NOW - ServiceNow: A Strong Investment Opportunity For The AI Era

2024-03-11 17:35:52 ET

Summary

• ServiceNow exceeds fourth quarter 2023 revenue and earnings guidance and raised subscription revenue guidance for 2024 due to strong adoption of AI products.
• The company benefits from customers seeking digital transformation solutions.
• It is in an excellent position to maintain or increase revenue growth while keeping costs in line during 2024 and beyond.

Since OpenAI previewed ChatGPT in November 2022, there has been a proliferation of software and cloud companies that claim generative Artificial Intelligence ((AI)) and other AI technology will be a growth driver for their business. Yet, some of these companies' claims have not met investor expectations for top and bottom-line growth in this challenging spending environment. For instance, Snowflake ( SNOW ) and Workday ( WDAY ) are enterprise software vendors that should benefit from AI's proliferation. Both companies recently reported earnings where they pulled back on their revenue growth targets, disappointing investors.

In contrast, when ServiceNow ( NOW ) reported its fourth quarter 2023 earnings on January 24, 2024, in addition to beating analyst revenue and earnings guidance for the fourth quarter, its full-year 2024 guidance exceeded targets it set years ago. In 2020, the company's Chief Executive Officer (CEO), Bill McDermott, established a goal of $10 billion in subscription revenue, and a year later, during its annual user event, Knowledge 2021, defined a timeline to reach that $10 billion goal by 2024 and reach $15+ billion in subscription revenue by 2026. During the company's fourth quarter 2023 guidance, Chief Financial Officer ((CFO)) Gina Mastantuono announced that the company was raising its subscription revenue guidance to between $10.555 billion and $10.575 billion for the full year 2024. Part of the reason that management raised guidance is due to the strength of customers adopting its AI products. If you want to invest in a company that benefits from the secular trend of AI adoption and shows tangible positive results in its earnings reports, consider an investment in ServiceNow. ...

For further details see: