Why ServiceNow (NOW) could be the next big name in enterprise cloud

ServiceNow Inc (NYSE: NOW), a cloud solutions provider specialized in enterprise workflow automation, has been busy forging new partnerships and acquiring new businesses in a market where IT spending reached a record high this year, thanks to the virus-induced cloud migration. Currently, the company is focused on the long-term strategy laid down by CEO Bill McDermott who took the helm more than a year ago.

Stock Climbs

NOW’s shares registered their biggest one-day gain this week, coinciding with reports that the company’s technology partner 3CLogic struck a deal with a European client to provide solutions that include integration with ServiceNow’s IT Service Management Suite. The stock reached a new peak and is trading close to the $550 mark. Of late, there has been a marked increase in the adoption of 3CLogic’s cloud contact center solution that supports ServiceNow’s native digital offerings for building omnichannel platforms.

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The stock’s impressive past performance and bullish outlook show the rally might continue for the rest of the year and beyond, offering a unique buying opportunity that should not be missed. Moreover, the tech firm has delivered stronger-than-expected profit consistently in recent years.

Digital Adoption

The company owes most of its recent growth to the rapid adoption of digital capabilities by enterprises to tackle the disruption caused by the coronavirus. The record customer growth underscores ServiceNow’s relevance in the changing market scenario. Its unique digital workflow solutions are in high demand as businesses continue to operate on the remote-work system. That, combined with the growing need for workplace automation, bodes well for the company that keeps expanding its capabilities in that area through innovations like artificial intelligence.

Customer Growth

ServiceNow delivered outstanding performance across the board in the September-quarter, aided by a 25% jump in subscription billing as demand conditions remained favorable. The company entered the fourth quarter with more than 1,000 customers – including several federal agencies. In the third quarter, it generated $1.2 billion in revenues, which is up 30% from last year. Earnings climbed 22% annually to $1.21 per share.

“In our largest deal ever, the Department of Veteran Affairs is modernizing its enterprise service management and IT capabilities. They are using the Now Platform to have real-time visibility into the health, availability, and costs of their critical business services. This will deliver significant benefits to our heroic veterans. With ITSM Pro, VA will automate its manual workflows with AI and machine learning capabilities to free up employees to better serve veterans,” said McDermott during the latest earnings conference call.

M&A, Partnerships

Continuing its aggressive M&A strategy, ServiceNow last month agreed to acquire artificial intelligence company Element AI, to meet the growing demand for AI-powered solutions. The deal is expected to help the company expand its footprint in the Canadian market. Earlier, it had cliched tie-ups with some of the leading tech entities including Accenture (ACN) and Microsoft (MSFT).

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Read analysts/managements comments on quarterly earnings

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ServiceNow’s market value more than doubled in the past nine months and the stock hit a new peak this week. All along, it outperformed the market.