20250424-招银国际-1Q25_cRPO_beats_guidance_despite_macrouncertainty__AI_momentum_continues_5页_1mb

ServiceNow (NOW US) Summary

Core Content

ServiceNow reported its 1Q25 financial results, showing strong performance despite macroeconomic uncertainties. The company's total revenue increased by 19% year-over-year (YoY) to US$3.09 billion, matching the Bloomberg consensus estimate. Non-GAAP operating income rose by 20% YoY to US$953 million, exceeding the consensus by 3%, attributed to internal AI efficiency gains. The company's cRPO (current recurring revenue) reached US$10.3 billion, beating guidance by 150 basis points (bps), driven by robust growth across workflows and industries.

Main Points

• Subscription Revenue Growth: Subscription revenue grew by 20% YoY to US$3.01 billion in constant currency.
• cRPO Growth: cRPO increased by 22% YoY to US$10.3 billion, while RPO rose to US$22.1 billion, up 25% YoY.
• Workflow Performance: All workflows delivered solid growth, with CRM, Industry & Core Business Workflows contributing 34% net new ACV in 1Q25 (up from 30% in 1Q24).
• Industry Growth: Manufacturing, healthcare, and public sector saw net new ACV growth of over 100%, 70%, and 30% YoY respectively.
• AI Momentum: AI products showed strong growth, with Pro Plus deals more than quadrupling YoY, and ITOM Plus/SecOps Plus and RaptorDB experiencing significant net new ACV increases.
• Acquisitions: ServiceNow plans to acquire Moveworks and Logik.ai to enhance its AI capabilities.
• Margin Expansion: Non-GAAP OPM improved by 50 basis points (bps) YoY to 30.9%, ahead of guidance, due to opex efficiencies from AI deployment.
• Management Guidance: For FY25, the company raised subscription revenue guidance by US$5 million to US$12.64–12.68 billion (+18.5–19.0% YoY), but in a conservative manner due to macro uncertainty in the second half of FY25.
• Valuation Update: The target price was lowered to US$1,115 based on a 52x FY25E EV/EBITDA multiple, reflecting a decline in sector valuations.
• Financial Forecast:
  • Revenue is forecasted to grow at 18.5–16.2% YoY from FY25 to FY27.
  • Gross margin is expected to rise from 79.3% in FY25E to 80.0% in FY27E.
  • Adjusted net profit is projected to increase from US$3.5 billion in FY25E to US$4.87 billion in FY27E.
  • Non-GAAP EPS is forecasted to grow from US$16.8 in FY25E to US$23.3 in FY27E.

Key Financial Metrics

Valuation

• Target Price: US$1,115, down from US$1,220.
• EV/EBITDA Multiple: 52x for FY25E, which is a premium to the sector average of 25x.
• Valuation Table:
  | Metric | FY25E (US$ mn) | FY26E (US$ mn) | FY27E (US$ mn) |
  |-------------------------|----------------|----------------|----------------|
  | Adjusted EBITDA | 4,434 | 5,161 | 6,178 |
  | Target EV | 230,589 | 287,610 | 341,150 |
  | Valuation per share (US$) | 1,115.0 | 1,220.0 | 1,310.0 |

Analyst Rating

• CMBIGM Rating: BUY
• Reasoning: Based on strong earnings growth outlook over 2025–2027, despite the conservative guidance for FY25 due to macro uncertainty.

Stock Performance

• Current Price: US$812.70
• Market Cap: US$169,041.6 million
• Share Performance:

  Period	Absolute (%)	Relative (%)
  1-mth	-4.4	4.1
  3-mth	-27.8	-13.7
  6-mth	-15.0	-6.4

Shareholding Structure

• BlackRock: 8.8%
• The Vanguard Group: 8.7%

Analysts

• Saiyi HE, CFA: (852) 3916 1739 | hesaiyi@cmbi.com.hk
• Wentao LU, CFA: luwentao@cmbi.com.hk
• Ye TAO, CFA: franktao@cmbi.com.hk
• Joanna Ma: (852) 3761 8838 | joannama@cmbi.com.hk

Disclaimer

• The report is for informational purposes only and not tailored to individual investors.
• Past performance is not indicative of future results.
• CMBIGM is not a registered broker-dealer in the U.S. or Singapore, and does not provide investment advice.
• This report is not an offer to buy or sell any security and is subject to change without notice.