According to IDC, worldwide spending on public cloud services is expected to grow at a 19.4% CAGR or almost six times the rate of overall IT spending growth. It is expected to grow from nearly $70 billion in 2015 to more than $141 billion in 2019.
ServiceNow (NYSE: NOW) recently reported its first quarter results that beat analyst estimates. First quarter revenues increased 44% over the year to $305.9 million, ahead of the market’s expectations of $301 million. Net loss was $333.3 million or $2.06 per share compared to loss of $58.1 million or $0.38 per share a year ago. Non-GAAP net income was $14.5 million or $0.09 per share, beating the Street estimate of $0.07 per share. Sales and marketing expenses increased 44% to $158.6 million and R&D spend increased 32% to $65.9 million. Billings grew 41% to $376.7 million.
By segment, first quarter revenues from subscriptions grew 48.7% over the year to $267.4 million and professional services revenues increased 20% to $38.45 million. The company now has 249 customers with Average Contract Value over $1 million, a net increase of 19 in the quarter.
By region, revenue from North America was $211 million, EMEA was $74 million, and Asia-Pacific and other was $21 million.
For the second quarter, ServiceNow expects revenues between $332 million and $335 million or a growth of 37% to 39% and billings between $370 million and $375 million. Analysts expect revenue of $333.8 million.
ServiceNow expects to end 2016 with revenues between $1.355 billion and $1.38 billion or a growth of 35% to 37% and billings to grow around 33% to $1.6 billion, just in line with analyst estimates. Analysts expect ServiceNow to end 2016 with EPS of $0.63 on revenue of $1.37 billion.
End of Legal Tussles for ServiceNow
ServiceNow was involved in patent litigation tussles with BMC and HP. In a welcome development, ServiceNow has resolved these disputes. ServiceNow announced last month: “it entered into a covenant not to sue for patent infringement with BMC for a term and took aggregate charges of $270 million for litigation settlement expenses related to its litigation associated with BMC and Hewlett Packard Enterprise.” ServiceNow was accused of infringing on seven BMC patents and BMC had received a favorable ruling that gave it an edge over ServiceNow in the proceedings.
Strategic acquisitions are a better bet for ServiceNow right now. Early April, ServiceNow acquired cloud management provider ITapp for an undisclosed sum. ITapp is currently used by cloud platforms like VMware, Microsoft Azure, Amazon Web Services, OpenStack, and Citrix XenServer. The ITapp acquisition is expected to strengthen ServiceNow’s cloud platform management portfolio. ITapp is expected to be integrated into the ServiceNow platform by 2017.
The cloud management space is seeing some consolidation. Earlier, Cisco announced the acquisition of CliQr Technologies, an application-centric hybrid cloud management software provider.
Last quarter saw the ServiceNow stock plunge even after beating analyst expectations and crossing $1 billion in annual revenue. This quarter however saw it regaining its market value. Its stock is currently trading at $67.28 with a market cap of $10.96 billion. It hit a 52-week low of $46 in early February and its 52-week high of $91.28 in December 2015.