Enterprise software maker ServiceNow reported third-quarter earnings and revenue that topped consensus estimates, boosted by federal government spending. NOW stock climbed Thursday as subscription revenue guidance came in above views.
Reported after the market close on Wednesday, ServiceNow earnings for the quarter ending Sept. 30 popped 49% to $2.92 from the year-earlier period.
Revenue climbed 25% to $2.29 billion, said the Santa Clara, Calif-based enterprise software maker.
NOW stock analysts had expected the company to report earnings of $2.56 a share on revenue of $2.27 billion.
In addition, ServiceNow said subscription revenue rose 27% to $2.22 billion, topping the consensus estimate of $2.19 billion.
NOW Stock: Subscription Revenue Beats
ServiceNow's current remaining performance obligations, or CRPO, came in above expectations. CRPO rose 27% to $7.43 billion. Analysts had projected CRPO of $7.32 billion.
CRPO bookings are an aggregate of deferred revenue and order backlog and serve as a sales growth metric.
In addition, federal government spending was strong in the quarter, said TD Cowen analyst Derrick Wood in a report.
"ServiceNow reported Q3 CRPO growth of 24% above guide of 21.5%, the biggest upside in nearly two years," Wood said. "Q4 CRPO guide of 21% was in-line but we view as continued conservatism. Fed was the highlight of the September quarter."
At Bank of America, analyst Brad Sills is upbeat on ServiceNow's initiatives in artificial intelligence.
"We are also encouraged by early demand signals for new AI offerings in large marquee accounts in the federal, real estate and IT verticals," he said in a report.
For the December quarter, ServiceNow predicted subscription revenue in a range of $2.32 billion to $2.325 billion vs. estimates of $2.30 billion.
On the stock market today, NOW stock climbed 3.9% to close at 550.95.
ServiceNow Stock: Expanded Alliance
Meanwhile, ServiceNow announced an expanded alliance with consulting firm Deloitte for artificial intelligence-related digital transformation projects.
Heading into the ServiceNow earnings report, the software stock had gained 36% in 2023.
The company's software tracks and manages services provided by information-technology departments. Also, its self-service tech portal enables company employees to access administrative and workflow tools.
Further, ServiceNow has expanded from its core business into software for human resources, customer service management and security.
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