ServiceNow earnings beats estimates, stock rallies

ServiceNow CEO Bill McDermott joins Yahoo Finance Live to discuss interest rates and growth amid the Fed's possible March rate hike.

Video Transcript

JULIE HYMAN: One of the tech stocks, though, it's doing quite well today, and then some, is ServiceNow. Brian Sozzi, you talked to the CEO of the company following its earnings report. And what, the stock's up, I think still in the double digits here this morning.

BRIAN SOZZI: Double digits, one of the hottest movers on the Yahoo Finance platform. Market cap now approaching $110 billion. And really, Julie, this was the first pure play software provider to report earnings for the quarter. I know we had those Microsoft results. But Microsoft obviously does many other things besides just software. So ServiceNow coming out here, beating on earnings, beating on the key metric of billings growth. Billings up 33%, as a lot of large customers, a lot of large corporations, reaching out to ServiceNow and wanting their workforce automation technology, as more people work from home during the pandemic.

And I caught up with CEO Bill McDermott here, asked him a little bit about the operating environment and if it is warranted that software stocks have sold off so much ahead of rate hikes.

BILL MCDERMOTT: For companies like ServiceNow, who are organic growth stories with very large cash positions, and that will continue to increase, that don't need to access the credit markets for their growth, are simply in a perfect position to create shareholder value. I actually think of it as a safe harbor.

BRIAN SOZZI: McDermott making the case here, Julie, that-- and look, he's seen a bunch of cycles here in terms of interest rates, in terms of software tech cycles. He was the longtime CEO of SAP. His contention is that he understands why the market has sold off, why it has in software stocks. But when you look at his business, at least where he sees it, things are still quite strong.

And interesting to me, he did say that billings growth has accelerated into the first quarter. So up 33% in the fourth quarter, looks to be even faster this quarter. And I think that's why you're seeing the stock really rip higher.

JULIE HYMAN: Yeah, I mean, it seems like investors here are getting the message, even if that doesn't mean the stock's not going to go down again with the rest of the group. But it is interesting that we now have Microsoft and ServiceNow sort of pushing back against the recent narrative in software stocks and the sell-off in software stocks. So we'll see what happens next.