ServiceNow Reports Strong Q4 Results but Stock Declines
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 5d ago
0mins
Should l Buy NOW?
Source: Fool
ServiceNow Inc's stock fell 4.14% and hit a 52-week low, despite reporting strong Q4 earnings that exceeded expectations.
The company reported adjusted earnings per share of 92 cents, surpassing the expected 88 cents, with revenue of $3.57 billion exceeding the forecast of $3.53 billion. Additionally, ServiceNow plans to acquire cybersecurity startup Armis for $7.75 billion and Moveworks for nearly $3 billion, aiming to enhance its AI and security capabilities. However, the broader software sector is facing challenges, contributing to the stock's decline.
Despite the stock's drop, ServiceNow's strong performance and optimistic future guidance indicate potential for recovery. The company forecasts subscription revenues between $3.65 billion and $3.66 billion for Q1, reflecting confidence in its growth trajectory.
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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: 102.630
Low
172.00
Averages
222.81
High
263.00
Current: 102.630
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.
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- Changing Competitive Landscape: With Alphabet's ongoing investments and successes in AI, YouTube's user base has grown to 750 million, and Waymo's self-driving business is outpacing Tesla, suggesting a strengthening competitive advantage that may attract more investor interest.
- Mixed Market Reactions: Despite OpenAI and Anthropic's strong performance in AI, Microsoft's Copilot sales have been disappointing, highlighting investor concerns about its future growth and reflecting differing levels of confidence across companies.
See More
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- Price Target Revision: Truist lowered ServiceNow's price target from $240 to $175 while maintaining a Buy rating, indicating that despite market concerns over terminal value, short-term fundamentals remain solid, reflecting a focus on AI narratives.
- AI Competitiveness Enhancement: Jim Cramer highlighted ServiceNow's increasing competitiveness in the AI space, especially as vendors with seat-based models underperform, suggesting a strategic shift towards AI applications to enhance market positioning.
- Growth Potential: Goldman Sachs added ServiceNow to its US Conviction List, maintaining a Buy rating with a $216 price target, anticipating the company to achieve 20% organic growth annually through 2029, showcasing robust expansion opportunities in new domains.
- Intelligent Platform Advantage: ServiceNow's Now Platform offers comprehensive workflow automation solutions embedded with AI and machine learning, aimed at boosting productivity and maximizing business outcomes, further solidifying its market leadership in digital transformation.
See More
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- Software Stock Selloff: Wedbush analyst Dan Ives highlighted that Wall Street's selloff of software stocks like Salesforce, ServiceNow, and Microsoft is unprecedented, indicating severe investor skepticism about their relevance in the AI era, which could lead to declining performance over the next few years.
- Historic Decline: Ives noted that in his 25 years of experience, he has never witnessed such a structural selloff, with software companies being perceived as lacking space in the AI age, reflecting a significant drop in market confidence that could result in a loss of about 5% of customers.
- AI Impact Analysis: While Ives acknowledged that AI disrupts the software industry, he argued that considering software as obsolete is an extreme view, citing Palantir as an example of how software can still thrive in the AI era, demonstrating that there is still room for software to succeed.
- Market Reaction: The stock prices of Microsoft, Salesforce, and ServiceNow have dropped 16.75%, 25.87%, and 30.47% respectively over the past month, indicating a pessimistic outlook from investors regarding the future prospects of these companies and reflecting a waning confidence in the software sector.
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- Investor Community Value: The emphasis is placed on the value of the Stock Advisor investor community, encouraging individual investors to engage and leverage the platform for the latest investment advice and market insights.
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Bitcoin Sentiment: Current bearish sentiment around Bitcoin contrasts sharply with previous bullish trends, with Clark suggesting that today's prices may be more attractive for investment compared to past highs.
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- ServiceNow's Revenue Growth: ServiceNow's subscription revenue increased by 19.5% year-over-year to $3.47 billion in Q4 2025, with a 98% customer renewal rate, providing strong revenue visibility for the future and showcasing its solid performance in the cloud services market.
- Success of AI Products: ServiceNow's AI product NOW Assist surpassed $600 million in annual contract value in Q4, with expectations to exceed $1 billion by 2026, demonstrating the company's success in monetizing AI and solidifying its role in enterprise digital transformation.
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