Somebody's got to clean up the mess.
Artificial intelligence is reshaping the way the world does business.
Related: Analyst updates ServiceNow stock price target ahead of earnings
Nearly three out of four businesses have started using AI for at least one business function, according to a McKinsey & Co. report
In addition, half of the survey respondents use AI for two or more of their business functions. That's up sharply from 2023, when less than a third of respondents had reported using AI for at least two business functions.
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And 64% of businesses believe that artificial intelligence will help increase their overall productivity.
But like any other major transition, there will be misery, and ServiceNow (NOW) wants to make the change as smooth as possible.
"For years, we've been talking about the mess of the 20th-century enterprise systems," CEO Bill McDermott told analysts on Oct. 23.
"Organizations around the world needed a platform to help them clean up that mess so they can modernize for the AI world," he said. "ServiceNow is that chosen strategic platforms."
"And we integrate with all those other systems, orchestrate the silos into modern workflows and create a consistent consumer-grade user experience," McDermott noted.
ServiceNow CEO plans to profit off AI
The cloud-computing platform company reported a net income of $3.72, up 27% from a year ago, while revenue climbed 22.3% to $2.80 billion.
ServiceNow forecasts that the full-year 2024 subscription revenue will range from $10.655 billion to $10.66 billion.
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"It's important to understand the history here," McDermott said. "When public cloud solutions came online as the last secular shift in the enterprise, they created sprawling governance challenges."
He noted that Chief Information Officers, at the direction of their CEOs, were asked to get things under control, the cost, security and integration, "and ServiceNow played that role."
"Now the C-suite is looking to ServiceNow to prevent another mess with AI," McDermott said. "We do see the risk that every vendor's bots and agents will scatter like hornets fleeing the nest, and they trust ServiceNow as the governance control tower, which is a privileged position for our platform."
ServiceNow, McDermott added, "has emerged as the AI platform for business transformation."
"The secular shift to AI is validated and is unfolding in real-time," he said.
Customer workflows had a great Q3 with 15 of the Top 20 deals and 17 deals over $1 million, McDermott said, "as we see more opportunity to disrupt the front office."
"Employee workflows were in 13 of the Top 20 with nine deals over $1 million, and creative workflow was strong again in 17 of the Top 20 with 13 deals over $1 million," he explained. "Here's the headline. Many companies have struggled to execute in what has been a complex macro environment."
"We are the benchmark for elite-level execution," he said.
McDermott also announced that ServiceNow was expanding its partnership with heavyweight AI chipmaking company Nvidia (NVDA) .
"Our partnership with Nvidia has been a game changer for enterprises embracing AI,” he said. “We're taking that to the next level by co-creating a shared vision on agentic AI."
"Together, Nvidia and ServiceNow are developing out-of-the-box use cases for AI agents on the Now platform using Nvidia NIM Agent Blueprints."
Earlier this month, TheStreet Pro’s portfolio manager Chris Versace raised his price target on ServiceNow shares to $1,000 from $900, following more research showing AI adoption in the enterprise sector accelerating.
Among other items, Versace said research indicated that a wider array of companies are adopting AI, “which plays into the diversified end market strength of ServiceNow.”
ServiceNow delivers solid Q3 earnings results
ServiceNow’s stock is up nearly 35% year-to-date, while shares surged 76% from a year ago.
Several investment firms adjusted their price targets after the company released its quarterly results.
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Piper Sandler raised the firm's price target on ServiceNow to $1,000 from $850 while maintaining an overweight rating on the shares.
The firm noted the third quarter showed another solid set of results buoyed by large deal momentum and strong AI adoption.
Of note, the firm said that Now Assist, ServiceNow's GenAI technology, reached 44 customers who spent over $1 million in the third quarter, evidencing the clear momentum around the broader AI play.
Piper analysts said they were impressed with Q3's execution and believe ServiceNow's GenAI capabilities will continue to drive the company's strategic positioning within large enterprises forward.
RBC Capital raised the firm's price target on ServiceNow to $1,045 from $985 and kept an outperform rating on the shares.
The company demonstrated a nice upside while 2024 subscription revenue guidance moved higher by more than the beat, the firm said.
ServiceNow execution remains impressive, and there were a number of positives from the quarter, led by increasing platform strength, robust Pro Plus/Now Assist adoption, the introduction of Workflow Data Fabric, and a building pipeline into year-end, RBC Capital said.
Barclays raised the firm's price target on ServiceNow to $1,000 from $980 and kept an overweight rating on the shares.
The company reported a “healthy Q3 across the board,” the firm said.
Barclays said that it believes ServiceNow shares “will continue to work once the dust settles around very short-term quarterly expectations.”
The company is delivering better sales growth than its peers at strong margin levels and has an emerging generative artificial intelligence story that seems credible, the firm added.
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