ServiceNow (NYSE:NOW) shares are trading 2% lower in pre-market Thursday despite the company reporting better-than-expected Q1 results.
NOW posted a profit of $2.37 per share on revenue of $2.14 billion, beating the analyst consensus for earnings of $2.04 on sales of $2.08B. Subscription revenue came in at $2.02B, slightly ahead of the $2B expected. The company also reported an adjusted gross margin of 83%, topping the consensus by 140 basis points.
“Once again, ServiceNow delivered a powerful combination of growth and profitability,” said ServiceNow Chairman and CEO Bill McDermott. “C-level decision makers are actively making enterprise platform investments that deliver significant business impact. Whether it’s cost-takeout or innovation to drive growth, ServiceNow is the intelligent platform for end-to-end digital transformation.”
The company raised its full-year forecast for subscription revenue. It now sees $8.47-8.52B, up from the prior forecast for FY subscription revenue of $8.44-8.5B. For the second quarter, NOW expects to generate between $2.04B and $2.05B.
Oppenheimer analysts said the results were “solid.”
“A mid-20% CRPO billings growth rate target for 1H:2023 places NOW in the upper echelon for growth among all SaaS companies this year despite a larger business. This helps make NOW defensible if the macro deteriorates further. Reiterate Outperform,” they wrote in a note.
Bernstein analysts added:
“We believe NOW remains well positioned for high growth over the next few years, fueled in part by ongoing demand for workflow automation, strong cross-sell opportunities, and greater penetration of newer markets.”