ServiceNow’s Q1 2025 earnings made headlines for all the right—and wrong—reasons.
The company reported strong revenue growth, showing why it’s still a major player in the digital workflow and AI transformation space. But a controversial earnings-per-share (EPS) figure sent mixed signals to investors, leaving many wondering what to make of it all.
Let’s break it down.
A Strong Start: 19% Subscription Revenue Growth
Today, April 23, 2025, ServiceNow released its Q1 2025 financial results after the market closed.
The headline number? A 19% year-over-year increase in subscription revenue—a key indicator for ServiceNow’s core business. This jump points to the company’s growing strength in AI and cloud-based digital transformation.
It’s a clear signal that customers are spending on platforms that help them automate workflows, manage operations, and shift toward a more modern, scalable model.
EPS Sparks Confusion
While the revenue growth was a win, the earnings-per-share number didn’t add up for everyone.
According to MarketBeat, the consensus EPS estimate was $3.78. The actual reported EPS? Just $2.31. That’s a big miss—about $1.47 short.
However, this figure is being debated. The discrepancy could be due to differences between GAAP and non-GAAP reporting, which is common in tech. But it still raised red flags.
TipRanks and Zacks had also forecasted EPS in the $3.78–$3.83 range, reinforcing the view that expectations weren’t met.
Investors React—Then Reconsider
At first, the market seemed to cheer the report.
On April 23, ServiceNow stock jumped in after-hours trading, hitting $898.509—up from its regular close of $874.945. Investors clearly liked what they saw in the revenue numbers.
But by the next day, sentiment shifted.
On April 24, the stock opened at $821.04 and closed at $812.7, a sharp drop from the post-earnings high. This suggests that as more analysts and traders reviewed the numbers, concerns about the EPS miss and valuation caught up.
The stock had traded between $707.25 and $898.50 over the past month, making this jump and pullback part of a larger pattern of volatility.
Analyst Views Remain Mixed
Analysts had high hopes going into the earnings call. Estimates on SeekingAlpha showed strong expectations, especially for normalized EPS. But post-earnings, the numbers fell short.
That said, many investors appear to have focused more on subscription revenue growth and strategic initiatives than on EPS alone.
What Drove the Growth?
The 19% revenue increase wasn’t just luck. It reflects a larger shift in ServiceNow’s strategy.
The company has leaned into AI-driven solutions and a consumption-based monetization model—both of which are key trends in the software-as-a-service (SaaS) world. It’s also working on expanding its global partnerships. One example: its deal with Microsoft Azure to bring a UAE-specific cloud solution, as mentioned in its earlier reports.
These moves are not only boosting revenue—they’re positioning ServiceNow as a go-to provider for enterprise tech transformation.
What to Watch Next
There’s still uncertainty. Foreign exchange headwinds and seasonality in U.S. federal business may affect future results. These issues were hinted at in the Q4 2024 financials.
Plus, with global economic forecasts cooling—like the IMF’s warning of a potential 2.8% global GDP slowdown—there’s added pressure on tech companies to deliver results that go beyond growth narratives.
The next key date for investors? May 5, 2025, when ServiceNow will host its Financial Analyst Day. Expect deeper insights into the company’s roadmap and how it plans to manage both opportunity and risk.
Final Thoughts
ServiceNow’s Q1 2025 results show a company that’s growing fast but facing questions. A 19% revenue increase is impressive. But the EPS confusion? Not so much.
Still, for long-term investors, the focus on AI, automation, and global partnerships might be enough to outweigh the short-term uncertainty. The market will be watching closely in the weeks ahead.
Author
