ServiceNow Earnings: Operating on a Higher Plane Within Enterprise Software

We are raising our fair value estimate to $840 per share from $790 after wide-moat ServiceNow delivered exceptional results against a stubborn macro backdrop. After raising our estimates in the near term to account for guidance, with strong profitability flowing through the next several years, we see shares as attractive. While there were many highlights in the form of better-than-expected headline numbers, including revenue and profitability, we were most impressed by the growth in remaining performance obligations, which accelerated meaningfully during the quarter. In short, generative artificial intelligence embedded in the firm’s Pro Plus tier was a powerful factor in attracting new customers to the platform. After several quarters of ServiceNow seeing this type of traction against the context of hesitation from generative AI offerings from peers, we think ServiceNow is clearly emerging as an AI leader. Beyond that, results reinforce our thesis that ServiceNow is leading the charge in automating and simplifying processes for enterprise customers throughout their businesses.