Why ServiceNow is planning a stock split - and everything else to know from earnings

ServiceNow's stock price has hovered near $1,000, and CEO Bill McDermott says a lower price will be more accessible to employees and investors interested in AI plays ServiceNow CEO Bill McDermott said he's deploying AI within his company so employees "don't have to do soul-crushing work anymore." ServiceNow Inc. plans a 5-for-1 stock split, which its CEO said is aimed at making the share price more accessible for employees and investors. The stock closed Wednesday at $912, which was the 14th-highest price among S&P 500 SPX components. While high stock prices aren't the investment barrier they once were, thanks to the advent of fractional trading, Chief Executive Bill McDermott said a lower price could help ServiceNow (NOW) better appeal to investors who've heard about its artificial-intelligence work. There have been far fewer stock splits among S&P 500 components this year than there were last year, with three taking effect so far in 2025 versus 18 in 2024, according to Dow Jones Market Data. But given the "new world order of things" with the software company's AI momentum, "we know that there are consumer investors, not just large institutional investors, that want a piece of our company, and we want to make it easy for them to be involved," McDermott told MarketWatch. "I think a lot of people are looking at the headlines today saying 'wow, I'm seeing layoffs, I'm hearing CEOs saying they're not getting their money out of their proof of concepts, and then ServiceNow is hiring,'" he said. "'They're beating and raising. They're splitting their stock.'" The split comes after a nearly 14% year-to-date decline for ServiceNow shares, reflecting pressure in the software sector. ServiceNow's stock rose 3.7% in the extended session Wednesday. McDermott said that ServiceNow has been deploying AI within its own business so that employees "don't have to do soul-crushing work anymore." The company is also "retooling" workers and hiring others, and said it wants to do the same for customers. The business is seeing momentum, generating $3.3 billion in subscription revenue for the third quarter, up 20.5% on a constant-currency basis and ahead of the $3.27 billion FactSet consensus. Current remaining performance obligations, a measure of contractual business expected to convert into revenue within 12 months, was up 20.5% as well to $11.35 billion, while analysts had been expecting $11.09 billion. ServiceNow boosted its full-year forecast on subscription revenue by more at the midpoint than the amount of the third-quarter beat. The company now models $12.835 billion to $12.845 billion, whereas its prior forecast was for $12.775 billion to $12.795 billion. McDermott said ServiceNow's AI tools are resonating because they integrate well with the big cloud providers, large language models and data sources, functioning as a "control tower" of sorts for business initiatives. As a result, ServiceNow has been able to realize more pricing power through its pricing model, which combines a traditional subscription-based component with a consumption-based one for AI-powered services. McDermott cited the popularity of the company's Pro Plus tier as a driver of this quarter's revenue beat. Customers get the predictability of per-seat pricing as well as access to AI tokens, which are renewable and will lead to future revenue growth, McDermott said. While there have been some concerns across the software industry that AI will lead to fewer software subscriptions due to increased efficiency, McDermott told MarketWatch that total licenses sold have only continued to grow. As customers "derive value from well-understood business cases, they'll continue to invest in more innovation as we pour on the R&D," McDermott said. -Emily Bary -Christine Ji This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

Why ServiceNow is planning a stock split - and everything else to know from earnings

Інші новини компанії