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Why ServiceNow Stock Jumped 20% Last Month

By Jeremy Bowman - Feb 5, 2020 at 8:29PM

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The cloud computing company posted another strong earnings report.

What happened

Shares of ServiceNow (NOW 1.47%) were climbing last month after the enterprise cloud computing specialist delivered a strong fourth-quarter earnings report. According to data from S&P Global Market Intelligence, the stock finished the month up 20%.

As you can see from the chart below, the stock gained over the course of January and then popped when its fourth-quarter earnings report came out at the end of the month.

NOW Chart

NOW data by YCharts.

So what

In the run-up to the earnings report, ServiceNow shares gradually gained as the company made an acquisition and announced a move into software for telecoms and finance companies.

An upward stock chart made out of clouds.

Image source: Getty Images.

On Jan. 22, the SaaS company said it would acquire Loom Systems, an Israeli artificial intelligence for IT operations (AIOps) company that ServiceNow said would boost its capabilities in AIOps, and the following week it made another acquisition in a similar field, taking over Passage AI. 

Also that week, the company announced a new industry solutions strategy, partnering with consulting firms Deloitte and Accenture to expand into new industries, starting with banking and telecommunications. All three of those announcements painted a picture of a company ambitiously expanding, and ServiceNow's fourth-quarter earnings report did little to dispel that notion.

In that quarter, revenue rose 33% to $951.8 million, beating estimates at $940 million. ServiceNow closed 76 new transactions worth $1 million or more, representing a 49% increase in annual contract value. On the bottom line, earnings per share increased from $0.77 to $0.96, beating estimates at $0.87.

CEO Bill McDermott said, "In Q4, we saw record deals and broad expansion of the Now Platform. ServiceNow is orchestrating what every company wants -- workflows that create great experiences."

Now what

Looking ahead, ServiceNow expects 30% subscription revenue growth of $4.22 billion to $4.24 billion, and expects a 22% operating margin for the year, up from 21% in 2019. The company is executing on both sides of the income statements and expanding through acquisitions and new ventures, and its momentum remains strong. It's not surprising to see investors cheer the latest earnings report.

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