ServiceNow, Inc. (NOW): A Bull Case Theory

Core Thesis - ServiceNow, Inc. is experiencing strong momentum with a balance of high growth and margin pressures related to AI and data center investments [2][5] - The stock was trading at $933.37 as of September 24th, with trailing and forward P/E ratios of 117.41 and 46.30 respectively [1] Financial Performance - The company reported a 22.4% year-over-year revenue growth in Q2, with remaining performance obligations (RPO) increasing by 28.5% and current RPO (cRPO) up by 24.4% [2] - Subscription revenue, which constitutes 96.8% of total sales, accelerated to a 22.5% year-over-year growth [2] - Gross margins decreased from 82.6% to 81.0%, while operating margin improved to 29.7% and free cash flow margin reached 16.6% [2] Valuation and Market Position - ServiceNow's forward EV/Sales multiple stands at 13.3 and P/E at 51.1, which are considered elevated compared to peers, yet justified by sustained revenue growth exceeding 20% and a renewal rate of 98% [3] - The company has established a competitive advantage through high switching costs, deep integrations across various workflows, strong brand equity, and expanding economies of scale [3] Customer Base and Recognition - ServiceNow has a growing base of large clients, with 528 customers paying more than $5 million in annual contract value (ACV) and over 30% year-over-year growth in customers with ACV above $20 million [3] - Notable clients include ExxonMobil, Standard Chartered, Merck, Starbucks, and NVIDIA, leveraging ServiceNow's AI Control Tower and automation capabilities [4] - The company has been recognized as a leader in Gartner's 2025 Magic Quadrants across IT service management, low-code, and AI-enabled applications [4] Financial Health - ServiceNow holds strong cash reserves of $6.1 billion against $2.3 billion in debt, positioning the company well for future growth [4]