ServiceNow dodges tariff and DOGE threats, beating forecasts and raising guidance – News

Shares of ServiceNow Inc. shot up in extended trading after the company reported better-than-expected first-quarter results and forecast higher revenue than Wall Street’s target.

The company said it’s seeing strong demand despite the current economic uncertainty, and reported earnings before certain costs such as stock compensation of $4.04 per share. Revenue for the period came to $3.09 billion, up more than 18% from a year earlier.

The results eased past Wall Street’s targets of just $3.83 per share in earnings and $3.09 billion in revenue. In addition, the company delivered $3 billion in subscription revenue – in line with the analyst consensus estimate.

ServiceNow Chairman and Chief Executive Bill McDermott (pictured) said the company’s position as the “platinum standard” for enterprise artificial intelligence drove its “outstanding” results.

Many shareholders were surprised at the company’s strong performance. Given the large amount of business it does with federal government agencies, there were concerns that the company might suffer due to pressure from Elon Musk’s so-called Department of Governmental Efficiency, which has been working to slash government spending.

However, in an interview with Barron’s, McDermott insisted that ServiceNow was ideally placed to benefit from such an efficiency drive, as it can help in the process of “taking billions in costs out of the government.”

ServiceNow has “always been about efficiency and effectiveness,” McDermott added. According to him, the company has actually picked up its federal business, as agencies replace more expensive legacy systems with its software.

In addition, the CEO said public sector systems from other countries have also been taking cues from DOGE, replacing their existing systems with ServiceNow’s platform in some areas to lower their costs.

Private companies are also looking to ServiceNow to help them lower costs and navigate the economic uncertainty created by President Donald Trump’s tariffs, he added.

“They’re doing this in anticipation that there could be less revenue, or there could be a difference in the trading environment and how they operate their supply chain,” McDermott said.

Valoir analyst Rebecca Wettemann told News she concurs with this assessment, saying that every federal agency has been asked to justify its mission and budget, prompting them to look for more efficient tools.

“ServiceNow is emerging as the platform of choice, as its tools help agencies streamline workflows, maximize existing software and infrastructure investments, and deliver measurable outcomes,” the analyst said. “The federal momentum is real and accelerating.”

According to Wettemann, one reason for ServiceNow’s traction in government is that switching to its platform doesn’t necessitate a major rip-and-replace operation.

“ServiceNow enables customers to layer its platform over heavily customized legacy systems,” she said. “That’s a compelling value proposition, especially for CIOs trying to avoid cost overruns and project delays.”

McDermott also talked about ServiceNow’s investments in AI, saying these have become one of the company’s primary business drivers. These days, AI has been integrated into almost every aspect of the company’s platform through its NOW models, which are now playing into the “AI agents” trend by helping companies to automate business processes.

Looking to the current quarter, ServiceNow forecast subscription revenue of between $3.03 billion and $3.04 billion, ahead of the Street’s $3.02 billion target. For the full year, it’s targeting a range of $12.64 billion to $12.68 billion, up slightly from its earlier range and above the analysts’ forecast of just $12.6 billion.

Outlook has become a big focus for Wall Street as shareholders remain fearful of how Trump’s tariffs will impact the global economy. They’re looking for signs that technology companies can weather the storm, and will have been encouraged by what ServiceNow had to say.

On a conference call, Chief Financial officer Gina Mastantuono said she is seeing strong demand signals from business leaders, and is “very confident in our ability to navigate these rapidly evolving times.”

ServiceNow’s strong earnings and guidance came just one day after its rival SAP SE, based in Germany, also delivered strong quarterly results and reiterated its earlier full-year guidance.

ServiceNow’s stock gained more than 10% on the back of the report, adding to a gain of almost 6% during the regular trading session. However, the stock is still down 23% in the year to date, despite these gains.

Photo: SAP SE