company’s government work.
Governments are saving billions
Bill McDermott, CEO of ServiceNow, said in an interview that his company is well positioned to benefit from efficiency gains because it can help government agencies cut billions in costs.
He added that the company has always stood for efficiency and effectiveness. According to him, the company has even won more government contracts because agencies are replacing more expensive, outdated systems with ServiceNow’s software.
The CEO also stated that public sector systems in other countries are following DOGE’s example and, in some cases, replacing their existing systems with the ServiceNow platform to save costs.
In addition, private companies are also turning to ServiceNow to reduce costs and cope with the economic uncertainty caused by President Donald Trump’s tariffs.
McDermott said these companies are doing so in anticipation of a possible decline in revenue or changes in the trading environment, which will affect how they manage their supply chains.
The CEO also spoke about ServiceNow’s investments in AI. According to him, these have become one of the company’s most important drivers. AI is now integrated into virtually every aspect of the platform through the so-called NOW models, which contribute to the trend of AI agents by helping companies automate their processes.
Positive outlook
For the current quarter, ServiceNow forecasts subscription revenue of between $3.03 billion and $3.04 billion, which is above the $3.02 billion Wall Street was expecting. For the full year, the company is targeting revenue between $12.64 billion and $12.68 billion, a slight increase from its previous forecast and above analysts’ estimates of $12.6 billion.
The outlook is an important focus for Wall Street, as investors remain concerned about the impact of Trump’s tariffs on the global economy. They are looking for signs that technology companies can weather the storm and will be encouraged by what ServiceNow has put forward.
ServiceNow’s strong earnings and revenue forecasts came just a day after rival SAP SE of Germany also reported strong quarterly results and reiterated its previous full-year forecast.
ServiceNow shares rose more than 10% after the report and had already gained nearly 6% earlier in the day. However, despite these gains, the stock is still down 23% so far this year.