ServiceNow posts Q4 growth as enterprise automation remains strong

Enterprise software and workplace management orchestrator ServiceNow announced rosy revenue numbers in its Q4 2022 earnings call Wednesday evening, saying that total revenues topped $1.9 billion, which represents a 20% year-on-year increase.

IDC analyst Stephen Elliot noted strong corporate management and the company’s expansion into the workplace experience market as contributing factors in the reported growth.

Most of ServiceNow’s revenue came from service subscriptions, which rose to $1.86 billion in the quarter, a 22% year-on-year rise. The company’s current remaining performance obligations, which represent contract revenue that will be recognized as such in ServiceNow’s numbers within the next 12 months, rose to nearly $7 billion as of the reporting date. That’s a 22% increase compared to the fourth quarter of 2021.

Chairman and CEO Bill McDermott was bullish on the company’s performance, saying that the market conditions that have helped grow ServiceNow’s revenues should remain strong in the foreseeable future.

“Our Q4 surge in new business shows that the secular tailwinds of digitization aren’t going anywhere,” he said in a statement accompanying the results. “The world works with ServiceNow as the end-to-end platform for digital transformation.”

ServiceNow’s substantial growth exceeded profitability guidance, according to CFO Gina Mastantuono, who credited net-new annual contract value gains for much of the surge.

“What’s more, our results were generated with a lower mix of early renewals from 2023, providing us more opportunities to drive further expansion throughout the year,” she said in the statement.

Despite the growth, ServiceNow’s stock price dropped nearly 8% in after-hours trading, for reasons that weren’t immediately clear. McDermott, however, has vowed “absolutely no layoffs in 2023,” according to a report from Bloomberg, bucking a trend among technology vendors of late.

IDC’s Elliot, who is group vice president of I&O, cloud operations, and DevOps, credited a healthy corporate culture for ServiceNow’s continued success, saying that, while rapid growth can sometimes cause companies to lose some of their strengths over time, ServiceNow has managed to avoid that.

“I’d say that they’re hitting on all cylinders,” he said. “I also think that they have been very consistent and focused on what customers are looking for, and translating that into investments in the company.”

This isn’t a surprise, Elliot added, given the strong leadership across ServiceNow’s management ranks. He credited McDermott, in particular, for helping to minimize internal politics and other distractions that can sap a company’s momentum as it expands into new business areas.

“They’ve had so much success with the IT management business,” he said. “And over the course of the past five years, the expansion into field service management, HR, employee experience businesses; [their focus] has continued to drive them.”