NOW vs. ORCL: Which Digital Transformation Stock Has Greater Upside?

Core Viewpoint - ServiceNow and Oracle are positioned to benefit from the growing digital transformation market, which is projected to reach approximately $4 trillion by 2027, with a CAGR of 16.2% from 2022 to 2027 [1] Group 1: Company Performance - ServiceNow shares have decreased by 7.7% year to date, while Oracle shares have dropped by 10.4% due to a tech sell-off influenced by higher tariffs and a challenging macroeconomic environment [2] - ServiceNow's Yokohama release introduces new AI agents across various domains, enhancing productivity and workflow efficiency [5] - ServiceNow's customer base has expanded, with 508 customers having more than $5 million in annual contract value (ACV), representing a 20% year-over-year growth [7] - ServiceNow expects second-quarter subscription revenues to be between $3.03 billion and $3.035 billion, indicating a year-over-year increase of 19% to 19.5% [8] - Oracle anticipates total revenue growth of 9-11% year over year for the third quarter of fiscal 2025, with cloud revenues expected to grow by 24-28% at constant currency [11] Group 2: Strategic Partnerships and Innovations - ServiceNow has established partnerships with major companies like NVIDIA, Amazon, and Vodafone to enhance its AI capabilities and service management solutions [6][10] - Oracle's partnerships with companies such as OpenAI and NVIDIA are driving its cloud business momentum, particularly with the launch of AI Agent Studio [9][10] Group 3: Earnings Estimates and Valuation - The Zacks Consensus Estimate for ServiceNow's 2025 earnings is $16.48 per share, reflecting an 18.39% increase over fiscal 2024, while Oracle's estimate has declined to $6.03 per share, suggesting 8.45% growth [12] - ServiceNow has consistently beaten earnings estimates, with an average surprise of 6.61%, compared to Oracle's surprise of 0.83% [13] - In terms of valuation, Oracle shares are trading at a forward Price/Sales ratio of 6.47X, which is lower than ServiceNow's 14.62X, indicating that Oracle may be a cheaper option [14] Group 4: Market Position and Outlook - Both companies are benefiting from strong demand for digital transformation despite macroeconomic challenges and tariff concerns [17] - ServiceNow's strong portfolio and partner base are highlighted as advantages over Oracle, which faces stiff competition and security issues in the cloud computing market [17]