ServiceNow Focusing On AI And Verticals For Growth

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Under the leadership of its newest CEO Bill McDermott, ServiceNow (NYSE: NOW) recently reported a stellar quarter. The company outperformed market expectations for the quarter on all fronts, sending the stock soaring to a record high.

ServiceNow’s Financials

ServiceNow’s fourth quarter revenues grew 33% over the year to $951.8 million, ahead of the market’s expectations of $941.1 million. Adjusted earnings grew 25% to $0.96 per share and were also significantly ahead of the market’s forecast of $0.87 for the quarter.

For the quarter, subscription revenues grew 35% over the year to $899 million, ahead of the Street’s forecast of $888.7 million. Non-GAAP Subscription revenues adjusted for constant currency grew 36% over the year to $907 million. Non-GAAP Professional services and other revenues grew 8% over the year to $53.3 million.

Total billings improved 35% to $1.365 billion with non-GAAP adjusted subscription billings growing 37% to $1.303 billion and Professional services and other billings growing 1% to $61.4 million.

ServiceNow expects to end the current quarter with subscription revenues of $975-$980 million, ahead of the Street’s forecast of $960.9 million. ServiceNow forecast subscription revenues for the year at $4.23 billion which were also ahead of the market’s forecast of $4.208 billion.

ServiceNow’s AI Acquisitions

ServiceNow continues to drive its AI initiatives and recently announced the acquisition of a conversational AI startup Passage AI for an undisclosed amount. Passage AI had raised $10.3 million from investors including Blumberg Capital.

Mountain View-based Passage AI was set up in 2016 to provide an AI platofrm that offers the tools for AI, NLU/P, deep learning technology, and bot building tools to businesses to help them communicate with their clients. Passage AI was known for its IT automation tool that used a conversational interface to submit a ticket and handle queries through APIs. Passage AI also has an HR automation tool that helps simplify employee conversations through a simple chat interface.

ServiceNow plans to leverage Passage AI’s natural language processing capabilities within its Virtual Agent and Service Portal to help simplify customer experience for its customers.

Earlier this year, ServiceNow had also announced the acquisition of Israel-based Loom Systems for an undisclosed sum. Loom Systems had raised $16 million in funding from investors including Flint Capital and Jerusalem Venture Partners.

Loom Systems provides an AIOps solution that can predict IT incidents before a customer is affected. Loom Systems’s technology sifts through the troves of data collected by IT operations teams to identify patterns and anomalies that can predict outages and issues to reduce L1 incidents. ServiceNow plans to user Loom’s AI capabilities to find potential dangers to the IT system’s health and address those issues before they become bigger concerns.

ServiceNow’s Vertical Focus

Besides developing its AI arsenal, ServiceNow is also working on building industry-focused solutions. Recently it announced plans to build solutions customized for finance and telecommunications clients. ServiceNow believes that its industry approach will help banks modernize their internal processes and provide more efficient customer service. Its banking solution will focus on simplifying the middle-to-back office operations of banks to help them deliver faster and more seamless customer experiences. Its telecommunications solution will focus on proactively anticipating issues and addressing them quickly to ensure customer satisfaction.

It entered into partnerships with Deloitte and Accenture. As part of the agreement, Deloitte will become its Lead Launch Partner for the banking solution and will help implement new workflows to transform how banks operate. Similarly, Accenture will be the Lead Launch partner for its new telecommunications solution and will help drive digital transformation through industry specific workflows. These industry-focused solutions are expected to be launched later this year, following which, it will work on additional solutions for healthcare, manufacturing, media, technology, and other sectors.

Its stock is currently trading at $338.50 with a market cap of $63.8 billion. It had climbed to a 52-week high of $355.99 earlier this week. It hit a 52-week low of $213.99 in February last year.

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