Analyst(s): Keith Kirkpatrick
Publication Date: October 25, 2024
ServiceNow reported strong financial growth for Q3 2024, with subscription revenues rising by 23% year-over-year. The company continues to lead AI-driven business transformation, with innovations such as the Now Platform Xanadu and strategic partnerships with NVIDIA and Siemens. Global expansion and a focus on corporate responsibility further bolster its market position.
What is Covered in this Article:
- Q3 2024 financial performance highlights
- AI Innovations and the Now Platform Xanadu
- Strategic partnerships with NVIDIA, Siemens, and others
- Global expansion efforts, including new data centers
- Corporate responsibility and sustainability initiatives
- Financial outlook for Q4 2024 and beyond
The News: ServiceNow exceeded expectations in Q3 2024, reporting $2.7 billion in subscription revenues, reflecting 23% year-over-year growth. The company’s remaining performance obligations surged to $19.5 billion, reflecting a strong customer commitment to AI-driven solutions.
ServiceNow also launched the Now Platform Xanadu, its largest AI update, with industry-specific telecom, financial services, and more capabilities. Additionally, partnerships with key players such as NVIDIA are set to enhance the platform’s AI capabilities and drive further business transformation across industries. Global expansion efforts include new data centers in Milan and Rome and a $1.5 billion investment in the UK.
ServiceNow Q3 FY2024 Highlights AI-Driven Growth & Expansion
Analyst Take: Driven by strong demand for the Now Platform, ServiceNow achieved double-digit revenue growth in its Q3 FY2024 earnings results, beating analysts’ estimates of $3.46 EPS by 7.5% to reach earnings of $3.72 per share, an increase of $0.26 per share.
ServiceNow said that its growth has been driven by the use of AI applications being deployed by its customers. For example, change summarization helps IT teams quickly assess the impacts of requests, leading to faster decisions and shorter cycles. Meanwhile, proactive LLM-based prompts assist managers and employees in completing critical tasks, such as approvals and training, reducing manual follow-ups, and improving completion rates. These innovations enhance both operational efficiency and the overall employee experience, making them crucial to ServiceNow’s continued market success.
From a cost-benefit perspective, ServiceNow’s focus on streamlining workflows through advanced AI offers high returns in productivity and efficiency, which the company believes will outweigh the amount spent for technology development.
Key Financial Performance
ServiceNow exceeded its financial guidance for Q3 2024, with subscription revenues hitting $2.7 billion, marking a 23% year-over-year growth (22.5% in constant currency). Total revenue for the quarter stood at $2.8 billion, reflecting a 22% year-over-year increase. These figures are noteworthy in a volatile economic environment, underscoring the sustained demand for the company’s AI-driven Now Platform.
A highlight of the quarter is the company’s remaining performance obligations (RPO), which surged to $19.5 billion—a 36% year-over-year growth—while current remaining performance obligations (cRPO) reached $9.36 billion, a 26% increase. ServiceNow’s continued financial strength, particularly in subscription revenues and RPO, highlights enterprises’ increasing reliance on AI solutions to drive operational efficiency and business resilience.
Ultimately, ServiceNow’s cloud backlog represents two things. First, ServiceNow has done an admirable job of demonstrating the value of migrating workflows and data to the cloud, which not only enables AI features to be rolled out quickly and consistently across the platform, but also enables real-time data sources from outside of the organization to be incorporated into things such as automated agents or workflows.
Customers believe that ServiceNow’s core competencies around IT service management, field service, and process automation, combined with the organization’s AI capabilities, will help drive greater efficiency and productivity. Second, ServiceNow’s strong backlog should provide the organization with a solid revenue pipeline into the future, muting the impact of the attention currently being paid to rivals such as Salesforce and Microsoft, which are making a lot of noise in the market about the power and benefits of their respective AI agent strategies.
Cloud migration still requires a significant amount of heavy lifting by organizations, but the integrated nature of ServiceNow’s platform and ability to expand into additional industry-specific use cases represents a compelling value proposition for organizations that want to beef up the efficiency and capacity of their support and service organizations.
AI at the Core of Business Transformation
Initially announced in September 2024, ServiceNow’s partnership with NVIDIA in the adoption of Agentic AI demonstrates the company’s focus on creating integrated, AI-powered solutions that enhance operational efficiency and cybersecurity while enabling workforce development in the age of AI.
The collaboration with NVIDIA, for example, aims to co-develop native AI agents within the ServiceNow platform, leveraging NVIDIA NIM Agent Blueprints. AI agents are designed to automate workflows by interacting with data, users, and systems to complete tasks autonomously.
These agents use machine learning and natural language processing to handle complex processes such as customer support, IT services, and HR management. By integrating AI agents, ServiceNow enhances productivity, reduces manual effort, and speeds up decision-making, thus improving operational efficiency.
The company also announced WorkFlow Data Fabric, which means IT and business teams can instantly pull data from multiple systems—whether it’s customer records or operational logs—allowing them to automate tasks such as issue resolution or customer service inquiries. This integration eliminates data silos, increases operational efficiency, and accelerates decision-making.
For example, a retail company using Workflow Data Fabric can integrate sales, inventory, and customer service data to respond faster to supply chain disruptions or customer service requests, enhancing its operational agility and service quality.
Global Expansion and Long-Term Investments
ServiceNow is growing through innovation partnerships and global expansion. The company continues to make strides in increasing its presence across key markets, with a notable emphasis on Europe. During Q3, ServiceNow announced plans to launch new data centers in Milan and Rome, addressing the growing demand for infrastructure in the region. Additionally, the company’s ongoing $1.5 billion investment in the UK reflects its commitment to expanding its global footprint.
One of ServiceNow’s growth strategies is its emphasis on workforce development. The National Academic Partnership with Singapore’s Republic Polytechnic, for example, aims to provide learners with access to emerging AI and cloud computing roles. This aligns with the Singaporean government’s Smart Nation agenda and reflects ServiceNow’s broader commitment to creating opportunities in AI and technology.
Why should businesses care about this? ServiceNow’s global expansion and workforce development investments are crucial for enterprises operating in or entering new markets. The presence of local data centers and academic partnerships can help businesses scale faster while ensuring compliance with regional regulations and standards.
The Full Year 2024 Guidance
Looking ahead to Q4 and beyond, ServiceNow has raised its full-year subscription revenue guidance to $10.65billion to $10.66 billion, representing a 23% year-over-year growth rate. This upward revision is driven by the strength of the company’s Q3 performance and its continued momentum in the market. Additionally, ServiceNow projects a 29.5% operating margin and 31% free cash flow margin for the full year, reflecting a strong balance between growth and profitability.
Real-world applications of its innovations support ServiceNow’s optimistic outlook. For instance, companies using Now Assist for IT Service Management are streamlining complex change processes, reducing cycle times, and improving decision-making efficiency.
Workflow Data Fabric integrates sales and inventory data in retail, allowing for faster responses to supply chain disruptions. These examples highlight how ServiceNow’s AI-driven solutions are helping businesses adapt to real-world challenges, reinforcing the company’s strong growth trajectory as AI and digital transformation dominate enterprise priorities.
Looking Ahead
Overall, ServiceNow had a great quarter and continues to drive innovation with its Now Platform Xanadu and the company’s strategic partnership with NVIDIA. The company focuses on integrating AI to address evolving business challenges. These innovations provide solutions that enhance operational efficiency and scalability, allowing enterprises to stay agile in a rapidly changing digital landscape.
This performance suggests that ServiceNow is leveraging its platform and partnerships to sustain growth while anticipating future technology needs, particularly as AI adoption becomes more central to enterprise operations. By focusing on innovation and expanding its product offerings, the company remains well positioned to lead businesses through the next phase of digital transformation, ensuring scalability, improved efficiency, and long-term customer retention.
Read the full press release on ServiceNow’s website.
Daniel Newman and his co-host of The Six Five Webcast, Patrick Moorhead of Moor Insights and Strategy discusses ServiceNow’s earnings in their latest episode. Check it out here and be sure to subscribe to The Six Five Webcast so you never miss an episode.
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.
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Author Information
Keith has over 25 years of experience in research, marketing, and consulting-based fields.
He has authored in-depth reports and market forecast studies covering artificial intelligence, biometrics, data analytics, robotics, high performance computing, and quantum computing, with a specific focus on the use of these technologies within large enterprise organizations and SMBs. He has also established strong working relationships with the international technology vendor community and is a frequent speaker at industry conferences and events.
In his career as a financial and technology journalist he has written for national and trade publications, including BusinessWeek, CNBC.com, Investment Dealers’ Digest, The Red Herring, The Communications of the ACM, and Mobile Computing & Communications, among others.
He is a member of the Association of Independent Information Professionals (AIIP).
Keith holds dual Bachelor of Arts degrees in Magazine Journalism and Sociology from Syracuse University.