Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of ServiceNow Inc (NYSE:NOW) were down 12.6% as of 10:55 a.m. Friday after the company announced solid first-quarter results, but followed with disappointing guidance.
So what: Quarterly revenue increased 52% year over year (62% on a constant-currency basis) to $212 million, helped by the addition of 23 net new Global 2000 customers during the quarter to bring its total to 545. That translated to a GAAP net loss of $58 million, or $0.38 per diluted share. On an adjusted basis, ServiceNow achieved net income of $2 million, or $0.01 per diluted share. Analysts, on average, would have settled for breakeven adjusted results on slightly lower sales of $210.9 million.
For the current quarter, however, ServiceNow expects revenue between $237 million and $242 million, or growth between 42% and 45%. Wall Street was modeling revenue slightly above the high end of that range.
ServiceNow also provided full-year 2015 guidance for revenue of $970 million to $1 billion, the midpoint of which sits slightly below analysts' consensus estimates for sales of $990.6 million.
Now what: On the surface, it's hard to blame the market for bidding shares of ServiceNow down given today's light guidance. But investors should also keep in mind ServiceNow's first-quarter results came in at the high end of its own previous guidance range. There's always the possibility, then, it could be underpromising with the intention of overdelivering once again. Whether the market will take kindly to that approach remains to be seen, but that's why I still don't think long-term investors should be panicking today. As long as ServiceNow continues its impressive growth as it strives toward sustained long-term profitability, I'm convinced its bullish thesis remains intact.