Table of Contents
- ServiceNow company profile
- The latest quarterly figures from June 2025
- ServiceNow stock forecast for 2026
- Key figures for ServiceNow stock from the HGI analysis
- ServiceNow stock valuation
The digital transformation of companies is one of the strongest megatrends right now, driven by automation, artificial intelligence, and the shift to cloud-based business models. Amid this structural upheaval, ServiceNow (ISIN: US81762P1021) has established itself as the leading platform for digital workflows. The California-based company is benefitting directly from the growing demand for efficient, scalable, and intelligent solutions that enable companies to modernize their processes and make them future-proof. It is therefore a real winner in the digitalization trend. Its positioning is clearly demonstrated by its sustained high growth of over 20 percent. The stock price is also following suit, with a gain of 3,873 percent over 20 years.
Source: ServiceNow stock price
If the megatrends and analysts' forecasts are to be believed, this development could continue. Double-digit revenue growth well beyond 2030 and a multiplication of earnings over the same period are possible. All of this is also reflected in the valuation. But is it sustainable? The following ServiceNow stock analysis aims to show how much potential the stock still has and what opportunities and risks are apparent.
ServiceNow company profile
ServiceNow is an American cloud computing company specializing in digital workflows. The company was founded in 2004 by Frederic Luddy and has been led since the end of 2019 by former SAP CEO Bill McDermott.
Specifically, the company seeks to transform old manual work processes into modern digital workflows. The advantages of digital workflows lie in increased efficiency, which can be measured in terms of better control, cost benefits, and time savings.
The strong demand for ServiceNow's software services is also reflected in the sustained high growth rates of subscription revenues. These amounted to US$10.7 billion in fiscal year 2024, an increase of 23 percent over the previous year. The majority of recurring revenues were generated with digital workflow products.
ServiceNow grew organically very well for a long time, but began a series of acquisitions in 2019. These could be crucial for ServiceNow's future growth. And indeed, with Moveworks, Rytion, Logik.ai, and Ultimate Suite, the pace of acquisitions has picked up significantly in the last two years alone. They are fueling external growth and masking potential weaknesses in innovation.
The latest quarterly figures from June 2025
ServiceNow significantly exceeded its own expectations in the second quarter of 2025 and presented impressive business figures. The software-as-a-service company generated revenue of US$3.2 billion. The majority of this, US$3.1 billion, came from subscription revenue.
Subscription revenue rose by 22.5 percent compared to the previous year.
The earnings side performed even better, with EBITDA rising 41 percent to US$530 million. EBIT and net income grew even faster, with growth of up to 50 percent. Net income for the second quarter of 2025 was US$385 million.
A particularly important indicator for the company is its “current remaining performance obligations,” i.e., the revenue expected to be generated in the next twelve months. These reached US$10.9 billion in the second quarter of 2025. This represents an increase of 24.5 percent compared to the previous year.
By contrast, total contractually committed but not yet realized revenue amounted to US$23.9 billion, representing an increase of 29 percent. The number of large customers also continued to grow, as the Management Board reported. The number of customers with an annual contract value (ACV) of over US$20 million grew by more than 30 percent compared to the previous year.
In total, ServiceNow signed 89 new contracts with an annual volume of over US$1 million in the second quarter. 528 customers achieved an ACV of over US$5 million, representing growth of around 19.5 percent. Large customers are becoming increasingly important for ServiceNow, especially in terms of demonstrating growth.
In addition to its financial successes, ServiceNow also presented numerous technological innovations. These included new AI-driven products such as the “AI Control Tower” and the “AI Agent Fabric.” These enable companies to centrally control and effectively deploy artificial intelligence. New solutions for CRM, data management, and operational processes were also unveiled. The introduction of “Autonomous IT,” for example, aims to make IT processes completely autonomous and fail-safe through the use of AI. ServiceNow is thus continuing to focus on innovation and entering new territory with the age of AI, which could mean new revenue potential. The company is also focusing on partnerships. ServiceNow is working with Amazon Web Services, NVIDIA, Cisco, and UKG, among others, to further advance AI innovations.
The acquisition of data platform provider data.world, which was completed in July, is also expected to further strengthen the platform's data expertise and AI offering. ServiceNow is also expanding its international presence. For example, a secure cloud platform for government applications was launched in Singapore and a partnership with Ferrari was initiated to provide digital support for the hypercar racing team.
ServiceNow stock forecast for 2026
Despite a few short-term challenges, ServiceNow is feeling good about the rest of the year. For example, the company expects a bit of a slowdown in the growth of current remaining performance obligations (cRPO), which is the contractually guaranteed revenue for the next 12 months, in the third quarter of 2025.
This is due to an above-average customer group whose contracts are scheduled to expire in the fourth quarter and are expected to be renewed at that time. This will temporarily dampen cRPO growth by about two percentage points in the third quarter, before this effect is expected to be offset in the fourth quarter. In addition, US federal authorities are currently facing challenging conditions. These include stricter budgetary constraints and changes in content requirements due to the new Trump administration. ServiceNow's management expects these developments to remain noticeable in the third quarter.
However, despite these factors, the company appears well prepared. The updated forecast already takes these challenges into account and should continue to provide a solid foundation for a successful 2025 as a whole. However, a specific forecast is only available for the following quarter, Q3/2025, and only for the Subscriptions and CRPO segments. Growth of 20 percent and 18.5 percent is forecast here. Compared to the most recently completed quarter, this represents a significant slowdown.
Source: Development of stock count and free cash flow per stock at ServiceNow
The forecast for the number of outstanding shares is once again slightly higher than last time, at 210 million. The dilution of existing shareholders is therefore continuing, albeit at an increasingly slower pace.
Source: Sales and margin forecast
Overall, however, growth should remain dynamic, as the chart above shows. Revenue growth of well over 20% well beyond 2030 should be realistic. And that with profitability continuing to rise. This would mean revenue of US$38.7 billion in 2032 with a net margin of almost 30%.
Source: Net margin
Net profit would then be US$11.4 billion, according to analysts' estimates. Compared to the US$3.5 billion profit expected for 2025, this would represent more than a threefold increase.
Key figures for ServiceNow stock from the HGI analysis
The latest High Growth Investing analysis of ServiceNow paints a mixed picture of the company's financial quality and growth prospects. With an HGI score of 11, ServiceNow ranks solidly in the middle of the rating scale. Although the company is not an absolute top scorer, it remains a high-quality growth company with a strong financial base, which can be found in the top scorer list for the growth strategy.
Source: HGI Score
The high gross margin of 79 percent is particularly impressive, allowing the company to present its operating business as extremely profitable. ServiceNow also scores well in terms of debt ratio, with a value of 0.14. The company is therefore virtually debt-free, underscoring its financial flexibility and resilience to crises. It has more than six billion in cash on its balance sheet. Both figures are so good that they score full points in the HGI rating. The company also scored full points for the Rule of 40 score, which is a combination of revenue growth and operating margin and stands at an impressive 53 percent. Values above 40 are considered a sign of balanced and healthy growth. In fact, with revenue growth of 21 percent, a free cash flow margin of over 31 percent was achieved.
However, ServiceNow's current revenue growth of 21 percent is only average. Although this is still solid growth at a high level, there are companies with stronger growth in the high-growth category. However, revenue growth has remained consistently strong in recent years. Similarly high figures were achieved with growth rates of between around 22 and 24 percent in the years 2022 to 2024. There does not seem to be any real sign of a slowdown here, which is a positive sign for long-term investors. The PEG ratio of 2.4, which measures the ratio of the price-earnings ratio to earnings growth, also scored two points. It too is only in the moderate midfield.
However, no points were awarded for the EV/sales valuation ratio. At an impressive 15.9, it shows that ServiceNow is still highly valued. However, this is not unusual for truly successful growth companies, especially since full profitability has not yet been achieved. Nevertheless, the valuation may be a potential risk factor, which we will discuss in more detail in the Valuation section.
ServiceNow stock valuation
Looking at the big picture, ServiceNow's valuation reflects the high regard in which the market holds the company. This is easily seen in the key figures below.
Source: key metrics
As indicated in the previous chapter, the valuation of ServiceNow stock is ambitious. Only strong earnings growth could justify the high P/E ratio. Most recently, EBIT growth of almost 50 percent was achieved. However, a look at past growth rates shows that this has slowed significantly. One reason for this development is research and development costs, which have been systematically reduced in recent years, while sales and administrative costs have risen only disproportionately. Further adjustments in this area will sooner or later also have an impact on revenue growth.
Source: Development of key operational metrics for ServiceNow
Nevertheless, the stock is trading at a significant premium to the industry average – and not without reason: ServiceNow is considered one of the leading players in the field of digital transformation and artificial intelligence in the corporate environment. The premium valuation signals a long-term growth story, the innovative strength of the platform, and the company's ability to generate stable earnings with high margins. At the same time, however, such a high valuation is always an expression of high expectations. It assumes, for example, that strong performance will not only be maintained but also accelerated in the coming years. ServiceNow will have to prove itself here with its new AI products, platform enhancements, and international expansion.
If ServiceNow delivers, the bet could pay off for long-term investors. In the short term, however, it could also lead to increased volatility, especially if the SaaS company fails to meet expectations or the market environment deteriorates. Geopolitical tensions or stricter budgetary constraints in the public sector alone would be enough to cause this. Something like this would quickly weigh on ServiceNow's new business. In addition, the company is heavily dependent on large customers. A significant portion of its growth therefore comes from a few very large contracts. If there are delays in contract renewals or even the loss of individual large customers, this is likely to have a noticeable impact on revenue and planning reliability. Furthermore, ServiceNow faces intense competition and must cope with rapid technological change. Not everyone can succeed in the long run. The market for enterprise software is notoriously competitive, especially in the areas of artificial intelligence and automation. Competitors such as Microsoft, Salesforce, and Workday have been developing similar technologies for years.
However, ServiceNow invests heavily in its own innovations and regularly brings advanced innovations to market. In addition, the platform is deeply integrated into the business processes of large companies, making it unattractive for customers to switch. Strategic partnerships with technology giants such as NVIDIA and AWS further strengthen its technological leadership position. High customer satisfaction and steady growth in the large customer segment alone underscore the company's competitive strength and moat.
Conclusion on ServiceNow stock
ServiceNow remains one of the most exciting growth stocks in the technology sector. The company impresses with consistently high revenue growth, excellent margins and a strong position in the promising market for AI-powered enterprise software. The latest quarterly figures once again confirm the operational strength and enormous potential of the platform.
However, the stock is highly valued, which brings with it a certain amount of pressure to perform. Given the company's strong financial base, innovative strength, and numerous strategic partnerships, this premium currently appears justified for investors with a long-term investment horizon.
Source: analyst rating & recommendation
Analysts also view the stock positively for the most part. Around 90 percent of them recommend buying, eight percent advise holding, and only two percent recommend selling. The average target price of US$1,122 is significantly higher than the last price of US$790. A potential gain of almost 23 percent could be achieved within a year.
The author and/or persons or companies associated with StocksGuide own or may own shares of ServiceNow. This article represents an expression of opinion and does not constitute investment advice. Please note the legal information.
