ServiceNow posted better-than-expected quarterly results and lifted its full-year financial guidance as the IT workflow-management software company continues its aggressive push to add generative artificial intelligence across its product line.
McDermott said ServiceNow’s third-quarter results received a boost from its push into generative AI software, noting that the company landed several multimillion- dollar AI deals in the quarter. “It is a tailwind for growth,” he said. “We were first to market with real products. We’ve built AI into use cases across the ServiceNow platform.”
One continuing question for enterprise AI software providers is how they are going to make money from the new offerings, but McDermott expects a surge of spending on the products. McDermott said increases in spending on IT, which have been running about 3.5% a year, are expected to double to about 7%.
ServiceNow’s own guidance focuses on subscription revenue, which likewise rose 27% in the quarter to $2.216 billion. That is ahead of both the range of $2.185 billion to $2.195 billion management had told investors to expect and the consensus call for $2.191 billion among analysts tracked by FactSet.
For the December quarter, ServiceNow sees subscription revenue of $2.32 billion to $2.325 billion, up 24.5% to 25%, and above the previous Street forecast at $2.301 billion. The company sees 21% growth in the quarter in current remaining performance obligations. It expects non-GAAP operating margin of 27.5%, slightly above the consensus forecast of 27.4%.