ServiceNow performed exceptionally well and exceeded expectations in the second quarter of 2024.
Revenue and Obligations: Q2 subscription revenues were $2.542 billion, growing 23% year-over-year in constant currency. Operating margin was over 27%.
ServiceNow RPO(remaining performance obligations) ended the quarter at approximately $18.6 billion, representing 31.5% year-over-year constant currency growth. The current RPO is $8.78 billion, representing 22.5% year-over-year constant currency growth. Both of these metrics beat the guidance given by the company earlier in the quarter.
Deals: In Q2 2024, the company closed 88 deals greater than $1 million, 14 deals over $5 million in net new ACV, and 4 deals over $10 million. The company now have 1,988 customers paying us over $1 million in ACV.
Product revenue: In Q2, Customer Workflows led with 14 deals over $1 million, followed by Employee Workflows with 12 deals over $1 million and Creators with 10 deals over $1 million. Security and Risk, ITSM, and ITOM also had 8, 9, and 10 deals over $1 million, respectively. In GenAI, the company signed 11 Now Assist deals with $1 million-plus net new ACV.
New Product: The company launched its RaptorDB Lighthouse program to help customers quickly ingest and analyze data at a massive scale as they pursue new AI use cases
Hyperscalers: Closed seven $1 million-plus now on Azure deals in Q2, with two of them as new logo wins. And one deal, in fact, was over $30 million in net new ACV.
Industry Deals: U.S. Federal net new ACV was up well over 50% from last Q2. Manufacturing, energy, and utilities grew net new ACV by over 50% year over year. Health care, life sciences, and retail and hospitality grew about 30% year over year.
Acquisitions & Investment: The company acquired Raytion, a Germany‑based industry leader in information retrieval technology. It then invested its first telecommunications-focused Ecosystem Ventures investment in Prodapt.
Partnerships: ServiceNow extended its partnerships with Microsoft for copilot integration, IBM for Watson integration, NVIDIA for the potential of AI avatars, and Genesys, Fujitsu, Equinix, and Infosys for technology partnerships. The company also partnered with Boomi, where they would expand the usage of ServiceNow solutions and work with ServiceNow on joint product development.
Telcom industry: ServiceNow and BT Group announced a multi‑year agreement to extend ServiceNow capabilities to all BT Group units; ServiceNow and Bell Canada announced an industry‑first collaboration to expand Bell’s use of the Now Platform in its digital transformation efforts.
Observations:
ServiceNow's performance in the first quarter was outstanding, as most of the revenue figures surpassed expectations, reflecting strong and promising growth.
2. The company's strong emphasis on AI has paid off, with over 11 companies signing deals for more than 1 million.
3. By emphasizing partnerships with technology and telecom companies, ServiceNow is successfully broadening its Total Addressable Market (TAM) and capitalizing on greater revenue potential.
Strategy: I believe ServiceNow is following an FIRM(Focused, Innovate, Revitalize & Monetize) strategy
Focused: Focusing on developing a world-class product portfolio which completely resonates with the customer.
Innovate: Develop best-in-class AI products for customers and ensure that new AI products are integrated with all existing products.
Revitalize: Focus on revitalizing the current product lineup and reorienting investment towards acquiring technology companies, which will lead to increased revenue and new product launches.
Monetize: Focusing on establishing, cultivating and monetizing strategic partnerships with other businesses to generate and capitalize on new sources of revenue for the company.
