In the wake of its fourth-quarter earnings report, ServiceNow's 2023 rally took a breather Thursday as investors tried to make sense of the company's results. NOW stock wavered as a key financial metric — current remaining performance obligations, or CRPO — came in slightly below company guidance.
Reporting after the close on Wednesday, the Santa Clara, Calif-based enterprise software maker said earnings jumped 46% to $2.28 per adjusted share. Revenue climbed 20% to $1.94 billion, ServiceNow said.
Meanwhile, NOW stock analysts expected the company to report earnings of $2.02 a share on revenue of $1.94 billion for the period, which ended Dec. 31.
In addition, ServiceNow said subscription revenue rose 22% to $1.86 billion, topping estimates of $1.84 billion.
Shares Advance In Early 2023
Shares initially plunged on the earnings release late Wednesday. Then NOW stock reversed up in early trading on Thursday. Shares wavered throughout the trading day before eventually jumping 3.2% to close at 463.07 on the stock market today.
Heading into the ServiceNow earnings report, NOW stock had gained 14% in 2023. Shares, however, remained above their 200-day moving average on Thursday.
Attention focused on CRPO bookings are an aggregate of deferred revenue and order backlog and serve as a sales growth metric. ServiceNow's fourth-quarter CRPO came in at $6.94 billion, up 25.5% from a year earlier. The software maker had forecast 26% growth.
ServiceNow attributed the slight miss to fewer early contract renewals, likely tied to a slowing economy.
"Bottom line, the CRPO miss feels like modest macro noise and is outweighed by the solid 22.5% to 23.5% initial subscription revenue growth guide," UBS analyst Karl Keirstead said in a note to clients.
NOW Stock: Revenue Outlook Tops Views
The enterprise software maker said it expects full-year 2023 subscription revenue in a range of $8.44 billion to $8.5 billion. Analysts predicted subscription revenue of $8.36 billion.
In conjunction with the earnings release, ServiceNow announced the promotion of C.J. Desai to president and chief operating officer. Desai joined ServiceNow in 2016 as chief product officer, then was promoted to COO in January 2022.
The company's software tracks and manages services provided by information-technology departments. Also, its self-service tech portal enables company employees to access administrative and workflow tools.
Further, ServiceNow has expanded from its core business into software for human resources, customer service management and security.
"ServiceNow has the potential to be a relatively defensible business in the event of a macro economic slowdown, in our view," NOW stock analyst Kash Rangan of Goldman Sachs said in a note.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
