The News: ServiceNow revenue rose to $2.15 billion in the second fiscal quarter of 2023, up 22% from $1.75 billion year-over-year, as the cloud digital workflow automation software vendor announced its latest earnings on July 26 for the quarter ending June 30, 2023. ServiceNow also posted non-GAAP net income of $486 million, up 48% from $329 million one year ago. See the full press release on the ServiceNow website.
ServiceNow Revenue Up in Q2 2023 to $2.15 Billion, Beating Estimates
Analyst Take: ServiceNow’s revenue boost of 22% to $2.15 billion in Q2 marked another solid earnings report as the company continues to show marketplace success with its expanding Now workflow automation platform and other enterprise software products. Across its Q2 numbers, ServiceNow impressively continued its trend line of outpacing its guidance.
Here are the ServiceNow Q2 2023 fiscal year earnings by the numbers:
- Q2 2023 revenue of $2.15 billion, up 22% from $1.75 billion YoY. The revenue figure beat the $2.13 billion consensus estimate expected by analysts at Investing.com.
- Q2 2023 non-GAAP net income of $486 million, up 48% from $329 million YoY.
- Q2 2023 non-GAAP diluted earnings per share (EPS) of $2.37, up from $1.62 per share YoY. The EPS price beat analyst consensus estimates of $2.05 per share from analysts at Investing.com.
- Q2 2023 non-GAAP gross profit of $1.76 billion, up 23% from $1.44 billion YoY.
- Q2 2023 non-GAAP gross margin of 82%, unchanged YoY.
- Q2 2023 non-GAAP income from operations of $544 million, up 36% from $399 million YoY.
- Q2 2023 non-GAAP operating margin of 25%, up from 23% YoY.
ServiceNow also reported current remaining performance obligations (cRPO) contract revenue of $7.2 billion as of June 30, 2023, which is up 25% YoY. In addition, ServiceNow increased its list of customers with more than $1 million in annual sales contract value to 1,724 customers, which is up 18% YoY.
ServiceNow Revenue by Business Segment
Here are ServiceNow’s Q2 2023 revenue numbers by segment:
For Q2, subscription revenue reached $2.08 billion, up 25% from $1.66 billion YoY. Professional services and other revenue came in at $75 million, down 20% from $94 million YoY.
ServiceNow Revenue Guidance for Q3 2023
ServiceNow also provided financial guidance for subscription revenue in Q3 2023 and for the full FY2023.
For Q3, the company expects subscription revenue between $2.185 billion to $2.195 billion, with YoY growth of 25.5% to 26%.
For the full FY2023, ServiceNow expects subscription revenue of $8.58 billion to $8.6 billion, with YoY growth of 24.5% to 25%.
ServiceNow Revenue Overview
Q2 was another strong quarter for ServiceNow in the enterprise workflow automation software market, again proving the value of its product offerings and expertise that continue to resonate with customers.
We talked with ServiceNow Chairman and CEO Bill McDermott, who spoke about the company’s work in bringing powerful generative AI features to its offerings, which he says will be a big lever of growth for ServiceNow. McDermott told us that the company’s playbook is working, which we believe is evident.
ServiceNow’s ability to optimize workflows and scale productivity for customers in IT, HR, customer service, and other markets bodes well for its long-term prospects.
We are also impressed with the company’s customer growth and we believe its deeper monetization of generative AI is substantial and will drive additional growth in future quarters. We believe that the increased generative AI investment by ServiceNow will lead to more spending per customer on added products and premier tools with transformative generative AI features, as well as higher retention rates due to AI-powered workflows and automations.
Another huge boon for customers will be ServiceNow’s increasing critical partnerships with systems integrators (SIs) that will help speed deployments and grow sales. It is hard not to see deeper partnerships with the world’s largest SIs paying off in the medium to long term due to these new innovations.
In addition, ServiceNow’s expanded partnership with KPMG and its introduction of its AI Lighthouse program with Accenture and NVIDIA are also solid developments that will benefit customers.
As we have said before, we believe that ServiceNow’s workflow automation tools will see continuing adoption and investment in the future as more companies realize how these tools can help them improve their critical business processes, especially in the still-challenging, post-Covid-19 global economy.
Disclosure: The Futurum Group 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 The Futurum Group as a whole.
Other insights from The Futurum Group:
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ServiceNow Announces Major Platform Expansion with its ServiceNow Now Platform Utah Release
ServiceNow Revenue Hits $1.94B in Q4 2022, Up 20% YoY
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.
