Core Insights - Sands Capital's Q3 2025 investor letter indicates a recovery in U.S. large-cap growth equities driven by strong corporate earnings, AI enthusiasm, and expectations for Federal Reserve policy easing [1] - The portfolio achieved a net return of 6.3% in the quarter, underperforming the benchmark's 10.5% gain [1] Company Analysis: ServiceNow, Inc. (NYSE:NOW) - ServiceNow is recognized as the leading provider of enterprise workflow automation software, holding a significant market share [3] - The stock experienced a one-month return of -11.95% and a 52-week decline of 22.92%, closing at $802.72 with a market capitalization of $167.087 billion on November 26, 2025 [2] - Despite concerns over potential government spending cuts and AI disruption, ServiceNow's fundamentals remain strong, with subscription revenue increasing by 22.5% year-over-year and operating margins expanding by 230 basis points [3] - The company reported a 50% year-over-year growth in its AI-enabled Pro Plus product, alongside increased adoption of other AI offerings [3] - In Q3 2025, ServiceNow's subscription revenues reached $3.299 billion, reflecting a 20.5% year-over-year growth in constant currency [4] - The stock is not among the 30 most popular stocks among hedge funds, with 106 hedge fund portfolios holding it at the end of Q2 2025, unchanged from the previous quarter [4]

Core Insights - ServiceNow, Inc. is a leading enterprise software company that provides a cloud-based platform for automating workflows across various business operations, evolving from an IT service-management tool since its founding in 2003 [1] - The company has a market capitalization of $171.7 billion, classifying it as a large-cap stock and highlighting its influence in the software application industry [2] Financial Performance - ServiceNow's stock is currently trading 33% below its 52-week high of $1,198.09, which was reached on January 28 [3] - Over the past three months, ServiceNow shares have decreased by 7.2%, underperforming the Nasdaq Composite's 7.8% increase [3] - In the last 52 weeks, ServiceNow's stock has risen by 5%, significantly trailing the Nasdaq Composite's 21.1% return [4] - Year-to-date, ServiceNow shares are down 24.3%, compared to the Nasdaq's 20.2% rise [4] - The stock has been trading below its 200-day and 50-day moving averages since late July, confirming a bearish trend [4] Strategic Developments - On November 18, ServiceNow shares fell by 2.1% following the announcement of new integrations with Microsoft Corporation, including Microsoft Agent 365 [5] - This collaboration aims to enhance AI orchestration and governance for shared customers, combining workflow intelligence, secure cloud infrastructure, and AI governance [5] - The unified approach is intended to provide enterprises with improved visibility, compliance, and control over AI agents, setting a new standard for enterprise-grade AI deployment and management [5]

Core Insights - ServiceNow is in advanced talks to acquire security startup Veza for over $1 billion, aiming to enhance its AI Agent-related products and services [1][2] - Veza's subscription software helps enterprises manage access permissions for employees and AI Agents, addressing new security challenges posed by AI [2] - The acquisition could differentiate ServiceNow's offerings in a crowded market of similar AI products from various software vendors [2] Group 1: Acquisition Details - ServiceNow is negotiating a deal that may be announced as soon as next week, although it is not finalized yet [2] - The acquisition is part of ServiceNow's strategy to sell more AI tools to its clients, enhancing its market position [2] Group 2: Veza's Business Model - Veza's annual service contracts, sold through Amazon Web Services, are priced at $100,000 [3] - The company has notable clients including Blackstone, Instacart, and Snowflake, indicating its market relevance [3] - Veza has experienced significant growth, with employee numbers increasing by over 50% in the past year [3] Group 3: Market Context - The demand for data control is rising as AI Agents may lead to new types of cyberattacks, making Veza's solutions increasingly relevant [2] - ServiceNow's previous acquisition of Moveworks for $2.85 billion is currently under antitrust review, highlighting the competitive landscape in the IT services sector [4]

Group 1 - The S&P 500 is experiencing significant gains during the Thanksgiving week, with most sectors benefiting from the rally [1][2] - Enterprise software and health care stocks are notably underperforming, missing out on the broader market gains [1][2] - Workday is identified as the largest laggard in the S&P 500, alongside other companies like Deere, Intuit, Salesforce, and ServiceNow, which are also trading lower [2] Group 2 - Workday and Deere reported disappointing quarterly results, contributing to their stock declines [2] - Salesforce, another key player in the enterprise software sector, is set to report its quarterly results in a week [2]

Core Insights - Microsoft and ServiceNow represent two distinct strategies in enterprise cloud transformation, with Microsoft being a diversified technology giant and ServiceNow focusing on workflow automation and enterprise service management [1] Microsoft Overview - Microsoft reported revenues of $77.7 billion for Q1 fiscal 2026, an 18% year-over-year increase, with significant growth from Microsoft Cloud [2] - The Intelligent Cloud segment generated $30.89 billion, driven by Azure's strong performance, particularly in AI services, which contributed 16 percentage points to growth [4] - Microsoft continues to expand its AI capabilities, launching new features like Work IQ and Agent 365, enhancing customer relationships and lifetime value [5] - Despite strong revenue growth, Microsoft faces challenges, including a net income loss of $3.1 billion and diluted earnings per share of 41 cents due to investments in OpenAI [6] - The competitive landscape is intensifying, with Microsoft facing competition from Google's Gemini and Amazon's cloud services, leading to stock price volatility [7] ServiceNow Overview - ServiceNow reported third-quarter subscription revenues of $3.3 billion, reflecting a 21.5% year-over-year growth, and raised its 2025 subscription revenue guidance [2][8] - The company achieved an operating margin of 33.5%, exceeding guidance, and raised its full-year operating margin targets to 31% [11] - ServiceNow's AI strategy includes the introduction of an AI Control Tower for monitoring AI agents, enhancing enterprise governance and collaboration [10] - The company has expanded strategic partnerships, including with NTT DATA and Nvidia, to accelerate AI-led transformation and broaden its market reach [12] Valuation and Performance Comparison - Microsoft has a price-to-earnings (P/E) ratio of 28.27, slightly below its 5-year historical average, indicating reasonable valuation relative to growth [13] - ServiceNow trades at a forward P/E of 40.95, reflecting expectations for significant earnings acceleration, justified by its superior growth rates and expanding margins [14] - Year-to-date, Microsoft stock has gained 12%, while ServiceNow has declined 23.3%, creating a more attractive entry point for long-term investors [17] Conclusion - ServiceNow offers compelling upside potential for investors interested in cloud software innovation and AI-driven enterprise transformation, with its specialized platform and strong revenue visibility [19]

Core Viewpoint - ServiceNow, Inc. (NYSE:NOW) is experiencing a decline in stock price despite a positive outlook from Wall Street, driven by strong fiscal Q3 results and raised full-year guidance [1][2]. Financial Performance - In fiscal Q3 2025, ServiceNow reported a revenue growth of 21.85% year-over-year, reaching $3.41 billion, which exceeded estimates by $49.93 million [2]. - The earnings per share (EPS) for the quarter was $4.82, surpassing expectations by $0.55 [2]. Guidance and Projections - Management has raised the full-year subscription revenue guidance to a range of $12.835 billion to $12.845 billion, up from the previous range of $12.775 billion to $12.795 billion [3]. Strategic Developments - ServiceNow announced new integrations with Microsoft aimed at enhancing AI orchestration and governance capabilities, which will connect their platforms more seamlessly [4].

Core Insights - ServiceNow is expanding its partnership with Microsoft, integrating its AI Control Tower with Microsoft Foundry and Copilot Studio to enhance enterprise-grade orchestration and governance across AI agents and workflows [2][3][4] Company Developments - ServiceNow's subscription revenue guidance for 2025 has been raised to between $12.835 billion and $12.845 billion, indicating a growth of 20% on a non-GAAP constant currency basis and 20.5% on a reported basis compared to 2024 [5] - The company is facing challenges due to tightening budgets from U.S. federal agencies, which may negatively impact subscription revenues in the fourth quarter of 2025 [5] Competitive Landscape - ServiceNow is experiencing stiff competition from Atlassian and Salesforce, with Atlassian focusing on subscription-based solutions that have seen a CAGR of approximately 40% from fiscal 2020 to fiscal 2025 [6] - Salesforce is enhancing its AI capabilities and data cloud business, reporting a 140% year-over-year increase in Data Cloud customer adoption in the second quarter of fiscal 2026 [7][8] Financial Performance - ServiceNow shares have declined by 24.6% year to date, underperforming the broader Zacks Computer and Technology sector, which has returned 25.9% [9] - The forward 12-month price/sales ratio for ServiceNow is 10.83X, significantly higher than the broader sector's 6.61X, indicating that the stock may be overvalued [10]

Core Insights - ServiceNow (NOW) is enhancing its collaboration with Microsoft (MSFT) through new integrations aimed at improving orchestration, governance, and collaboration across AI agents and workflows [1][2] - The partnership will connect ServiceNow's AI Platform with Microsoft 365, Copilot, Foundry, and GitHub, facilitating better management of autonomous AI agents [1][2] - ServiceNow has raised its subscription revenue guidance for 2025 to between $12.835 billion and $12.845 billion, indicating a 20% growth on a non-GAAP constant currency basis [3] Integration and Collaboration - The integration of NOW's AI Control Tower with Microsoft Foundry and Copilot Studio will enable automatic governance across AI agents on Microsoft platforms [2] - ServiceNow Build Agent's integration with GitHub allows secure access to GitHub issues, pull requests, and discussions [2] - Upcoming integration of Now Assist with Microsoft Agent 365 will bring enterprise workflows into Microsoft Word, Outlook, and Teams [2] Competitive Landscape - ServiceNow faces significant competition from Atlassian (TEAM) and Salesforce (CRM), both of which are enhancing their subscription-based solutions and AI capabilities [4][5] - Atlassian has seen a CAGR of approximately 40% in its subscription segment from fiscal 2020 to fiscal 2025, driven by demand for automated communication systems [4] - Salesforce reported a 140% year-over-year increase in Data Cloud customer adoption, indicating strong demand for AI tools that enhance enterprise workflows [5] Financial Performance and Valuation - ServiceNow's stock has declined by 24.6% year to date, underperforming the broader Zacks Computer and Technology sector, which has returned 25.9% [6] - The forward 12-month price/sales ratio for NOW is 10.83X, significantly higher than the sector average of 6.61X, suggesting that the stock may be overvalued [9] - The Zacks Consensus Estimate for fourth-quarter 2025 earnings is $4.35 per share, reflecting an 18.53% year-over-year growth [11]

Core Viewpoint - ServiceNow (NOW) stock presents an attractive investment opportunity due to its high margins, indicative of pricing power and cash generation ability, available at a discounted price [2][10]. Company Overview - ServiceNow is a leading enterprise software company that provides digital workflow solutions aimed at automating operations and enhancing efficiency, supported by a widely adopted platform and strong recurring revenue [3]. Recent Performance - Despite a 23% decrease in stock value this year, NOW has become 35% less expensive based on its Price-to-Sales (P/S) ratio compared to one year ago [4]. - In Q3 2025, ServiceNow recorded 103 deals exceeding $1 million in net new annual contract value, expanding its high-value customer base to 553 accounts with over $5 million in Annual Contract Value (ACV) [5]. Financial Metrics - Remaining Performance Obligations reached $24.3 billion, indicating strong revenue visibility, and management has raised its full-year cash flow margin guidance [5]. - The company boasts a 97% customer renewal rate, underscoring the durability of its solutions [5]. - ServiceNow has demonstrated a 21.1% revenue growth over the last twelve months and a 22.3% growth over the last three-year average [10]. Valuation - NOW stock is currently offered at a P/S multiple of 13.4, representing a 35% markdown compared to one year ago [10].

Core Insights - Both Netflix and ServiceNow are high-growth companies with significant stock price increases over the past decade, each up nearly 900% [1][2] Netflix - Netflix completed a 10-for-1 stock split, reducing the share price from over $1,000 to approximately $114, making it more accessible to a broader investor base [3][5] - The company reported a 17% year-over-year revenue increase to $11.5 billion, driven by member growth, price increases, and advertising strength [5] - Netflix's current valuation stands at about 48 times earnings and 11 times sales, which is considered demanding for a media company, but sustainable double-digit revenue growth could justify this valuation [6] ServiceNow - ServiceNow's subscription revenue reached $3.3 billion in Q3, marking a 22% year-over-year increase, contributing to total revenue growth of 22% to $3.4 billion [7][9] - The company's remaining performance obligations grew by 21% year-over-year to approximately $11.4 billion, indicating a strong backlog of contracted revenue [9] - Free cash flow increased by 18% year-over-year to $592 million, allowing for continued investment in AI capabilities while expanding margins [10] - ServiceNow's board approved a five-for-one stock split, pending shareholder approval, with a forward price-to-earnings ratio of 41, reflecting its growth potential in the AI sector [11]