ServiceNow(NYSE: NOW) stock is jumping in Thursday's trading following the company's recently published quarterly report. The software specialist's share price was up 7.8% as of 10:45 a.m. ET.
ServiceNow reported its third-quarter results after the market closed yesterday and posted sales and earnings for the period that beat Wall Street's expectations. The company recorded non-GAAP (adjusted) earnings per share of $3.72 on sales of $2.8 billion, topping the average analyst estimate's call for per-share earnings of $3.45 on revenue $2.75 billion.
ServiceNow delivers strong growth in Q3
ServiceNow's revenue increased roughly 22% year over year in the third quarter, and its adjusted earnings per share rose roughly 27% compared to the prior-year period. The company's subscription revenue grew 23% year over year to hit $2.715 billion, and the business closed out the quarter with remaining performance obligations of $19.5 billion -- up 36% year over year. The business recorded 15 new transactions with annual contract value above $5 million in the quarter, representing a roughly 50% increase over contract additions in the category compared to Q3 2023.
ServiceNow raises its sales target for the year
For the fourth quarter, Service Now expects subscription revenue to come in between $2.875 billion and $2.88 billion -- suggesting growth of 21.75% at the midpoint of the target range. The company also expects to end the quarter with current remaining performance obligations up 21.5% compared to the close of last year's quarter. The better-than-expected Q3 performance caused management to raise full-year performance targets.
ServiceNow expects subscription revenue for the year to come in between $10.655 billion and $10.66 billion -- good for annual growth of 23%. Previously, the company had guided for sales to be between $10.575 billion and $10.585 billion -- or growth of roughly 22%. The company also expects a gross profit of 84.5% for subscription services, an operating income margin of 29.5%, and a free-cash-flow margin of 31%.
In addition to the beat-and-raise quarterly report, investors were likely also happy to hear about specific new deals that ServiceNow landed. The company announced that it's expanding its partnership with Nvidia to promote the adoption of its Agentic AI for enterprises, and it also announced it had secured new deals with Snowflake and Databricks.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia, ServiceNow, and Snowflake. The Motley Fool has a disclosure policy.
