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How Did ServiceNow Perform in Q3 2018?

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Updated

Revenue growth of 37%

ServiceNow (NOW) announced its third-quarter results on October 24 and reported revenues of $676.2 million—a rise of 37.6% YoY (year-over-year) compared to revenues of $491.4 million in the third quarter of 2017.

ServiceNow reported a non-GAAP EPS of $0.68 in the third quarter—a YoY growth rate of 79%. Analysts expected ServiceNow to post revenues of $659.1 million and an EPS of $0.60 in the third quarter.

The company managed to beat the estimates by 2.6% and the EPS by 13% in the third quarter.

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Why did the shares decline?

Although ServiceNow beat analysts’ estimates, the stock fell 6.4% and closed at $170.21. The stock fell due to the lower subscription revenue guidance for the fourth quarter.

ServiceNow expects subscription billings between $900 million and $905 million in the fourth quarter—lower than analysts’ estimates of $914.7 million. The stock might also be impacted by the tech sell-off on October 24.

The S&P 500 (SPY) fell 3% on October 24. The Invesco QQQ ETF (QQQ) and the Technology Select Sector (XLK) fell 4.6% and 4.5%, respectively.

During the company’s earnings call, CEO John Donahoe said, “We had a strong third quarter, continuing our global momentum and accelerating our role as a strategic partner enabling digital transformation. This was our largest federal quarter ever, with the US government representing our biggest deals, and underscoring how digital transformation is becoming both a public and private sector imperative worldwide.”

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