4. ServiceNow Inc. (NYSE:NOW)
Market Capitalization as of September 13: $181.62 billion
Number of Hedge Fund Holders: 97
ServiceNow Inc. (NYSE:NOW) is a software company that operates a cloud computing platform to help companies manage digital workflows for enterprise operations. Its products are designed to improve efficiency, reduce costs, and enhance customer experience, and are widely used by businesses of all sizes, from small enterprises to large corporations.
The company impressed the market with a strong second quarter. The total revenue generated was up 22.19% year-over-year and reached $2.63 billion. Revenue generated from new Pro Plus edition contracts, which feature GenAI capabilities, doubled from the previous quarter. Subscription revenue increased by 23% year-over-year.
The company experienced a 26% year-over-year increase in deals exceeding $1 million, securing 6 net new logos. A federal customer that surpassed the $100 million annual contract value (ACV) threshold, and it also signed its third-largest net new ACV deal ever.
All workflow segments were represented in the top 20 deals, with Security, Risk, IT Service Management (ITSM), and IT Operations Management (ITOM) each having 8-10 deals valued over $1 million. Specifically, Customer Workflows had 14 deals, Employee Workflows had 12, and Creator Workflows had 10 deals exceeding $1 million. It secured 11 new contracts, each valued at over $1 million.
Analysts believe that the company’s strength lies in its NOW platform, which simplifies the integration of various tools and software, including Salesforce, Microsoft, and SAP. ServiceNow Inc. (NYSE:NOW) offers a portfolio of 168 digital workflow solutions, with a 98% renewal rate.
The company is positioned for impressive growth, driven by its strong Q2 performance and innovative AI capabilities. 97 hedge funds are long NOW, with the highest stake at $1.26 billion by Fisher Asset Management.
Lakehouse Global Growth Fund stated the following regarding ServiceNow, Inc. (NYSE:NOW) in its April 2024 investor letter:
“US-based software company, ServiceNow, Inc. (NYSE:NOW), provided another strong result, continuing its long and consistent track record of 20%-plus revenue growth combined with healthy profitability. Subscription revenues grew 25% year-on-year to $2.5 billion and free cash flow grew 47% year-on-year to $1.2 billion. The company’s core operating metrics were also impressive with remaining performance obligations growing 26% year-on-year to $17.7 billion (i.e. roughly 2x 2023 revenue) and renewal rates holding steady at 98%. Performance was evenly spread across segments, products, and geographies, with notable strength in the US federal government. The company now boasts 1,933 customers generating in excess of $1 million in Annual Contract Value (ACV), which is pleasing to see as it implies multiple solutions are involved and that the company’s platform model is increasingly resonating with customers. In our view, ServiceNow is one the highest quality software businesses globally as the combination of consistent growth at scale, robust free cash flow generation and a large addressable market make it a compelling opportunity.”
