ServiceNow leans on customer quality, not volume, as market shifts


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Dive Brief:

  • ServiceNow is crediting a focus on quality rather than quantity of customers for the company’s rather positive quarter, despite friction in the tech industry and global economic headwinds.
  • “When we started to sense noise in the macro early in 2022, we shifted immediately to a conservative cost-management posture in running the company,” Bill McDermott, chairman, CEO and president of ServiceNow, said last week, according to a SeekingAlpha transcript. “This allowed us to focus on execution with our team rather than look to workforce actions to leverage.”
  • The company reported a 98% renewal rate and more than 120 deals valued at greater than $1 million in Q4 for the period ending Dec. 31. Subscription revenues reached almost $1.9 billion, growing 22% year-over-year.

Dive Insight:

ServiceNow has emerged as a bright spot in the tech industry after a volatile quarter for vendors. January earnings reports were marked by layoffs, realignment of priorities with business operations and customers scrutinizing spending, as the impacts of inflation and anticipation of a recession linger.

“We’ve really evolved our focus away from the number and the volume of new customers to landing the right new customers that can land with us and expand with us over time,” Gina Mastantuono, CFO at ServiceNow, said during the earnings call.

The company grew net new annual contract value 100% year-over-year in retail, hospitality, transportation and logistics. Additionally, the company reported 100% increases in net new annual contract value deals valued at $5 million and $10 million, securing two of its top five largest deals ever.

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