The News: ServiceNow revenue rose to $1.94 billion in the fourth fiscal quarter of 2022, up 20 percent from $1.61 billion one year ago, as the cloud workflow automation software vendor announced its latest earnings on January 25 for the quarter ending December 31, 2022. ServiceNow also posted non-GAAP net income of $464 million, up 56.7 percent from $296 million one year ago. Read the full Press Release on the ServiceNow website.
ServiceNow Revenue Hits $1.9B in Q4 2022, Up 20% YoY
Analyst Take: ServiceNow’s revenue boost of 20 percent to $1.94 billion from one year ago extends the company’s impressive string of earnings successes in recent years with its Now workflow automation platform and other enterprise software products. The latest results are even more impressive today because they arrive amid the challenging macroeconomic forces that continue to affect many tech and consumer companies around the world.
Here are the ServiceNow Q4 2022 and full fiscal year 2022 (FY2022) earnings by the numbers:
- Q4 2022 revenue of $1.94 billion, up 20 percent from $1.61 billion one year ago. The revenue figure met the $1.94 billion consensus estimate expected by analysts at Yahoo Finance.
- Q4 2022 non-GAAP net income of $464 million, up 56.7 percent from $296 million one year ago.
- Q4 2022 non-GAAP basic earnings per share (EPS) of $2.29, up from $1.49 per share one year ago. The EPS price beat analyst consensus estimates of $2.02 per share from analysts with Yahoo Finance.
- Q4 2022 non-GAAP gross profit of $1.6 billion, up 22 percent from $1.3 billion one year ago.
- Q4 2022 non-GAAP gross margin of 83 percent, compared to 81 percent one year ago.
- Q4 2022 non-GAAP income from operations of $544 million, up 48.2 percent from $367 million one year ago.
- QA4 2022 non-GAAP operating margin of 28 percent, up from 23 percent one year ago.
- FY2022 full year revenue of $7.24 billion, up 22.9 percent from $5.89 billion one year ago.
- FY 2022 non-GAAP net income of $1.5 billion, up 28 percent from $1.2 billion one year ago.
- FY 2022 non-GAAP basic EPS of $7.66, up from $6.07 per share one year ago.
- FY 2022 non-GAAP gross profit of $5.9 billion, up 24.5 percent from $4.7 billion one year ago.
- FY 2022 non-GAAP gross margin of 82 percent, compared to 81 percent one year ago.
- FY 2022 non-GAAP income from operations of $1.86 billion, up 25.5 percent from $1.48 billion one year ago.
- FY 2022 non-GAAP operating margin of 26 percent, up from 25 percent one year ago.
There was other good earnings news for ServiceNow as well.
The company’s current remaining performance obligations (cRPO) contract revenue was $6.94 billion as of Q4 2022, which is up 22 percent from one year ago. In addition, ServiceNow has grown its customer base of customers with more than $1 million in annual sales contract value to 1,637 customers, which is up 22 percent from a year ago.
ServiceNow Revenue Beneath the Numbers
ServiceNow’s Q4 earnings figures showed great results, but interestingly, the market immediately reacted conversely and the stock declined more than seven percent even as good numbers were posted. It was not what we would have expected on a beat and raise, however the share prices recovered after the company’s conference call with analysts.
In that call, ServiceNow Chairman and CEO Bill McDermott said that his company’s promising Q4 earnings performance “shows that the secular tailwinds of digitization aren’t going anywhere.” We believe this is a smart and insightful observation about today’s customer needs for continuing digital transformation, which is obviously helping to drive ServiceNow’s success in the marketplace.
McDermott knows what he is building, and we believe that his executive focus and enthusiasm should continue to drive ServiceNow’s stock price up long-term. Having an executive team with this kind of forward-looking outlook is a positive benefit for any company, especially when global macroeconomic conditions continue to be challenging.
ServiceNow Revenue by Business Segment
Here are ServiceNow’s Q4 and FY 2022 revenue numbers by segment:
For Q4, subscription revenue reached $1.86 billion, up 22 percent from $1.52 billion one year ago. Professional services and other revenue came in at $80 million, down 12 percent from $91 million one year ago.
For the full FY2022, subscription revenue totaled $6.89 billion, up 23.6 percent from $5.57 billion one year ago. Professional services and other revenue totaled $354 million, up nine percent from $323 million one year ago.
ServiceNow Revenue Guidance for Q1 2023 and Full Year 2023
ServiceNow also provided financial guidance for subscription revenue in Q1 2023 and for the full year of FY2023.
For Q1 2023, the company expects subscription revenue between $1.99 billion to $2 billion, for YoY growth of 22 percent to 22.5 percent.
For the full FY2023, ServiceNow expects subscription revenue of $8.44 billion to $8.5 billion, for YOY growth of 22.5 percent to 23.5 percent.
ServiceNow Earnings Overview
This was a positive reporting period for ServiceNow, again proving the value of its product offerings and expertise in the enterprise workflow automation software marketplace. As we have said over the last few quarters, we continue to remain bullish on this growing and progressive company and its strong revenue performance and smart executive team.
The value and importance of the cloud-based workflow automation offerings from ServiceNow is that they are built to revamp enterprise business processes by removing unneeded steps from workflows and letting enterprises get more work done in less time on a SaaS subscription pay-as-you-use-it basis. We believe that ServiceNow’s workflow automation tools will likely see continuing adoption and investment in the future as more companies realize how these tools can help them as they battle macroeconomic conditions and tight labor markets around the world.
And there is another good sign for ServiceNow – in our view, enterprise tech continues to be more deflationary than other market segments, particularly in the workflow, automation, analytics, and AI markets. This is an opportunity for companies like ServiceNow with tech products that can deliver great value and results during difficult times.
It will be interesting to watch ServiceNow’s performance through the rest of 2023 as the global market continues to recover from a wide range of challenges from the Covid-19 pandemic to the war in Ukraine and more. For ServiceNow, 2023 is looking like another promising year in its recent history.
Disclosure: Futurum Research is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of Futurum Research as a whole.
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Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
