Not as many $1m customers as last quarter? Sorry, we're out: ServiceNow shares fall despite soaring revenues

Not a good look for company 'at the epicentre of the workflow revolution'

ServiceNow has spooked investors by adding fewer high-value contracts in the first calendar quarter of 2021 than it did the previous quarter.

Although Q1 subscription revenues were $1.293bn, up 30 per cent on a year earlier, net income from operations was $97m, up 7 per cent, and performance beat market expectations, shares fell yesterday.

The culprit was fewer new high-value deals. The corporate presentation [PDF] showed the service desk software company added 53 deals of more than $1m in annual contract value (ACV) in Q1. This had slowed from the prior quarter, when 82 deals were added, even though economies have, in a rather stop-start fashion, been emerging from lockdown since then. In its last pre-pandemic quarter, Q4 2019, ServiceNow added 81 deals with more than $1m ACV. The company pointed out that its annual measure in that metric showed a 23 per cent increase.

Still, ebullient CEO Bill McDermott had plenty to smile about. For example, current remaining performance obligations, contract wins to be billed in the next 12 months, amounted to $4.4bn, an increase of 33 per cent year‑on‑year.

As observers of the one-man ego factory will know, McDermott is prone to let verbosity get the better of him. In this case, telling earnings call listeners that ServiceNow is "at the epicentre of the workflow revolution. Our purpose has never been more relevant. We are making the world of work work better for people."

Let us pause for a moment to take that on board.

McDermott also strayed onto his favourite subject: over-reach of the firm's service desk and workflow technology. In this vein, he parroted pearls of wisdom as follows: "In an increasingly distributed hybrid workforce, companies need to create frictionless experiences... only the Now platform can do this with native integrations. The platform of platforms, the power of one, one data model, one architecture, one enterprise solution to workflow for every business challenge."

The Register has taken ServiceNow to task over what it means by "one data model" in that it does not mean a model of how organisations store enterprise records, and instead refers to a "service data model," as innovation veep Chris Pope told us in March. He admitted the shifting definitions of "data model" could be confusing. ®

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