ServiceNow Beats Expectations As Subscriptions Rise. The Stock Is Splitting.

ServiceNow is expected to report third-quarter earnings after the closing bell. (David Paul Morris/Bloomberg)

Key Points

• ServiceNow exceeded third-quarter financial expectations with earnings of $2.40 per share and revenue of $3.4 billion.
• Subscription revenue increased by 21.5% from the prior year, reaching $3.3 billion, and full-year guidance was raised.
• The company announced a five-for-one stock split and an expanded agreement with Nvidia for AI integration.

Digital-workflow software company ServiceNow beat third-quarter financial results and raised its full-year subscription guidance.

Santa Clara, Calif.-based ServiceNow, one of the tech companies expected to benefit from the greater adoption of artificial intelligence, posted quarterly earnings of $2.40 a share on revenue of $3.4 billion, up 22% from the year-ago quarter. Of that revenue, $3.3 billion came from subscriptions, a 21.5% increase from a year ago.

Wall Street had expected earnings of $2.20 a share and revenue of $3.36 billion, according to FactSet.

The company’s shares were rising 4.7% in after-hours trading, after closing down 2.8% on Thursday, at $911.70. ServiceNow’s stock is down 14% year to date and down 4% over the past 12 months, while the S&P 500 index is up 17.2% this year and up 18.5% over the past 12 months.

For the current fourth quarter, ServiceNow expects subscription revenue of $3.42 billion to $3.43 billion, up 19.5% from the year-ago quarter.

For the full year, it now projects subscription revenue of $12.83 billion to $12.85 billion, up 20.5% from last year. Last quarter, the company said it expected full-year subscription revenue of $12.775 billion to $12.795 billion.

ServiceNow Chairman and CEO Bill McDermott said businesses in every industry are focused on AI “as the innovation opportunity of our generation. Leaders work with ServiceNow because they trust this proven platform as the core of their technology estate for decades to come.”

ServiceNow also announced a five-for-one stock split, subject to the approval of shareholders at a special meeting on Dec. 5.

The company also beat second-quarter expectations in July, raising its full-year subscription revenue outlook then, too*.*

On Tuesday, ServiceNow announced an expanded agreement with Nvidia to unite intelligent workflows and open models to scale “trusted AI” across industries. It also introduced Apriel 2.0, the next generation of its Apriel Nemotron open model family, post-trained with Nvidia and ServiceNow-provided data.

Ayako Yoshioka, portfolio consulting director at Wealth Enhancement Group, told MarketWatch ahead of Wednesday’s results that investors should pay special attention to ServiceNow’s pricing model, which combines legacy seat-based licensing with the emerging trend of AI-token usage fees. Yoshioka said updates about the success of its pricing model could give the stock a boost.

ServiceNow management will host a conference call to discuss results at 5 p.m. Eastern time on Wednesday.

Write to Janet H. Cho at janet.cho@dowjones.com