ServiceNow Is Betting Big on AI. Investors Need to Watch These Growth Drivers
ServiceNow's AI business just crossed a milestone that most enterprise software companies spend years chasing, yet the stock still sits well below where the numbers say it should trade. Here is what the gap reveals about where shares could go…
Our 24/7 Wall St. price target for ServiceNow (NYSE:NOW | NOW Price Prediction) is $246.50. That means 77.84% upside from the current price of $138.61. Our model rates the stock a buy with high confidence.
| Metric | Value |
|---|---|
| Current Price | $138.61 |
| Price Target from 24/7 Wall St. | $246.50 |
| Upside/Downside | 77.84% |
| Recommendation | BUY |
| Confidence Level | 90% |
ServiceNow is turning its AI roadmap into real contract value. ServiceNow AI passed $1B in annual contract value, agentic deployments grew 9x in 9 months, and management raised full-year subscription guidance to $15.76-$15.78B.
The share price still trails that progress. Our high confidence comes from steady performance: ServiceNow has beaten revenue and EPS estimates in each of the six quarters in our data.
A 24% Revenue Quarter Is Pulling Shares Off the Lows
The stock gained 0.93% over the past week and 5.08% over the past month. It is still down 9.09% year to date and 24.62% over the past year. Over the past 52 weeks it has traded between $81.24 and $192.97.
Second-quarter revenue came in at $3.987B, +24% YoY, above the $3.927B estimate. Non-GAAP EPS of $0.90 topped the $0.8564 consensus. Current remaining performance obligations (cRPO, contracted revenue due within 12 months) reached $13.20B, and the renewal rate held at 98%.
Why Bulls See $273 and Beyond
AI monetization is accelerating. AI net new ACV grew over 40% quarter over quarter, and million-dollar-plus AI deals tripled. Price uplifts on the ProPlus tier remain above 30%. Level 1 AI agents are closing 80 to 85% of service requests with no human involvement.
Cybersecurity, strengthened by the Armis and Veza acquisitions, is already a billion-dollar-plus business. Bill McDermott, ServiceNow’s chief executive, called this “the foundation for a re-rating of ServiceNow.”
Most analysts on Wall Street agree: 10 analysts rate the stock a strong buy and 35 rate it a buy. In the bull case, the stock reaches $273.09, a 97.02% return.
What Could Derail the AI Growth Story
GAAP operating income fell to $162M (-54.75% YoY), and GAAP subscription gross margin slipped to 73.5% from 80%. Some of Q2’s strength came from U.S. Federal revenue pulled forward from Q3. Q3 subscription growth is guided to slow to about 20.5%, and currency changes will cut about $35M from Q3 cRPO.
That said, most of the GAAP pressure comes from amortization of acquired intangibles and stock-based compensation linked to the acquisitions. Non-GAAP subscription gross margin is guided at 81%, and free cash flow rose to $634M, +20.5% YoY. Our bear case of $194.48 still sits above today’s price.
ServiceNow Grows Faster Than Salesforce and Workday
Salesforce (NYSE:CRM) is a direct rival now that ServiceNow runs a 2 billion ACV CRM business. Salesforce grew revenue 10.83% last quarter and trades at 26x trailing earnings, while Agentforce ARR climbed over 240%. ServiceNow’s 30x forward multiple is a modest premium for much faster growth, which makes our target look reasonable.
Workday (NASDAQ:WDAY) competes with ServiceNow’s EmployeeWorks for HR workflows. Workday trades at 53x trailing earnings on 12.82% revenue growth, with a 31.1% non-GAAP operating margin. Next to Workday, our target looks conservative.
| Company | P/E | Latest Revenue Growth |
|---|---|---|
| ServiceNow | 30x (forward) | 24.0% |
| Salesforce | 26x (trailing) | 10.83% |
| Workday | 53x (trailing) | 12.82% |
AI Monetization Tips the Scale Toward a Buy Rating
Our 24/7 Wall St. price target of $246.50 carries a buy rating at 90% confidence. The key factor is AI growing from a pilot program into a source of ACV.
The bull case strengthens if AI ACV remains on track to beat one and a half billion by year-end. The case weakens if Q3 cRPO growth falls short of guidance. Today, the growth figures support the buy rating.
Here is where our model projects ServiceNow would trade if prevailing trends persist.
| Year | Price Target from 24/7 Wall St. |
|---|---|
| 2026 | $246.50 |
| 2027 | $362.24 |
| 2028 | $472.65 |
| 2029 | $589.22 |
| 2030 | $664.57 |
These estimates assume ServiceNow continues executing toward its $30B+ subscription revenue target for 2030. Results could land well above or below these levels depending on how fast AI pricing scales and how smoothly Armis is integrated.
Contact [email protected] for any questions or corrections.
Vandita Jadeja is a financial publisher with over a decade of experience writing about financial topics, including investment, savings, retirement, insurance and banking. Vandita is a Chartered Accountant who loves to debunk financial concepts for readers.
Her work has appeared on sites that include The Motley Fool, InvestorPlace, and Benzinga. She covers investing and focuses on stock picks and price prediction for 24/7 Wall St.
When not looking for the next stock investment opportunity, she can be found traveling, reading, chasing sunsets and enjoying her iced latte.
