Results: ServiceNow, Inc. Exceeded Expectations And The Consensus Has Updated Its Estimates

Shareholders of ServiceNow, Inc. (NYSE:NOW) will be pleased this week, given that the stock price is up 10% to US$828 following its latest second-quarter results. Revenues were US$2.6b, approximately in line with whatthe analysts expected, although statutory earnings per share (EPS) crushed expectations, coming in at US$1.26, an impressive 25% ahead of estimates. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on ServiceNow after the latest results.

Check out our latest analysis for ServiceNow

Taking into account the latest results, the current consensus from ServiceNow's 37 analysts is for revenues of US$10.9b in 2024. This would reflect a meaningful 9.6% increase on its revenue over the past 12 months. Per-share earnings are expected to step up 14% to US$6.35. In the lead-up to this report, the analysts had been modelling revenues of US$10.9b and earnings per share (EPS) of US$6.01 in 2024. So the consensus seems to have become somewhat more optimistic on ServiceNow's earnings potential following these results.

There's been no major changes to the consensus price target of US$870, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic ServiceNow analyst has a price target of US$950 per share, while the most pessimistic values it at US$640. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. The period to the end of 2024 brings more of the same, according to the analysts, with revenue forecast to display 20% growth on an annualised basis. That is in line with its 23% annual growth over the past five years. Compare this with the broader industry, which analyst estimates (in aggregate) suggest will see revenues grow 12% annually. So it's pretty clear that ServiceNow is forecast to grow substantially faster than its industry.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards ServiceNow following these results. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. The consensus price target held steady at US$870, with the latest estimates not enough to have an impact on their price targets.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for ServiceNow going out to 2026, and you can see them free on our platform here.

Even so, be aware that ServiceNow is showing 1 warning sign in our investment analysis , you should know about...

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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