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ServiceNow (NOW)
NYSE:NOW

ServiceNow (NOW) AI Stock Analysis

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ServiceNow

(NYSE:NOW)

Rating:75Outperform
Price Target:
ServiceNow showcases strong financial performance with remarkable revenue and cash flow growth. The technical indicators suggest a positive trend, although the high valuation poses a risk. The earnings call highlights robust growth prospects with a strategic AI focus, while the Moveworks acquisition further positions the company for future innovation and market expansion. Despite macroeconomic uncertainties, the company remains fundamentally sound and well-positioned for continued success.
Positive Factors
AI Revenue Growth
A new target for AI revenue to reach $1B in ACV by the end of 2026 was announced, which seems attainable with M&A and customer upgrades.
Customer Adoption
Now Assist is continuing to scale rapidly, with significant growth in its customer base and usage, indicating increasing adoption and value.
Pricing Strategy
Sustain a 30%+ realized price lift, indicating strong pricing power.
Negative Factors
Analyst Conference
There was less enthusiasm compared to the last analyst day due to fewer long-term updates.
Government Spending
State and local governments are experiencing a spending slowdown, primarily due to budget rationalizations and the ripple effects of federal funding impacts.
Macroeconomic Concerns
Partners at the expo hall are cautiously optimistic, noting minimal pipeline impact despite macroeconomic scrutiny and continued interest in Pro Plus SKUs for HRSD and CSM use-cases.

ServiceNow (NOW) vs. SPDR S&P 500 ETF (SPY)

ServiceNow Business Overview & Revenue Model

Company DescriptionServiceNow, Inc. is a leading enterprise cloud computing platform provider that specializes in digital workflow solutions. The company operates within the IT services and enterprise software sectors, offering a range of products designed to improve IT service management (ITSM), IT operations management (ITOM), and business process automation. ServiceNow's core offerings enable organizations to enhance productivity, streamline operations, and drive digital transformation across IT, employee, and customer workflows.
How the Company Makes MoneyServiceNow generates revenue primarily through the sale of subscriptions to its cloud-based platform and related professional services. The company's subscription model allows customers to access its suite of software applications, which are typically sold on multi-year contracts. Key revenue streams include IT service management, IT operations management, and customer and employee workflow solutions. ServiceNow also earns from professional services, such as consulting and training, which help clients integrate and optimize the platform for their specific needs. Significant partnerships with major technology firms and systems integrators further enhance ServiceNow's market reach and contribute to its revenue growth.

ServiceNow Key Performance Indicators (KPIs)

Any
Any
Large Customers
Large Customers
Tracks the number of significant clients, indicating ServiceNow's ability to attract and retain major accounts, which can drive substantial revenue and stability.
Chart InsightsServiceNow's large customer base has consistently expanded, surpassing 2,000 by the end of 2024, reflecting strong market penetration and customer trust. The latest earnings call underscores this growth, highlighting a record-breaking performance with significant deal closures and strategic AI advancements. The company's focus on AI, with a 150% growth in Pro Plus AI offerings, positions it well for future expansion. Despite challenges like federal business seasonality and FX headwinds, ServiceNow's strategic partnerships and robust financial outlook suggest continued momentum in acquiring large customers.
Data provided by:Main Street Data

ServiceNow Earnings Call Summary

Earnings Call Date:Apr 23, 2025
(Q1-2025)
|
% Change Since: 24.61%|
Next Earnings Date:Jul 23, 2025
Earnings Call Sentiment Positive
The earnings call highlighted strong financial performance with significant growth in subscription revenue, CRPO, and margins. The company also showed impressive gains in AI adoption and public sector engagements. However, macroeconomic and geopolitical uncertainties were acknowledged as potential risks. The sentiment is influenced positively by the raised guidance and robust growth metrics.
Q1-2025 Updates
Positive Updates
Subscription Revenue Growth
Subscription revenue grew 20% year over year in constant currency, slightly above the high end of our guidance range.
CRPO Growth
Current remaining performance obligations (CRPO) grew 22% year over year in constant currency, 150 basis points above guidance.
Operating and Free Cash Flow Margins
Operating margin was 31%, about 100 basis points above guidance, and free cash flow margin was 48%.
Large Deals Increase
Closed 72 deals greater than a million in net new ACV, up from 63 a year ago.
AI Adoption and Innovation
Pro Plus deals more than quadrupled year over year, with strong growth in AI-driven products like Now Assist.
Public Sector Growth
US public sector grew over 30% year over year with significant new deals.
Manufacturing and Healthcare Growth
Manufacturing net new ACV grew over 100% year over year, and healthcare and life sciences grew over 70%.
Strong Balance Sheet
Ended the quarter with $10.9 billion in cash and investments.
Raised Guidance
Raised the subscription revenue guidance for full year 2025.
Negative Updates
Macro and Geopolitical Uncertainty
Acknowledgement of potential risks from the current geopolitical environment affecting future performance.
Federal Market Challenges
Uncertain environment with federal government budgets impacting short-term expectations.
Company Guidance
During the ServiceNow Q1 2025 earnings call, the company reported robust financial results and provided optimistic guidance for the remainder of the year. Subscription revenue grew by 20% year-over-year in constant currency, exceeding the high end of their guidance, while the current remaining performance obligation (CRPO) increased by 22% year-over-year, 150 basis points above expectations. Operating margin was 31%, with free cash flow margin reaching 48%, surpassing the rule of 50. The company secured 72 deals worth over a million in net new annual contract value (ACV), including 9 deals over five million. The number of customers billing more than five million in ACV rose to over 500, up from 425 the previous year. ServiceNow raised its full-year subscription revenue guidance to $12.64-$12.68 billion, representing 18.5% to 19% year-over-year growth. For Q2, the company anticipates subscription revenues between $3.030 billion and $3.035 billion, with a CRPO growth of 19.5% and an operating margin of 27%. The company emphasized its strategic focus on AI and highlighted the successful integration of AI into its operations, demonstrating significant operational efficiencies and positioning ServiceNow as a leader in the enterprise AI market.

ServiceNow Financial Statement Overview

Summary
ServiceNow is experiencing robust revenue growth and maintains strong profitability metrics. Its balance sheet highlights a prudent leverage strategy with a low debt-to-equity ratio, and solid cash flow generation supports ongoing investments and shareholder returns.
Income Statement
85
Very Positive
ServiceNow has demonstrated strong revenue growth with a TTM revenue increase of approximately 4.41%, following consistent annual growth over recent years. The company maintains robust profitability, evidenced by a gross profit margin of 78.96% and a net profit margin of 13.41% as of the latest TTM data. The EBIT and EBITDA margins are also solid at 12.93% and 18.01%, respectively. This reflects efficient operations and strong pricing power in the software application sector.
Balance Sheet
78
Positive
The balance sheet of ServiceNow indicates a healthy financial position, with a low debt-to-equity ratio of 0.09, suggesting prudent leverage management. The return on equity (ROE) is a strong 15.17%, highlighting effective use of shareholder funds. The equity ratio stands at 48.36%, indicating a balanced capital structure with substantial equity backing.
Cash Flow
82
Very Positive
ServiceNow's cash flow metrics exhibit positive trends. The operating cash flow to net income ratio is 2.99, indicating strong cash generation from operations relative to net income. Free cash flow has grown consistently, with a notable TTM free cash flow of $3,672 million. The free cash flow to net income ratio is 2.39, showing efficient conversion of earnings to cash. This strong cash flow performance supports ongoing investments and shareholder returns.
Breakdown
TTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income StatementTotal Revenue
11.47B10.98B8.97B7.25B5.90B4.52B
Gross Profit
9.05B8.70B7.05B5.67B4.54B3.53B
EBIT
1.48B1.36B762.00M355.00M257.00M198.86M
EBITDA
2.34B2.23B1.59B768.00M257.00M452.93M
Net Income Common Stockholders
1.54B1.43B1.73B325.00M230.00M119.00M
Balance SheetCash, Cash Equivalents and Short-Term Investments
6.60B5.76B4.88B4.28B3.30B3.09B
Total Assets
20.97B20.38B17.39B13.30B10.80B8.72B
Total Debt
2.40B2.28B2.28B2.23B2.21B2.14B
Net Debt
-970.00M-26.00M387.00M762.00M486.00M458.37M
Total Liabilities
10.83B10.77B9.76B8.27B7.10B5.88B
Stockholders Equity
10.14B9.61B7.63B5.03B3.69B2.83B
Cash FlowFree Cash Flow
3.67B3.42B2.70B2.17B1.79B1.35B
Operating Cash Flow
4.60B4.27B3.40B2.72B2.19B1.79B
Investing Cash Flow
-1.80B-2.50B-2.17B-2.58B-1.61B-1.51B
Financing Cash Flow
-1.48B-1.34B-803.00M-344.00M-506.00M596.65M

ServiceNow Technical Analysis

Technical Analysis Sentiment
Positive
Last Price1012.74
Price Trends
50DMA
910.30
Positive
100DMA
939.09
Positive
200DMA
954.01
Positive
Market Momentum
MACD
24.93
Positive
RSI
59.83
Neutral
STOCH
40.20
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For NOW, the sentiment is Positive. The current price of 1012.74 is below the 20-day moving average (MA) of 1014.28, above the 50-day MA of 910.30, and above the 200-day MA of 954.01, indicating a neutral trend. The MACD of 24.93 indicates Positive momentum. The RSI at 59.83 is Neutral, neither overbought nor oversold. The STOCH value of 40.20 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive 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 3 New Risks
1.
We may not be able to protect or enforce our intellectual property rights. Q4, 2024
2.
Incorporating AI technology into our offerings may result in operational, legal, regulatory, ethical and other challenges. Q4, 2024
3.
Our industry and business may be harmed by global economic and political conditions. Q4, 2024

ServiceNow Peers Comparison

Overall Rating
UnderperformOutperform
Sector (62)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
NONOW
75
Outperform
$209.66B137.2216.86%21.01%-20.93%
75
Outperform
$67.05B137.765.70%15.38%-67.58%
74
Outperform
$69.79B-40.16%27.50%-49.96%
73
Outperform
$40.66B257.066.48%25.54%40.02%
CRCRM
72
Outperform
$252.83B41.3710.31%0.61%7.97%14.85%
70
Outperform
$54.13B-34.33%19.12%-161.42%
62
Neutral
$11.70B10.39-7.10%2.92%7.45%-8.42%
* Technology Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
NOW
ServiceNow
1,012.74
309.58
44.03%
CRM
Salesforce
263.17
21.82
9.04%
WDAY
Workday
249.48
34.53
16.06%
TEAM
Atlassian
210.92
47.46
29.03%
DDOG
Datadog
119.70
10.08
9.20%
SNOW
Snowflake
209.60
77.56
58.74%

ServiceNow Corporate Events

M&A TransactionsRegulatory Filings and Compliance
ServiceNow Files Prospectus for Share Resale Post-Acquisition
Neutral
May 30, 2025

On May 30, 2025, ServiceNow, Inc. filed a prospectus supplement with the SEC related to the resale of shares by certain stockholders. These shares were acquired through ServiceNow’s acquisition of Logik.io Inc., indicating a strategic move to integrate and expand its technological capabilities.

The most recent analyst rating on (NOW) stock is a Hold with a $960.00 price target. To see the full list of analyst forecasts on ServiceNow stock, see the NOW Stock Forecast page.

Executive/Board ChangesShareholder Meetings
ServiceNow Shareholders Approve Key Governance Amendments
Neutral
May 27, 2025

At the 2025 annual meeting of shareholders held on May 22, 2025, ServiceNow, Inc. announced that shareholders approved amendments to the company’s Certificate of Incorporation, which include reflecting Delaware law provisions regarding officer exculpation and eliminating supermajority voting provisions. Additionally, the shareholders elected directors, approved executive compensation, and ratified the appointment of PricewaterhouseCoopers LLP as the independent auditor for 2025. The meeting also saw shareholders voting against proposals related to the right to cure nomination defects and removing the one-year holding period for calling special meetings, indicating a preference for maintaining existing governance structures.

The most recent analyst rating on (NOW) stock is a Hold with a $960.00 price target. To see the full list of analyst forecasts on ServiceNow stock, see the NOW Stock Forecast page.

Executive/Board ChangesBusiness Operations and StrategyFinancial Disclosures
ServiceNow’s Paul Smith Resigns as President
Neutral
Apr 23, 2025

On April 21, 2025, Paul Smith resigned as President of Global Customer and Field Operations at ServiceNow, effective April 23, 2025, with Paul Fipps succeeding him. ServiceNow reported strong financial results for Q1 2025, with subscription revenues of $3,005 million, marking a 19% year-over-year growth. The company continues to innovate with AI advancements and strategic acquisitions, such as Moveworks and Logik.ai, to enhance its platform capabilities. ServiceNow’s partnerships with companies like Aptiv and Vodafone Business further bolster its AI transformation efforts, while its recognition in industry assessments underscores its leadership in AI and innovation.

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.