ServiceNow, Inc. Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next

Investors in ServiceNow, Inc. (NYSE:NOW) had a good week, as its shares rose 3.2% to close at US$951 following the release of its third-quarter results. Revenues were US$2.8b, approximately in line with whatthe analysts expected, although statutory earnings per share (EPS) crushed expectations, coming in at US$2.07, an impressive 31% ahead of estimates. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

Check out our latest analysis for ServiceNow

Taking into account the latest results, the consensus forecast from ServiceNow's 38 analysts is for revenues of US$13.2b in 2025. This reflects a sizeable 26% improvement in revenue compared to the last 12 months. Per-share earnings are expected to jump 32% to US$8.54. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$13.2b and earnings per share (EPS) of US$8.07 in 2025. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.

The consensus price target rose 6.9% to US$991, suggesting that higher earnings estimates flow through to the stock's valuation as well. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic ServiceNow analyst has a price target of US$1,170 per share, while the most pessimistic values it at US$716. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await ServiceNow shareholders.

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. We can infer from the latest estimates that forecasts expect a continuation of ServiceNow'shistorical trends, as the 21% annualised revenue growth to the end of 2025 is roughly in line with the 22% annual growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 12% per year. 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. Fortunately, they also reconfirmed their revenue numbers, suggesting that it's tracking in line with expectations. Additionally, our data suggests that revenue is expected to grow faster than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.

With that in mind, we wouldn't be too quick to come to a conclusion on ServiceNow. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple ServiceNow analysts - going out to 2026, and you can see them free on our platform here.

Don't forget that there may still be risks. For instance, we've identified 2 warning signs for ServiceNow that you should be aware of.

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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.