ServiceNow Q1 2023 Earnings Report
Key Takeaways
ServiceNow reported strong Q1 2023 results, exceeding guidance for topline growth and profitability. Subscription revenues grew 24% year-over-year to $2,024 million, and total revenues increased by 22% year-over-year to $2,096 million. The company is focused on balancing innovation with cost management and profitability.
ServiceNow delivered a powerful combination of growth and profitability.
C-level decision makers are actively making enterprise platform investments that deliver significant business impact.
ServiceNow launched a major platform expansion with the Utah release.
ServiceNow added Deborah Black, VP of engineering at Netflix, to the company’s Board of Directors.
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ServiceNow Revenue by Segment
Forward Guidance
ServiceNow provided guidance for the second quarter of 2023 and full-year 2023.
Positive Outlook
- Second Quarter 2023 subscription revenues are expected to be $2,040 - $2,045 million, representing 23% - 23.5% year-over-year growth, 23.5% - 24% adjusted for constant currency.
- Second Quarter 2023 income from operations margin is expected to be 23%.
- Weighted-average shares used to compute diluted net income per share are expected to be 205 million for the second quarter of 2023.
- Full-year 2023 subscription revenues are expected to be $8,470 - $8,520 million, representing 23% - 23.5% year-over-year growth, 23% - 23.5% adjusted for constant currency.
- Full-year 2023 subscription gross profit margin is expected to be 84%.
Challenges Ahead
- Full-year 2023 income from operations margin is expected to be 26%.
- Full-year 2023 free cash flow margin is expected to be 30%.
- Weighted-average shares used to compute diluted net income per share are expected to be 206 million for the full-year 2023.
- The non-GAAP growth rates for subscription revenues and cRPO are adjusted only for constant currency to provide better visibility into the underlying business trends.
- Guidance for GAAP subscription revenues and GAAP subscription revenue and cRPO growth rate is based on the 31-day average of foreign exchange rates for March 2023 for entities reporting in currencies other than U.S. Dollars.