ZACKS·2025-12-29 13:31Core Insights - Salesforce (CRM) and ServiceNow (NOW) are leading enterprise cloud software companies that assist large organizations in modernizing operations and automating workflows [1][2] Salesforce Overview - Salesforce maintains a leading position in the customer relationship management market and is expanding its ecosystem to include artificial intelligence (AI), data, and collaboration [3] - The company has integrated generative AI into its offerings, significantly enhancing automation and decision-making capabilities [4] - In Q3 of fiscal 2026, Salesforce's AI-driven products generated $1.4 billion in recurring revenues, marking a 114% year-over-year increase, with Agentforce alone contributing $540 million, up 330% year over year [5] - However, Salesforce is experiencing a slowdown in sales growth, with revenues increasing by only 8.7% year over year in the first nine months of fiscal 2026, reflecting cautious enterprise spending [6][7] ServiceNow Overview - ServiceNow is benefiting from increased adoption of its workflows, which support automation across various business functions, driving efficiency for customers [8] - The company closed 103 transactions exceeding $1 million in net new annual contract value (ACV) in Q3 2025, with a total of 553 customers contributing over $5 million in ACV [9][10] - ServiceNow's AI strategy includes a comprehensive approach to enterprise adoption, exemplified by its AI Control Tower, which helps monitor AI agents across systems [10][12] - The federal business segment of ServiceNow grew over 30% year over year in Q3 2025, indicating strength in a challenging market [13] Growth Outlook Comparison - ServiceNow's growth profile appears stronger, with projected revenue and earnings per share (EPS) growth of 20.5% and 24.5% for 2025, and 18.1% and 16.8% for 2026 [14] - In contrast, Salesforce's fiscal 2026 estimates indicate a revenue growth of 9.5% and an EPS increase of 14.6%, with projections of 10.8% and 10.5% for fiscal 2027 [17] Valuation and Performance - Over the past six months, Salesforce shares have decreased by 2.4%, while ServiceNow shares have fallen by 25.2% [21] - Salesforce trades at a forward price-to-sales (P/S) multiple of 5.48, significantly lower than ServiceNow's 10.23 [23] Conclusion - While Salesforce is a stable and profitable company, its growth has slowed. ServiceNow demonstrates stronger growth, better execution, and clearer demand trends, giving it an edge as an investment despite a higher valuation [25]