ServiceNow (NOW) Earnings Preview: High Expectations and AI Growth in Focus

ServiceNow is set to report its fourth-quarter earnings after the market closes today, with a call scheduled for 5:00 PM ET. The enterprise software leader, known for its cloud-based digital workflow solutions, has consistently demonstrated strong revenue growth and earnings expansion, making it one of the more reliable performers in the software sector.

With expectations high, the company’s ability to deliver another quarter of steady execution will be key in determining whether its stock can sustain its recent momentum. Shares of ServiceNow have appreciated nearly 45 percent over the past year, recently setting a new all-time high. However, with the stock trading at elevated levels, any deviations from investor expectations could trigger short-term volatility.

Earnings Expectations and Historical Performance

The FactSet consensus estimate calls for earnings per share of $3.65, reflecting a 17 percent increase from the prior year. Revenue is projected to rise by 21 percent to approximately $2.96 billion. ServiceNow has a strong track record of surpassing earnings estimates, having not registered a miss in over five years. Revenue growth has remained impressively steady, consistently exceeding 20 percent on a year-over-year basis for the past five years.

A key metric to watch will be subscription revenue, which accounts for the majority of ServiceNow’s total sales. The company previously guided for fourth-quarter subscription revenue to be in the range of $2.875 billion to $2.880 billion, a sequential increase of about 6 percent. Investors will also focus on the company’s forecast for non-GAAP operating margins, which were projected to be around 29 percent.

Another important indicator will be current remaining performance obligations, which represent future contracted revenue. In the third quarter, current RPO grew by 23.5 percent to $9.36 billion, reflecting strong demand for ServiceNow’s solutions.

Industry Trends and Sector Performance

ServiceNow has benefited from ongoing digital transformation efforts across various industries. The company has highlighted strength in several key verticals, including technology, media, and telecommunications, which saw net new annual contract value (ACV) more than double year-over-year in the previous quarter. Retail and hospitality also exhibited robust demand, with ACV growth exceeding 80 percent.

The broader enterprise software sector has been experiencing a shift as companies prioritize cost efficiency and automation. With economic uncertainty lingering, many businesses have become more selective in their IT spending. ServiceNow’s platform, which helps enterprises streamline operations and reduce costs, has positioned it well in this environment.

The Growing Role of AI in ServiceNow’s Business

Artificial intelligence is expected to be a major topic during the earnings call. ServiceNow has been expanding its generative AI capabilities, which continue to gain commercial traction. In the third quarter, the company reported that 44 customers had spent more than $1 million on its Now Assist AI offering, with six customers spending over $5 million and two exceeding $10 million in spending.

Generative AI remains a priority for many enterprises, and ServiceNow’s ability to integrate AI-driven automation within its workflow solutions could be a key differentiator. Management’s commentary on AI adoption trends and customer engagement with its AI-powered solutions will be a critical area of focus.

Potential for a Stock Split

Another topic of interest for investors is whether ServiceNow could announce a stock split. With shares having crossed the $1,000 mark since the last earnings report, the possibility of a split has become more relevant. While a stock split would not directly impact the company’s fundamentals, it could increase accessibility for retail investors and provide additional liquidity.

Key Takeaways and Market Implications

ServiceNow has established itself as one of the most consistent performers in the enterprise software industry, with a history of strong revenue growth, expanding profitability, and reliable execution. The company’s focus on AI, digital transformation, and workflow automation continues to resonate with large enterprises, helping to drive strong demand for its platform.

For today’s earnings report, key themes to monitor include:

- Subscription revenue growth and updated guidance for the coming quarters

- Performance across key industry verticals, particularly in technology, media, and retail

- Updates on AI-driven product adoption and customer spending trends in generative AI

- Management’s outlook on macroeconomic conditions and IT spending trends for 2025

- Any potential announcement regarding a stock split

Given the stock’s recent rally to all-time highs, expectations are elevated. If ServiceNow delivers another strong quarter and provides an optimistic outlook, shares could continue their upward trajectory. However, any signs of slowing growth or cautious commentary on enterprise IT spending could lead to short-term selling pressure. Regardless of near-term stock movements, ServiceNow remains well-positioned as a leader in enterprise automation and AI-driven digital workflows.