ServiceNow CEO Bill McDermott has been on a mission to persuade investors to stop thinking of his enterprise software company as a standard SaaS (software-as-a-service) business.
So far, McDermott has met with skepticism from the Street, which has been fixated on the lofty valuation of ServiceNow’s shares. The stock trades at a trailing price-to-earnings ratio that is more than twice that of some competitors, such as Salesforce. As a result, ServiceNow’s stock has declined 40% over the past year despite consistently strong results.
But on Wednesday, McDermott got yet more ammunition to wield against ServiceNow’s doubters.
The company reported fourth-quarter earnings that handily beat Wall Street’s top-line and bottom-line growth forecasts for a ninth consecutive quarter. Subscription revenue for the three months ended Dec. 31 was $3.47 billion—up 21% year over year—and non-GAAP earnings per share were $0.92. Both figures topped consensus estimates of roughly $3.42 billion and $0.87, respectively.
The company also raised its full-year 2026 guidance for subscription revenue, forecasting it will make between $15.53 billion to $15.57 billion. This implies growth of roughly 20% to 21%—well above the 18% to 18.5% that analysts had expected.
The company reported that Now Assist, its AI product suite, more than doubled its net new annual contract value in Q4 compared with the prior year.
ServiceNow’s shares were down 4% in after-hours trading following the announcement.
This may be evidence that McDermott’s message—don’t lump us in with other SaaS companies—is starting to land.
“We don’t live in the SaaS neighborhood,” McDermott told Fortune in an interview ahead of the earnings release. “Functional SaaS and feature SaaS will be automated by ServiceNow and the language models that are meeting us in the middle of our workflow, where business happens.” Functional SaaS companies are those that provide software to serve a broad work function, like Salesforce for sales and customer service, or Workday for human resources. Feature SaaS companies are those that take on narrow tasks, such as Zoom for meetings, or DropBox for file transfers.
