What happened
ServiceNow (NOW -2.32%) is making big gains in today's trading following better-than-expected first-quarter results. The customer relationship management (CRM) software specialist's share price was up roughly 6.9% as of 11:30 a.m. ET Thursday.
ServiceNow published Q1 results after the market closed yesterday, and it delivered top- and bottom-line results that came in ahead of the market's expectations. The company posted earnings per share of $1.73 on sales of $1.72 billion, while the average analyst estimate had targeted per-share earnings of $0.23 on revenue of $1.7 billion.
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So what
ServiceNow's earnings in Q1 crushed the market's expectations, and the business generally delivered encouraging results across the aboard. Overall sales in the period were up 26%, or 29% on a currency-adjusted basis, and subscription revenue rose in line with total sales growth to reach roughly $1.63 billion. The demand outlook for the company's services also remains strong, with management reporting remaining performance obligations of $5.69 billion -- up 29% compared to the prior-year period.
Now what
With interest rates on track to rise substantially this year, growth stocks have been under the microscope when it comes time to report earnings and issue guidance. Luckily, ServiceNow has knocked it out of the park on both of those fronts.
The company expects subscription revenue to rise roughly 26% year over year to between $1.67 billion and $1.68 billion, and it anticipates remaining performance obligations at the end of the quarter will be up 28% year over year. It also expects a 25% increase for operating income, a non-GAAP (adjusted) operating margin of 22%, and 31% growth for free cash flow. For the full-year period, management is guiding for subscription revenue to be between $7.03 billion and $7.04 billion, representing growth of roughly 26%.
ServiceNow has a market capitalization of roughly $99.5 billion and is valued at approximately 13.4 times this year's expected sales and 67.6 times expected earnings.
