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ServiceNow (NOW)
NYSE:NOW
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ServiceNow
(NYSE:NOW)
72Outperform
Positive Factors
AI Capabilities
The acquisition of Moveworks is expected to enhance ServiceNow's AI capabilities, providing more perceptive, AI-driven enterprise search capabilities and front-end AI assistants for self-service automation.
Market Reach Expansion
Moveworks achieving FedRAMP Ready status should help NOW build upon public sector success, expanding its market reach.
Revenue Growth
The significant opportunity to cross-sell Moveworks' offering into NOW's ~8,400 customers, given the low ~3% overlap, suggests potential for revenue growth.
Negative Factors
Earnings Guidance
Investors have been concerned by a smaller than expected Q4 performance and a guidance for 2025 that seems weighted towards the second half, causing unease in the market.
Financial Investment
The acquisition of Moveworks is not cheap, as ServiceNow is paying more than 11x EV/R on the estimated 2026 revenue for the asset, indicating a significant financial investment.
Strategic Timing
The strategic value of the Moveworks deal may cause concern among investors due to its timing, coming right after earnings.
ServiceNow (NOW) vs. S&P 500 (SPY)
Market Cap
$149.53B
Dividend YieldN/A
Average Volume (3M)2.07M
Price to Earnings (P/E)105.5
Beta (1Y)1.36
Revenue Growth22.44%
EPS Growth-18.31%
CountryUS
Employees26,293
SectorTechnology
Sector Strength40
IndustrySoftware - Application
Share Statistics
EPS (TTM)6.84
Shares Outstanding207,199,390
10 Day Avg. Volume1,897,188
30 Day Avg. Volume2,067,062
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)15.52
Price to Cash Flow (P/CF)26.10
P/FCF Ratio31.10
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$1,135.73Price Target Upside57.38% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering33
ServiceNow Business Overview & Revenue Model
Company DescriptionServiceNow, Inc. is a leading American enterprise cloud computing company based in Santa Clara, California. It specializes in providing digital workflow solutions that streamline and automate business processes across various industries. ServiceNow's core products focus on IT service management (ITSM), IT operations management (ITOM), and IT business management (ITBM), along with expanding suites in customer service, human resources, and security operations. The company's solutions are designed to help organizations improve efficiency, reduce operational costs, and enhance overall user experiences.
How the Company Makes MoneyServiceNow generates revenue primarily through the sale of subscription-based licenses for its cloud-based platform and related applications. This subscription model provides a steady and predictable revenue stream as customers pay ongoing fees to access the platform's various services. Additionally, ServiceNow offers professional services, including consulting, implementation, and training, which contribute to its revenue. The company also forms strategic partnerships and alliances with other technology firms, which can enhance its product offerings and expand its market reach, thereby supporting its revenue growth. ServiceNow's focus on continuous innovation and expanding its product suites allows it to cater to a broad range of business needs, encouraging customer retention and attracting new clients, further boosting its revenue.
ServiceNow Financial Statement Overview
Summary
ServiceNow presents a compelling financial profile with strong growth in revenue and profitability, supported by a solid balance sheet and efficient cash flow management. The company’s strategic investments and operational efficiency have positioned it well for continued success. While there is room for improvement in EBIT margins, the overall financial health is strong, making ServiceNow a robust player in the software industry.Income Statement
ServiceNow has demonstrated strong revenue growth, with a consistent upward trend over the years. The gross profit margin remains high at approximately 79.2%, reflecting efficient cost management and pricing power. The net profit margin of 13% indicates solid profitability. However, the EBIT margin of 12.4% suggests potential room for operational efficiency improvements. Overall, the company shows robust financial health, supported by consistent revenue growth and strong profitability metrics.85
Very Positive
Balance Sheet
The balance sheet reflects a healthy financial position with a low debt-to-equity ratio of 0.08, indicating conservative use of leverage. The return on equity stands at 14.8%, showcasing effective utilization of shareholders' funds. With an equity ratio of 47.1%, the company maintains a balanced capital structure, providing stability. The cash reserves and short-term investments are substantial, enhancing liquidity.80
Positive
Cash Flow
ServiceNow's cash flow statement reveals a strong operating cash flow to net income ratio of 2.99, signifying efficient cash generation from operations. The free cash flow growth rate is impressive, highlighting the company's ability to reinvest and sustain growth. However, the free cash flow to net income ratio of 2.40 suggests some variability, potentially due to capital expenditures. Overall, the cash flow metrics indicate robust cash-generating capabilities and prudent financial management.78
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 10.98B | 8.97B | 7.25B | 5.90B | 4.52B | Gross Profit |
| 8.70B | 7.05B | 5.67B | 4.54B | 3.53B | EBIT |
| 1.36B | 762.00M | 355.00M | 257.00M | 198.86M | EBITDA |
| 2.33B | 1.59B | 768.00M | 257.00M | 452.93M | Net Income Common Stockholders |
| 1.43B | 1.73B | 325.00M | 230.00M | 119.00M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 5.76B | 4.88B | 4.28B | 3.30B | 3.09B | Total Assets |
| 20.38B | 17.39B | 13.30B | 10.80B | 8.72B | Total Debt |
| 789.00M | 2.28B | 2.23B | 2.21B | 2.14B | Net Debt |
| -1.51B | 387.00M | 762.00M | 486.00M | 458.37M | Total Liabilities |
| 10.77B | 9.76B | 8.27B | 7.10B | 5.88B | Stockholders Equity |
| 9.61B | 7.63B | 5.03B | 3.69B | 2.83B |
| Cash Flow | Free Cash Flow | |||
| 3.42B | 2.70B | 2.17B | 1.79B | 1.35B | Operating Cash Flow |
| 4.27B | 3.40B | 2.72B | 2.19B | 1.79B | Investing Cash Flow |
| -2.50B | -2.17B | -2.58B | -1.61B | -1.51B | Financing Cash Flow |
| -1.34B | -803.00M | -344.00M | -506.00M | 596.65M |
ServiceNow Technical Analysis
Negative
721.65
Price Trends
920.72
Negative
996.32
Negative
922.06
Negative
Market Momentum
-33.52
Negative
38.89
Neutral
30.48
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For NOW, the sentiment is Negative. The current price of 721.65 is below the 20-day moving average (MA) of 818.14, below the 50-day MA of 920.72, and below the 200-day MA of 922.06, indicating a bearish trend. The MACD of -33.52 indicates Negative momentum. The RSI at 38.89 is Neutral, neither overbought nor oversold. The STOCH value of 30.48 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for NOW.
ServiceNow Risk Analysis
ServiceNow disclosed 27 risk factors in its most recent earnings report. ServiceNow reported the most risks in the “Tech & Innovation” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
ServiceNow Peers Comparison
Overall Rating
UnderperformOutperform
Sector (57)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
81 Outperform | $2.68T | 28.98 | 34.29% | 0.88% | 15.04% | 12.38% | |
75 Outperform | $148.77B | 22.99 | 47.28% | ― | 10.65% | 44.84% | |
75 Outperform | $57.76B | 111.05 | 6.15% | ― | 16.94% | -62.24% | |
75 Outperform | $231.37B | 37.84 | 10.26% | 0.66% | 8.72% | 51.47% | |
72 Outperform | $149.53B | 105.50 | 16.53% | ― | 22.44% | -18.31% | |
67 Neutral | $359.70B | 30.14 | 108.79% | 1.25% | 6.23% | 12.37% | |
57 Neutral | $18.57B | 9.42 | -13.42% | 2.72% | 5.01% | -23.43% |
* Technology Sector Average
Performance Comparison
NOW
ServiceNow
721.65
-63.95
-8.14%
ADBE
Adobe
349.07
-135.21
-27.92%
MSFT
Microsoft
359.84
-61.53
-14.60%
ORCL
Oracle
128.27
5.25
4.27%
CRM
Salesforce
240.76
-59.69
-19.87%
WDAY
Workday
217.14
-51.47
-19.16%
ServiceNow Earnings Call Summary
Earnings Call Date: Jan 29, 2025 | % Change Since: -36.90% | Next Earnings Date: Apr 23, 2025
Earnings Call Sentiment Positive
The earnings call highlighted ServiceNow's strong performance and strategic growth in AI and partnerships, with robust financial metrics and positive future outlook. However, some challenges such as federal business seasonality, tax headwinds, and FX impacts were noted, but these are outweighed by the positive achievements and plans.Highlights
Record-Breaking Performance and Business Fundamentals
ServiceNow exceeded expectations for the fourth quarter, achieving subscription revenue growth of 21% and CRPO growth of 22%, with an operating margin of 29.5%. The company's RPO reached nearly $23 billion, and it holds $10 billion in cash and investments.
AI Innovation and Growth
ServiceNow saw stunning 150% quarter-over-quarter deal growth in Pro Plus AI offerings, with 1,000 customers on the Agentic AI journey. The Pro Plus SKUs maintained a greater than 30% price uplift over Pro, indicating strong value delivery.
Strategic Partnerships and Ecosystem Expansion
ServiceNow expanded collaborations with major partners like AWS, Google Cloud, and Microsoft to accelerate AI transformation and offer new solutions in the marketplace, enhancing the company's ecosystem.
Strong Customer Engagement and New Deals
ServiceNow closed 170 deals greater than $1 million in net new ACV in Q4, including the largest new logo deal in company history, reflecting strong customer trust and market penetration.
Positive Outlook and Future Growth Plans
ServiceNow is on track to achieve $15 billion plus revenue by 2026, with a bold ambition for $30 billion plus in the future, supported by a healthy balance sheet and strategic investments in AI and data solutions.
Lowlights
Federal Business Seasonality
The 2025 guidance reflects a more back-end weighted deal linearity in the U.S. federal business due to the change in the presidential administration, which could impact revenue recognition timing.
Incremental Cash Tax Headwind
ServiceNow anticipates an incremental cash tax headwind of 100 basis points year-over-year, affecting free cash flow margin expansion.
FX Headwinds Impact on Revenue
ServiceNow faces an incremental $175 million FX headwind for 2025, which impacts the subscription revenue growth outlook.
Company Guidance
During the call, ServiceNow provided robust guidance for the first quarter and full year 2025, emphasizing their strategic shift towards incorporating more consumption-based monetization for AI and data solutions. They projected subscription revenues between $12.635 billion and $12.675 billion, reflecting a 20% year-over-year growth at constant currency. The company highlighted their 29.5% operating margin for 2024 and projected a 30.5% operating margin for 2025, alongside a free cash flow margin of 32%. Notably, they reported a remaining performance obligation (RPO) of $22.3 billion, representing a 26% year-over-year growth. ServiceNow also discussed their strategic focus on AI, particularly their Pro Plus AI offerings, which saw 150% quarter-over-quarter deal growth, and their plans to leverage AI to enhance customer and employee workflows, driving significant efficiency gains and positioning themselves as a leader in enterprise AI solutions.ServiceNow Corporate Events
M&A TransactionsBusiness Operations and Strategy
ServiceNow to Acquire Moveworks for AI Expansion
Positive
Mar 10, 2025
On March 10, 2025, ServiceNow announced its agreement to acquire Moveworks, a move aimed at combining ServiceNow’s agentic AI and automation capabilities with Moveworks’ AI assistant and enterprise search technology. This acquisition is expected to enhance ServiceNow’s platform by accelerating enterprise AI adoption and innovation, particularly in CRM and employee engagement, while expanding its reach to millions of users and integrating seamlessly with existing systems.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.