ServiceNow Q3 shines as it rides digital transformation, workflow automation trends

CEO Bill McDermott said ServiceNow is benefiting from digital transformation spending and the realization by enterprises that "their technology architecture is their business architecture."

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ServiceNow reported better-than-expected third quarter results as it continues to gain wallet share from customers and boost overall contract values.

The company reported third quarter revenue of $1.512 billion, up 31% from a year ago, with earnings of 31 cents a share. Non-GAAP earnings for the third quarter were $1.55 a share.

Wall Street was expecting third quarter revenue of $1.475 billion with non-GAAP earnings of $1.38 cents a share.

ServiceNow said it now has 1,266 customers with more than $1 million in annual contract value, up 25% from a year ago.

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CEO Bill McDermott said ServiceNow is benefiting from digital transformation spending and the realization by enterprises that "their technology architecture is their business architecture." ServiceNow has popularized workflow as a concept and its ability to automate via its platform is likely to be more critical as inflation runs through the economy.

McDermott said ServiceNow's goal was to become the "defining enterprise software company of the 21st century." The company plans to have more than $15 billion in revenue by 2026. On a conference call, McDermott said:

ServiceNow is at the intersection of two generational opportunities: first, the need for a new technology foundation is supercharging our close partnership with CIOs. The second dimension fueling ServiceNow is the reordering of the enterprise application platforms for hyperautomation. Over several decades, enterprises have invested trillions into on-premise and first-generation SaaS applications. These applications satisfy the business process needs of the 20th century. Today, new business models require a fully connected value chain. Legacy environments are not adaptive enough to enable this change. 

The third quarter included a bevy of partnerships with Microsoft and Celonis as well as the launch of its Now Platform Rome release.

For the fourth quarter, ServiceNow projected subscription revenue of $1.51 billion to $1.52 billion. For 2021, ServiceNow is projecting subscription revenue of $5.56 billion to $5.57 billion.