ServiceNow Lowers Revenue Forecast Due to Strong Dollar Impact
Santa Clara, Thursday, 30 January 2025.
ServiceNow has adjusted its 2025 subscription revenue forecast, citing a $175 million impact from strong U.S. dollar fluctuations, leading to an 8% drop in after-hours share trading.
Revenue Forecast Details
ServiceNow (NYSE: NOW) projects its 2025 annual subscription revenue to be between $12.64 billion and $12.68 billion [1], falling short of analysts’ expectations of $12.83 billion [1]. The company’s first-quarter subscription revenue forecast for 2025 is set between $2.995 billion and $3 billion [1], below the market estimate of $3.04 billion [1]. This adjustment comes after ServiceNow reported fourth-quarter 2024 earnings of $3.72 per share on January 28, 2025 [2].
Currency Impact and Business Model Shift
The strength of the U.S. dollar is expected to create a significant currency headwind of approximately $175 million for the company’s 2025 subscription revenue [2][3]. Additionally, ServiceNow is undertaking a strategic shift in its business model, expanding its consumption-based monetization approach across its artificial intelligence and data products [1]. This transition is particularly focused on AI services, where clients will pay based on actual usage rather than fixed subscriptions [2].
Recent Performance and AI Innovation
Despite the revised forecast, ServiceNow demonstrated solid performance in Q4 2024, with total revenues reaching $2.957 billion, representing a 21% year-over-year growth [3]. The company has made significant strides in AI implementation, launching the AI Agent Orchestrator [1], designed to coordinate automated task management. Nearly 500 customers now have over $5 million in annual contract value, showing a 21% year-over-year growth [3].
Market Response and Future Outlook
The market reacted strongly to the revised guidance, with ServiceNow’s stock dropping over 9% to $1,037 on January 30, 2025 [2]. However, analysts suggest that the conservative guidance might be more related to prudent expectations for AI monetization ramp-up rather than fundamental business concerns [2]. The company’s federal business is expected to experience slower growth in the first half of 2025, which management attributes to seasonal patterns related to the change in presidential administration [1].