ServiceNow (NOW) is scheduled to release its fourth-quarter 2023 results on Jan 24.
The Zacks Consensus Estimate for fourth-quarter revenues is currently pegged at $2.40 billion, up 23.55% from the figure reported in the year-ago quarter.
The consensus mark for fourth-quarter earnings is pegged at $2.77 per share over the past 30 days, indicating growth of 21.49% from the figure reported in the year-ago quarter.
ServiceNow’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 14.93%.
ServiceNow, Inc. Price and EPS Surprise
ServiceNow, Inc. price-eps-surprise | ServiceNow, Inc. Quote
Let’s see how things are shaping up for ServiceNow prior to this announcement.
Factors at Play
ServiceNow’s fourth-quarter 2023 results are expected to benefit from expanding clientele. It has been gaining from the rising adoption of its workflows by enterprises undergoing digital transformation.
The availability of new solutions — Automated service suggestions, Service Request Playbook and Workplace Scenario Planning — is helping the company win new customers. It had 1,789 total customers with more than $1 million in annual contract value (ACV) at the end of the third quarter.
ServiceNow’s expanding generative AI portfolio has been driving prospects. It enhanced the Now Assist generative AI portfolio with the launch of Now Assist in Virtual Agent, Flow generation and Now Assist for Field Service Management.
These three new solutions help customers smoothen up their workflow and increase productivity. These help users by saving time on searching, summarizing and creating basic information while enabling conversational self-service, incident deflection and workflow automation simultaneously.
Now Assist has rapidly been gaining traction with adoption by the likes of NVIDIA, Deloitte and Teleperformance. ServiceNow solutions have witnessed rapid adoption among federal agencies in recent times.
In third-quarter 2023, ServiceNow inked 19 federal deals worth more than $1 million, including three deals above $10 million. ACV for the federal end-market jumped 75% year over year.
NVIDIA, which is also ServiceNow’s technology partner, is using its Now Assist features like case summarization and question-answering to bring efficiencies to its operations.
The launch of Vancouver has been a game changer for ServiceNow’s generative AI portfolio. Vancouver embeds generative AI across all workflows on the Now Platform. It has also helped expand ServiceNow’s clientele.
A strong portfolio and expanding partner base are expected to have driven subscription revenue growth. For fourth-quarter 2023, subscription revenues are projected between $2.320 billion and $2.325 billion, suggesting a year-over-year improvement of 24.5-25% on a GAAP basis. At cc, subscription revenues are expected to grow 23-23.5%.
The Zacks Consensus Estimate for subscription revenues is currently pegged at $2.32 billion, indicating 25% growth from the figure reported in the year-ago quarter.
What Our Model Says
According to the Zacks model, the combination of a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.
ServiceNow has an Earnings ESP of 0.00% and a Zacks Rank #4 (Sell).
Stocks to Consider
Here are a few companies worth considering, as our model shows that these have the right combination of elements to beat on earnings in their upcoming releases:
Apple (AAPL) has an Earnings ESP of +3.65% and a Zacks Rank #2 at present.
Apple shares have gained 37% in the trailing 12-months. AAPL is set to report its first-quarter fiscal 2024 results on Feb 1.
Fair Isaac (FICO) has an Earnings ESP of +1.73% and a Zacks Rank #2.
Fair Isaac shares have gained 92.6% in the past year. FICO is set to report its first-quarter fiscal 2024 results on Jan 25.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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