Stock Bulls Rejoice as ServiceNow (NOW) Selloff ‘Looks Overdone,’ Says Analyst

ServiceNow (NOW) shares have fallen more than 40% over the past 12 months, sharply lagging the broader market, as the S&P 500 (SPX) is up roughly 14% over the same period. With expectations reset ahead of earnings and the company continuing to execute at a high level, I view the current environment as an attractive entry point and remain bullish on the stock.

The company reports Q4 2025 results on January 28 after the close, and I think the setup leans favorable. If management provides the clarity investors want—especially after an unusually active M&A stretch—there’s room for upside both on the earnings print and in the forward outlook.

A Track Record of Consistent Execution

ServiceNow remains one of the most consistent large-cap software operators in the market. Over the past eight quarters, the company has beaten both EPS and revenue expectations in every single quarter, a rare achievement at this scale. Despite that consistency, estimates have been trimmed modestly into Q4, leaving room for another upside surprise.

Consensus currently calls for EPS of $0.88 on revenue of $3.53 billion. Meanwhile, EPS expectations have been nudged 3.2% lower over the past year, while revenue estimates are down less than 1%, reflecting more caution around margins and near-term spending rather than demand weakness. I expect ServiceNow to at least meet, and likely slightly exceed, both figures.

A Key Source of Potential Upside

One of the most underappreciated aspects of the Q4 setup is the current remaining performance obligations (CRPO). Consensus implies a $1.2 billion sequential increase in Q4 CRPO, only marginally above the historical seasonal average. Given recent industry checks, improving enterprise IT budgets, and a favorable FX backdrop, this bar looks achievable—and beatable.

Looking into Q1 2026, Street estimates imply a record sequential decline in CRPO, which strikes me as overly pessimistic. Seasonally, Q1 CRPO declines are typically modest, and this year, there are incremental tailwinds that are not fully reflected in consensus, including the contribution from Moveworks.

Based on my estimates, Moveworks alone could contribute roughly $70 million in Q1 revenue, or about 2% of total revenue, supporting organic growth near 19%. When combined with strong core execution, this creates a credible path to in-line or modestly upside CRPO guidance for Q1—an outcome that could meaningfully improve investor sentiment.

AI Momentum and Sales Execution Remain Intact

Beyond the quarterly mechanics, my constructive view is rooted in ServiceNow’s strategic positioning. The company continues to benefit from accelerating enterprise adoption of AI-powered workflows, particularly in IT operations, employee experience, security, and automation use cases. Recent industry surveys point to healthy deal sizes, expanding account activity, and growing traction for AI-enabled products across multiple verticals.

Importantly, ServiceNow’s AI strategy is not a standalone bet—it is deeply embedded within its workflow platform. This integration approach allows customers to adopt AI incrementally, driving expansion rather than replacement spending. That dynamic supports durable subscription growth, stable sales productivity, and strong renewal economics.

M&A Becomes a Short-Term Headwind

One reason for the stock’s underperformance has been investor unease around ServiceNow’s aggressive M&A activity in late 2025. December alone saw two major transactions announced, with a combined value approaching $10 billion. The largest was the planned acquisition of Armis, a fast-growing security platform with over $340 million in ARR and growth exceeding 50%.

While investors often penalize software names embarking on large acquisition sprees, I view these deals as strategically sound. They meaningfully expand ServiceNow’s footprint in security, identity, and AI-driven automation—areas that are increasingly critical as enterprises deploy agentic AI at scale. Importantly, these acquisitions also reduce near-term guidance risk by providing incremental revenue support, while preserving headroom for future raises.

That said, ServiceNow has clearly become a “show-me” stock again. Investors will want greater transparency around inorganic contributions, integration timelines, and margin impact before re-rating the shares meaningfully higher. Q4 earnings and early 2026 guidance represent the first opportunity to reset that narrative.

A Durable Long-Term Compounder

Stepping back, my confidence in ServiceNow’s long-term story remains unchanged. The company’s technology differentiation, deep roots in enterprise IT, success expanding into new product areas like AI and security, rapid product velocity, and strong partnerships with global system integrators all reinforce its ability to take share in a $300 billion underpenetrated TAM.

At scale, ServiceNow continues to demonstrate strong unit economics, high recurring revenue visibility, and expanding cash flow margins. Over the next several years, I expect subscription growth to remain in the high-teens, sales productivity to stay resilient, and free cash flow margins to expand as bookings growth reaccelerates and AI-driven expansion deepens across the installed base.

Valuation Reset Leaves Narrow Premium

ServiceNow does trade at a premium to peers on traditional multiples, but context matters. The stock trades at a P/E of 38.7x, compared with a sector median of 24.8x, yet meaningfully below its five-year average of 75.7x. Similarly, EV/EBITDA stands at 50.5, versus a sector median of 19.2x, but is still well below its five-year average of 123.6x. 

In other words, while the market continues to price in quality and growth, the multiple compression from historical levels suggests expectations have become more reasonable.

To estimate intrinsic value, I averaged the outputs of 12 valuation methodologies, including P/E multiples, EV/Revenue multiples, and a five-year DCF with a growth exit. This framework yields a fair value of approximately $165 per share, implying over 28% upside from the current price.

Is ServiceNow a Good Share to Buy?

Wall Street remains decisively bullish on ServiceNow. According to Wall Street analysts tracked by TipRanks, the stock carries a consensus Strong Buy rating, supported by 30 Buy ratings, 2 Hold, and zero Sell ratings.

Among 32 Wall Street analysts providing stock price targets, the average target stands at $212.45, implying almost 60% upside over the next 12 months. This level of optimism underscores broad confidence in ServiceNow’s long-term growth trajectory and execution.

See more NOW analyst ratings

NOW Bulls Out in Force Ahead of Earnings

With expectations reset and fundamentals intact, I see a favorable risk-reward setup for ServiceNow heading into Q4 earnings. A solid print, upside to CRPO, and clearer messaging around AI and recent acquisitions could act as catalysts to re-anchor investor confidence.

For these reasons, I remain bullish on ServiceNow and view current levels as an attractive opportunity ahead of earnings.