Software company ServiceNow (NOW) has had a rough 12 months, down nearly 50%. The company’s business strategy has come under fire as it expanded through a series of acquisitions, and analysts began questioning whether some of the company’s core services would be disrupted by emerging artificial intelligence (AI) platforms. Dan Ives and Wedbush Securities are breathing some new life into the enterprise software company, however. Wedbush recently announced that it was reinstating ServiceNow to its IVES AI ...

ServiceNow Inc. (NYSE:NOW) is one of the 11 Best Beaten Down Growth Stocks to Buy Now. On February 2, Goldman Sachs added ServiceNow to its US Conviction List, citing its belief that the company can grow 20% YoY organically through 2029, given its “still robust expansion opportunities in new domains.” The firm currently has a Buy call on the shares, with a target price of $216. Goldman Sachs likes ServiceNow's (NOW) "robust expansion opportunities in new domains" This addition to the US Conviction List ...

Financial Data and Key Metrics Changes - Q4 subscription revenues reached $3.466 billion, growing 19.5% year-over-year in constant currency, exceeding guidance by 150 basis points [31] - Free cash flow margin for the full year 2025 was 35%, up 350 basis points year-over-year, and total free cash flow was $4.6 billion, up 34% year-over-year [38] - Operating margin was 31%, 100 basis points above guidance, driven by top-line outperformance and operational efficiencies [37] Business Line Data and Key Metrics Changes - Net new ACV growth accelerated both quarter-over-quarter and year-over-year, with 244 deals greater than $1 million in net new ACV closed in Q4 [33] - Emerging product areas, including Now Assist, Workflow Data Fabric, Raptor, and CPQ, all outperformed in Q4 [31] - Now Assist surpassed $600 million in ACV, tracking well towards a $1 billion-plus target for 2026 [36] Market Data and Key Metrics Changes - Transportation and logistics led growth with net new ACV growing over 80% year-over-year, followed by business and consumer services at over 70% [32] - The public sector, including federal and state/local, showed significant growth, with global government business up 80% year-over-year [60][61] - The number of customers contributing $20 million or more in ACV rose over 30% year-over-year [34] Company Strategy and Development Direction - The company aims to be the AI-defining enterprise software company of the 21st century, focusing on integrating AI into workflows for business reinvention [14] - ServiceNow's strategy includes opportunistic M&A to expand into a larger total addressable market (TAM), now beyond $600 billion [12] - The company emphasizes organic growth, having achieved significant milestones without relying on M&A for revenue [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand environment, noting that customers are looking for platforms that deliver positive ROI and simplify operations [48][49] - The company anticipates 20% subscription revenue growth for 2026, with a strong pipeline and increasing customer demand for integrated AI solutions [10][39] - Management highlighted the importance of AI in driving efficiencies and improving operational resilience across customer deployments [36] Other Important Information - The company announced a $5 billion share repurchase authorization, with an immediate $2 billion accelerated share repurchase program [14][39] - Monthly active users grew 25%, indicating strong engagement with the platform [9] - The company is integrating new acquisitions, Armis and Veza, into its existing platform to enhance security and operational capabilities [74] Q&A Session Questions and Answers Question: What are the tailwinds and headwinds in the demand environment? - Management noted that while there are legacy systems that burden companies, there is a strong demand for platforms that deliver cross-functional AI capabilities, leading to a robust pipeline [48][49] Question: How did the federal business perform in Q4? - Despite the government shutdown, the federal business saw significant deals and a strong pipeline, with public sector growth expected to continue into 2026 [60][61] Question: What is the outlook for gross margins? - Management indicated that while there are temporary headwinds due to strategic moves towards hyperscalers, overall margins are expected to improve as these deals scale [65]

Core Viewpoint - ServiceNow is positioning itself as a unique player in the enterprise software market, distinct from traditional SaaS companies, despite facing skepticism from investors regarding its high valuation and stock performance [1][2]. Financial Performance - ServiceNow reported fourth-quarter earnings that exceeded Wall Street's expectations for both revenue and earnings for the ninth consecutive quarter, with subscription revenue reaching $3.47 billion, a 21% increase year-over-year, and non-GAAP earnings per share at $0.92, surpassing consensus estimates of approximately $3.42 billion and $0.87 respectively [3]. - The company raised its full-year 2026 subscription revenue guidance to between $15.53 billion and $15.57 billion, indicating a growth rate of approximately 20% to 21%, which is above the analysts' expectations of 18% to 18.5% [4]. Strategic Direction - CEO Bill McDermott emphasized that ServiceNow aims to be the central hub for AI and data access, differentiating itself from functional and feature SaaS companies [6][7]. - The company has been actively acquiring firms to enhance its AI and security capabilities, including the $7.75 billion acquisition of cybersecurity firm Armis and a $2.85 billion deal for AI-powered employee experience platform Moveworks [7][8]. Market Positioning - McDermott's strategy is to communicate that ServiceNow should not be categorized with traditional SaaS companies, as it focuses on automating workflows and integrating AI into its platform [5][6]. - Despite a 40% decline in stock value over the past year, the latest quarterly results suggest that ServiceNow can achieve organic growth exceeding 20% year-over-year, countering concerns about its acquisition strategy being solely focused on buying revenue growth [2][8].

Core Insights - ServiceNow (NOW) and Adobe (ADBE) utilize software-as-a-service (SaaS) technologies to aid enterprises in business transformation, with ServiceNow focusing on AI-powered workflow solutions and Adobe on creative software and digital experiences [1] Group 1: ServiceNow (NOW) - ServiceNow's workflows, including ITSM, ITOM, ITAM, security, and CRM, are gaining traction, with expectations for AI products to exceed $0.5 billion in annual contract value (ACV) by 2025 and reach $1 billion by 2026 [2] - The company is expanding its partner base with notable names like NVIDIA and Microsoft, and has made strategic acquisitions such as Logik.io and Moveworks to enhance its AI and workflow capabilities [3][4] - The acquisition of Veza strengthens its security and risk portfolios, while the $7.75 billion acquisition of Armis enhances its cyber exposure management capabilities [4] Group 2: Adobe (ADBE) - Adobe is experiencing strong demand for its AI-powered products, including Creative Cloud Pro and Acrobat, and is enhancing user experiences through new conversational interfaces [5] - The company has formed partnerships with major AI ecosystems like AWS and Microsoft, and has added 45 new partners in the last fiscal quarter, expanding its market reach [6] - Adobe targets a 10.2% annualized recurring revenue growth for fiscal 2026, driven by its innovative AI portfolio and expanding enterprise adoption [7] Group 3: Financial Performance and Valuation - In the past 12 months, NOW shares have decreased by 44.3%, while Adobe shares have dropped by 33.6% [9] - NOW is considered overvalued with a Value Score of F, trading at 8.24 times sales, compared to Adobe's Value Score of B and a price/sales ratio of 4.52 [12] - The Zacks Consensus Estimate for NOW's 2026 earnings is $4.03 per share, reflecting a 16.5% increase from 2025, while Adobe's estimate is $23.44 per share, indicating a 12% increase over fiscal 2025 [16][17] Group 4: Competitive Positioning - ServiceNow's robust AI portfolio, strong partner network, and strategic acquisitions provide it with a competitive edge over Adobe, which faces significant competition in the SaaS and AI sectors [18]

ServiceNow, Inc. (NYSE:NOW) is one of the best strong buy stocks to invest in right now. On December 30, Canaccord Genuity reaffirmed a bullish stance on ServiceNow, Inc. (NYSE:NOW), giving the stock a Buy rating with a price target of $224.00. ServiceNow, Inc. (NOW) Is Competing With The Rise Of AI, Says Jim Cramer In a separate development, ServiceNow, Inc. (NYSE:NOW) announced on December 23 that it entered into an agreement to acquire Armis, a leading company in cyber exposure management and cyber ph ...

Core Insights - The acquisition of AI startups by major companies is becoming a prevalent trend, with many startups either negotiating for acquisition or already acquired [2][3] - The AI startup landscape is shifting from a focus on independent innovation to dependency on large corporations for resources and market access [4][10] Acquisition Trends - In 2025, there were 262 AI-related acquisitions globally, a 35% increase year-over-year, averaging one acquisition every 1.5 days [3] - Major acquisitions include Nvidia's $20 billion purchase of Groq and OpenAI's $6.5 billion acquisition of io, highlighting the trend of large companies consolidating their positions in the AI market [3] - The average valuation premium for acquired startups is significant, with Manus being acquired for $4.5 billion, a 125% premium over its $2 billion valuation [8] Funding Landscape - AI startups raised a record $150 billion in 2025, with 64% of funding directed towards the top 10% of companies, leaving many smaller startups facing funding shortages [3][11] - Companies that are closely tied to major corporations receive significantly higher funding, averaging three times more than independent startups [18] Market Dynamics - The AI industry is transitioning from a "thousand models" competition to an "ecosystem segmentation" phase, where large companies dominate through resource control and strategic acquisitions [4][10] - The cost of computing power has become a critical barrier for startups, with over 70% of high-end computing resources controlled by major players like Nvidia, Google, and Microsoft [6][10] Strategic Shifts - Startups are increasingly pivoting from general-purpose models to specialized applications due to the high costs and resource constraints associated with large models [6][10] - The trend of "open-source tools" provided by giants like ByteDance and Google is locking startups into their ecosystems, reducing their ability to innovate independently [7][13] Future Outlook - By 2030, the AI industry is expected to stabilize into a structure where a few major players dominate the foundational layer, while numerous vertical champions emerge in specialized fields [21][23] - The survival of AI startups will increasingly depend on their ability to carve out unique niches with proprietary data and industry expertise, as well as their access to affordable computing resources [19][20][24]

Core Insights - ServiceNow, Inc. has completed the acquisition of Moveworks, enhancing its AI capabilities and positioning itself as a leading quality stock before 2026 [1][2] Group 1: Acquisition Details - Moveworks specializes in enterprise search and conversational AI, which will integrate with ServiceNow's backend strengths in agentic AI and intelligent workflows [2] - The acquisition results in a unified platform that acts as an "AI-native front door" for employees, improving user interactions through natural language [2] Group 2: Strategic Alignment - The acquisition aligns with ServiceNow's goal to embed AI throughout business operations, with the company already resolving 90% of IT tickets and 89% of support requests autonomously using AI [3] - Moveworks introduces a "Reasoning Engine" for enhanced query handling and integrates with over 100 tools, trusted by major companies like Siemens, Toyota, and Unilever [3] Group 3: Market Response - Following the acquisition, Stifel lowered its price target for ServiceNow from $1,150 to $230 while maintaining a Buy rating, indicating that long-term prospects remain unchanged despite the adjustment reflecting the stock split [4]

Core Viewpoint - ServiceNow has initiated a significant acquisition spree, spending at least $12 billion on mergers and strategic investments this year, including its largest acquisition of $7.75 billion for cybersecurity startup Armis [1][4]. Group 1: Acquisition Strategy - The acquisition of Armis marks ServiceNow's largest deal to date, following a $2.8 billion acquisition of Moveworks and a $750 million investment in Genesys [1][4]. - In addition to the three disclosed large transactions, ServiceNow has completed six other undisclosed acquisitions this year, bringing total spending on acquisitions and investments to over $12 billion [4]. Group 2: Investor Concerns - Investors are worried that ServiceNow may be relying on acquisitions to stimulate growth, especially given CEO Bill McDermott's controversial acquisition history at SAP [2][5]. - Following the announcement of the Armis deal, ServiceNow's stock price has dropped 18% this year, with an additional 12% decline after the news broke [2]. Group 3: Growth Pressure - Despite maintaining rapid revenue growth, ServiceNow faces pressure as analysts predict that sales growth will fall below 20% by 2026, excluding acquisitions [6]. - The company expects to generate over $13 billion in sales this year, a 21% increase from last year, but growth rates are anticipated to stabilize [6]. - McDermott had previously indicated a focus on organic growth and smaller, "bolt-on" acquisitions, contrasting with the current trend of larger deals [6].

Core Insights - The acquisition of ARM by ServiceNow is strategically aimed at enhancing its cybersecurity capabilities and addressing the increasing complexity of security management due to the rise in AI adoption and the proliferation of IoT and medical devices [1][3][4] - ARM is recognized as a leading vendor in the cybersecurity space, with significant adoption among Fortune 500 companies, which positions ServiceNow to expand its security platform effectively [2][7] - The combined capabilities of ServiceNow and ARM are expected to create a differentiated offering in the cybersecurity market, with a focus on automation and comprehensive security posture management [4][9][16] Financial Performance - ServiceNow's security business has surpassed $1 billion in revenue, and the addition of ARM is projected to contribute an additional $300 million in run rate revenue [3][5] - ARM is currently generating $340 million in revenue and is growing at a rate of 50%, which aligns with ServiceNow's goal of maintaining a subscription revenue growth rate of over 20% [6][7] - The company has consistently achieved a "rule of 50" performance, indicating strong financial health with over 20% subscription revenue growth and over 30% free cash flow margin [6][19] Strategic Direction - The acquisition is part of a broader strategy to accelerate ServiceNow's roadmap and enhance its capabilities in response to customer demands [10][11] - ServiceNow does not anticipate further large-scale M&A activity in the near future, focusing instead on smaller tuck-in acquisitions and IP purchases to complement its existing portfolio [10][11] - The integration of ARM's team and technology is expected to bolster ServiceNow's position as a premium security platform provider [16][18]