ServiceNow (NYSE:NOW) easily surpassed analysts’ expectations for the first quarter of 2023 despite a challenging macro environment. The workflow management software provider’s adjusted earnings per share increased 37% year-over-year to $2.37 and beat the consensus estimate of $2.04.
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Meanwhile, the company’s Q1 revenue increased 22% year-over-year to $2.1 billion, with subscription revenue rising 24%. Also, the top line came in above the analysts’ estimate of $2.09 billion.
During the reported quarter, the company witnessed 66 transactions that contributed over $1 million in net new annual contract value, up 27% year-over-year. Also, the current remaining performance obligations (cRPO), which track contract revenue that will be reported as revenue in the following 12 months, increased 23% to $7.01 billion.
Looking forward, ServiceNow expects cRPO in the second quarter to rise by 23% from the year-ago quarter. Moreover, Q2 subscription revenue is anticipated to be between $2.04 billion and $2.05 billion.
Markedly, the company raised its full-year subscription revenue guidance to $8.47 billion to $8.52 billion, compared to the prior guidance of $8.44 billion to $8.5 billion.
Alongside Q1 earnings, ServiceNow announced that Deborah Black, Netflix’s (NFLX) Vice President of Engineering, will join ServiceNow’s Board of Directors. With her inclusion, ServiceNow’s board will now consist of 11 people.
Is ServiceNow Stock a Buy?
Following the Q1 earnings release, four analysts reaffirmed Buy ratings on NOW stock, which reflects their optimism about the company’s performance.
Moreover, Goldman Sachs analyst Kash Rangan said that the results might help ease investor concerns about Q1 renewals. He added, “The raise in the low end of management’s FY revenue guidance largely reflects the beat in Q1 and is not likely to add execution risk to the remainder of the year.”
ServiceNow scores the Street’s Strong Buy consensus rating based on 17 unanimous Buys. The average NOW stock price target of $543.12 implies 19.6% upside potential. Shares have gained 17.8% so far this year.
