ServiceNow Reports 20% Revenue Growth Amid AI Adoption
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1h ago
0mins
Source: seekingalpha
- Sustained Revenue Growth: ServiceNow has achieved over 20% year-over-year revenue growth for three consecutive quarters, demonstrating that enterprise software firms can benefit from the rise of artificial intelligence, despite a 40% decline in stock value during this period, reflecting market caution towards software stocks.
- Strong Financial Performance: The company's fourth-quarter results revealed a 26% increase in remaining performance obligations to $28.2 billion, a 57% surge in free cash flow, and a 40% jump in the number of new annual contract value transactions exceeding $1 million, indicating a solid business foundation and promising growth potential.
- Strategic Acquisition Plans: ServiceNow plans to acquire cybersecurity firm Armis for $7.75 billion, expected to close in the second half of 2026, which will help the company create a unified security exposure and operations stack to defend against AI-powered attacks, further expanding its market share.
- AI Platform Expansion: The company projects a 19.5% to 20% growth in subscription revenue for 2026, enhancing its AI platform's competitiveness through partnerships with top large language model creators, showcasing its commitment to continuous innovation in a rapidly evolving market.
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Analyst Views on NOW
Wall Street analysts forecast NOW stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for NOW is 222.81 USD with a low forecast of 172.00 USD and a high forecast of 263.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
32 Analyst Rating
30 Buy
2 Hold
0 Sell
Strong Buy
Current: 116.730
Low
172.00
Averages
222.81
High
263.00
Current: 116.730
Low
172.00
Averages
222.81
High
263.00
About NOW
ServiceNow, Inc. provides an artificial intelligence (AI) platform for business transformation. The Company’s AI platform connects people, processes, data, and devices to increase productivity and maximize business outcomes. Its intelligent platform, the Now Platform, is a cloud-based solution that helps enterprises and organizations across public and private sectors digitize workflows. The workflow applications built on the Now Platform are organized into four primary areas: Technology, CRM and Industry, Core Business and Creator. Its products include IT Service Management, IT Operations Management, HR Service Delivery, ServiceNow AI Agents, AI Experience, Build Agent, ServiceNow AI Control Tower, AI Agent Fabric, RaptorDB, Workflow Data Fabric, Workplace Service Delivery, ServiceNow Platform Encryption, Telecommunications Service Operations Management, and others. The Company also offers identity security, helping organizations secure access across the enterprise.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
ServiceNow Reports 20% Revenue Growth Amid AI Adoption
- Sustained Revenue Growth: ServiceNow has achieved over 20% year-over-year revenue growth for three consecutive quarters, demonstrating that enterprise software firms can benefit from the rise of artificial intelligence, despite a 40% decline in stock value during this period, reflecting market caution towards software stocks.
- Strong Financial Performance: The company's fourth-quarter results revealed a 26% increase in remaining performance obligations to $28.2 billion, a 57% surge in free cash flow, and a 40% jump in the number of new annual contract value transactions exceeding $1 million, indicating a solid business foundation and promising growth potential.
- Strategic Acquisition Plans: ServiceNow plans to acquire cybersecurity firm Armis for $7.75 billion, expected to close in the second half of 2026, which will help the company create a unified security exposure and operations stack to defend against AI-powered attacks, further expanding its market share.
- AI Platform Expansion: The company projects a 19.5% to 20% growth in subscription revenue for 2026, enhancing its AI platform's competitiveness through partnerships with top large language model creators, showcasing its commitment to continuous innovation in a rapidly evolving market.
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Software Stocks Plunge Amid Market Concerns
- Software Stock Decline: In January 2026, the iShares Expanded Tech-Software Sector ETF fell 16%, with major software companies like Microsoft, Palantir, and ServiceNow experiencing significant price drops, indicating market concerns about the future of the software sector.
- AI Disruption Fears: Investor anxiety over AI tools potentially replacing enterprise software has intensified, leading to decreased confidence in these companies, even as they continue to report solid growth figures and guidance.
- Valuation Pressures: ServiceNow's stock has plummeted 50% from its peak in late 2024, yet it still trades at a P/E ratio of 70, highlighting the valuation bubble in the software sector, while Palantir's price-to-sales ratio stands at 99 and P/E at 353.
- Investment Opportunities: Although short-term market fluctuations are unpredictable, high-quality software stocks like Microsoft, bolstered by its robust Azure cloud computing business, are viewed as attractive investments, currently down 23% from last year's peak.
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