Back to top

Image: Bigstock

What's in the Offing for ServiceNow's (NOW) Q2 Earnings?

Read MoreHide Full Article

ServiceNow, Inc. (NOW - Free Report) is scheduled to release second-quarter 2021 results on Jul 28.

The Zacks Consensus Estimate for revenues is currently pegged at $1.36 billion, which indicates growth of 26.8% from the year-ago quarter. The quarterly performance is likely to have been driven by the company’s robust product portfolio and the Now Platform in the to-be-reported quarter.

The Zacks Consensus Estimate for second-quarter earnings has been unchanged at $1.20 for the past 30 days, which suggests a decline of 2.4% from the prior-year quarter.

ServiceNow, Inc. Price and EPS Surprise ServiceNow, Inc. Price and EPS Surprise

ServiceNow, Inc. price-eps-surprise | ServiceNow, Inc. Quote

Factors at Play

ServiceNow’s second-quarter results will likely reflect benefits from strong adoption of the company’s workflows by enterprises amid the COVID-19 pandemic-induced accelerated digital transformation trend.

The company estimates second-quarter non-GAAP adjusted subscription revenues to lie between $1.29 billion and $1.295 billion (adjusted for constant currency), which indicates a jump of 27-28%, year over year. Non-GAAP adjusted subscription billings are projected between $1.25 billion and $1.225 billion, which suggests a rise of 23% year over year.

Notably, the Zacks Consensus Estimate for subscription billings is currently pegged at $1.254 billion, which calls for an improvement of 23.2% from the year-ago quarter.

ServiceNow's return-to-work solutions, especially the Safe Workplace Suite, deserve special mention. The gradual unlocking phase has commenced in many countries. With economies re-opening and people starting to go back to work, companies will need to provide the highest safety standards for their employees to prevent spread of the COVID-19 virus.

The robust adoption of the Safe Workplace suite is anticipated to have aided the company in the second quarter. The company’s Safe Workplace app has more than 900 customers.

The company’s HR solutions have also been growing in popularity on the heightened need for effective employee management amid evolving workspace trends. Higher adoption of HR offerings, along with strong demand for ServiceNow’s customer service management (CSM) solutions, is likely to have contributed to the top line during the to-be-reported quarter.

Nonetheless, higher expenditure on product innovation might have exerted pressure on margins during the quarter under review.

Weakness across industries like airlines, retail, hospitality, energy and transportation, which have been hit hard by the COVID-19 crisis, is an added concern for the company, at least for the near term.

Moreover, the re-imposition of lockdowns in several parts of the world due to another infection wave might have hindered business prospects for the company.

What Our Model Says

Our proven model does not predict an earnings beat for ServiceNow this season. The combination of a positive Earnings ESP, and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), increases the chances of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell, before they’re reported, with our Earnings ESP Filter.

Though ServiceNow currently sports a Zacks Rank of 1, it has an Earnings ESP of 0.00%.

Stocks With Favorable Combinations

Here are some companies, which, per our model, have the right combination of elements to post an earnings beat in their upcoming release:

Avnet, Inc. (AVT - Free Report) has an Earnings ESP of +9.82% and currently flaunts a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Apple Inc. (AAPL - Free Report) has an Earnings ESP of +3.40% and carries a Zacks Rank #3, at present.

Facebook (FB - Free Report) has an Earnings ESP of +7.52% and holds a Zacks Rank of 3, currently.

In-Depth Zacks Research for the Tickers Above

Choose a ticker to receive a FREE report - normally $25 each:

Apple Inc. (AAPL) - free report >>

Avnet, Inc. (AVT) - free report >>

Facebook, Inc. (FB) - free report >>

ServiceNow, Inc. (NOW) - free report >>