ServiceNow: Strong Execution and AI Momentum Offset M&A Concerns, Creating Attractive Risk/Reward

In a report released yesterday, Derrick Wood from TD Cowen maintained a Buy rating on ServiceNow, with a price target of $200.00.

Derrick Wood has given his Buy rating due to a combination of factors that, in his view, still position ServiceNow as a top‑tier software name despite recent concerns. He points to consistently strong operational execution, highlighted by better‑than‑expected contract backlog growth and robust federal segment momentum, as well as management raising its 2025 outlook while AI‑related annual contract value is tracking ahead of ambitious targets. Feedback from key global systems integrator partners also indicates solid upside, with these partners beating their own growth goals, seeing strong adoption of premium offerings and AI features like NOW Assist, and planning for accelerated growth into 2026.

At the same time, Wood acknowledges the market’s worries around ServiceNow’s aggressive M&A pivot, including the sizeable Armis acquisition and roughly $12 billion deployed for a relatively modest level of recurring revenue, which alters the company’s historically clean organic narrative. However, he interprets these deals as strategically important to broaden ServiceNow’s platform in the current AI cycle and believes the company remains well placed competitively, supported by survey data showing strong customer spending intentions in workflow automation, IT service management, and AI budgets directed toward ServiceNow. With the stock down sharply and now trading at a lower free‑cash‑flow multiple, he sees the risk/reward as attractive, expects another solid beat on remaining performance obligations, and therefore maintains a Buy rating even as he notes investors may require more guidance through this transition.

In another report released yesterday, TipRanks – PerPlexity also reiterated a Buy rating on the stock with a $144.00 price target.