What happened
Shares of ServiceNow (NOW -5.89%) charged sharply higher Thursday, surging as much as 15%, before ending the trading day up 9.1%.
The catalyst that drove the cloud-based digital workflow specialist higher was fourth-quarter financial results that easily surpassed expectations.
So what
ServiceNow generated revenue of $1.61 billion, up 30% year over year, renewing investors' confidence in the company's growth story. At the same time, the company delivered adjusted earnings per share (EPS) of $1.46, a 25% increase.
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To give those numbers context, analysts' consensus estimates were calling for revenue of $1.6 billion and adjusted EPS of $1.43.
ServiceNow's current remaining performance obligation -- which represents sales that are under contract and will be recognized as revenue over the coming 12 months -- swelled to $5.7 billion, up 29% year over year. This gives investors keen insight into the company's future.
Additionally, ServiceNow closed 135 agreements with more than $1 million in net new annual contract value (ACV), which surged 52% year over year, while customers with more than $1 million in ACV climbed 25%.
Now what
ServiceNow gave investors other reasons to cheer. Management expects first-quarter revenue in a range of $1.61 billion to $1.615 billion, which would represent growth of roughly 25%. Additionally, ServiceNow is guiding for full-year 2022 revenue of $7.03 billion, or growth of roughly 26%.
Management's tendency to "beat and raise," or surpassing analysts' expectations while also raising guidance, was enough to send the stock higher.
I'd be remiss if I didn't point out that even after its recent drubbing, ServiceNow stock isn't cheap when measured using traditional metrics. It has a forward valuation of 14, when a reasonable a price-to-sales ratio is generally considered to be between 1 and 2. As a result, the stock will likely continue to be volatile, particularly given the current market environment. That said, management is forecasting year-over-year revenue growth of 26% for 2022, which may well be conservative given its history.
