ServiceNow, Inc. (NYSE:NOW) is among the 5 Tech Stocks with Best Earnings Growth in 2026. On March 6, Citizens reaffirmed a Market Outperform rating and a price target of $260 on ServiceNow, Inc. (NYSE:NOW), highlighting the company’s footing for the agentic era. This is achieved through the company’s customer relationships, architecture, and AI Control Tower offering. In 2026, Assist ACV is anticipated to reach $1 billion, up from the current $600 million. Citizens emphasized the company’s pending Armis ...

Core Viewpoint - The fear that AI will completely disrupt the business models of many software companies may be overstated, as established players have advantages that new entrants lack [1][9]. Industry Overview - The recent sell-off in software stocks is attributed to concerns over generative AI's potential to disrupt established enterprise SaaS companies [2][3]. - The market is beginning to recognize that new AI rivals could significantly impact sales for established companies, leading to a decline in stock prices [3]. Company Analysis - Harris | Oakmark analysts believe that the market has overvalued many SaaS stocks, particularly due to the impact of stock-based compensation and unrealistic expectations of linear revenue growth [4]. - Salesforce and SAP are highlighted as entrenched players in their customers' operations, utilizing a land-and-expand strategy to enhance customer value over time [13]. - SAP reported a 25% growth in its cloud backlog last year, although concerns about AI displacing its products persist [14]. - Salesforce's Agentforce platform has seen a 169% year-over-year increase in sales, reaching $800 million, showcasing its effective use of AI to enhance its ecosystem [15]. Investment Opportunities - The indiscriminate sell-off in software stocks has created attractive investment opportunities, particularly in companies like Microsoft and ServiceNow [12][18]. - Microsoft's enterprise software segment continues to grow at high-teens percentage rates, bolstered by the integration of its Copilot AI feature, which has 15 million paid subscribers [16]. - ServiceNow is experiencing strong momentum with its Now Assist feature, projecting its annual contract value to reach $1 billion by the end of 2026 [17]. - The forward P/E ratios of these companies range from 15 (Salesforce) to 29 (ServiceNow), reflecting their growth potential while accounting for AI-related risks [18].

Core Insights - Four high-profile tech stocks have experienced significant declines between 23% and 37% in 2026, while the Nasdaq 100 remains nearly flat, indicating a potential disconnect between market performance and analyst expectations [1][16] - The stocks in question are The Trade Desk, Oracle, ServiceNow, and AppLovin, all of which have strong fundamentals and aggressive analyst price targets despite their recent selloffs [2] The Trade Desk - The Trade Desk's stock has dropped 37% year-to-date, currently trading at $23.95, with an analyst consensus price target of $36.73, suggesting an upside of over 53% [3][16] - The decline lacks an obvious earnings catalyst, as Q4 2025 revenue was $847 million, up 14% year-over-year, and operating income grew 11% to $157 million [4] - The stock is 67% below its level from one year ago, with a bullish analyst sentiment where 20 out of 38 analysts rate it Buy or Strong Buy [5] Oracle - Oracle's stock has decreased by 23% year-to-date, currently priced at $150.31, with a consensus target of $269.94, indicating an upside of approximately 80% [6][16] - The stock has fallen over 56% from its 52-week high of $345.72, trading below its 50-day and 200-day moving averages [7] - Oracle's cloud infrastructure growth is a key driver, with quarterly earnings growth of 91% year-over-year and a 32% operating margin, although concerns about debt and financing have emerged [8][9] ServiceNow - ServiceNow's stock has dropped 29% year-to-date, currently at $109.30, with an analyst consensus target of $190.50, implying an upside of roughly 74% [10][16] - The company reported Q3 2025 revenue of $3.41 billion, up 22% year-over-year, and raised its full-year guidance, indicating strong financial performance [11] - The stock is 42% below its level from one year ago, with a focus on its AI platform and strategic partnerships, although it trades at a trailing P/E of 64x [12] AppLovin - AppLovin's stock has fallen 34% year-to-date, currently priced at $444.93, with a consensus target of $661.59, suggesting an upside of about 49% [13][16] - The company reported exceptional Q4 2025 results, with revenue of $1.66 billion, up 66% year-over-year, and net income of $1.10 billion, up 84% [14] - Despite strong fundamentals, the stock's decline appears driven by valuation concerns and broader market sentiment, with a beta of 2.49 indicating high volatility [15] Summary of Performance Across All Four Stocks - The Trade Desk: Current Price $23.95, Analyst Target $36.73, Implied Upside ~53%, YTD Performance -37%, Analyst Buy % 53% [16] - Oracle: Current Price $150.31, Analyst Target $269.94, Implied Upside ~80%, YTD Performance -23%, Analyst Buy % 73% [16] - ServiceNow: Current Price $109.30, Analyst Target $190.50, Implied Upside ~74%, YTD Performance -29%, Analyst Buy % 91% [16] - AppLovin: Current Price $444.93, Analyst Target $661.59, Implied Upside ~49%, YTD Performance -34%, Analyst Buy % 86% [16]

Core Insights - ServiceNow's shares have declined by 41.9% over the past three months, underperforming the broader Computer and Technology sector and the Financial-Miscellaneous Services industry [2][3] - Concerns regarding short-term growth, rising AI and cloud spending, and acquisition integration risks have contributed to the stock's decline [3][10] - Despite the downturn, ServiceNow's fundamentals indicate potential for a hold position, supported by strong AI adoption and a discounted valuation [8][20] Company Performance - ServiceNow's stock has underperformed compared to competitors like SAP, Microsoft, and Salesforce, which saw declines of 19.3%, 20.8%, and 20.9% respectively [4] - The company is experiencing increased adoption of its AI-native products, with Now Assist exceeding $600 million in Annual Contract Value (ACV) and new ACV more than doubling year over year [9][10] - The growth in AI adoption is translating into platform expansion, with enterprises increasing AI use for customer service and operations [11] Competitive Landscape - Competitors such as SAP, Salesforce, and Microsoft are embedding service management and workflow automation into their larger enterprise platforms, posing challenges for ServiceNow [5] - ServiceNow is leveraging a rapidly expanding partner ecosystem, including collaborations with Microsoft, OpenAI, and industry-specific alliances, to enhance AI adoption and interoperability [12][13] Valuation and Market Position - ServiceNow's valuation remains attractive, with a forward 12-month Price/Sales (P/S) multiple of 6.48X compared to the industry average of 13.88X, indicating potential for appreciation [14] - The company is facing pressures from elevated AI spending, acquisition integration risks, and weak technical momentum, which may impact margins and investor sentiment in the near term [20]

Core Insights - ServiceNow (NOW) reported fourth-quarter 2025 adjusted earnings of 92 cents per share, exceeding the Zacks Consensus Estimate by 5.75% and reflecting a 26% year-over-year increase. Revenues reached $3.57 billion, surpassing the consensus mark by 1.25% and increasing by 20.7% year over year [1][8]. Revenue Performance - Subscription revenues improved by 20.9% year over year to $3.47 billion, while on a constant currency basis, revenues increased by 19.5% to $3.41 billion. Professional services and other revenues rose by 12.1% year over year to $102 million, with a constant currency increase of 11% to $101 million [2]. - The current remaining performance obligations (cRPO) stood at $12.85 billion, marking a 25% year-over-year increase on a reported basis and a 21% increase on a constant currency basis. Remaining performance obligations on a constant currency basis rose 22.5% year over year to $28.2 billion [3]. Client Growth and Product Performance - The company recorded 244 transactions exceeding $1 million in net new annual contract value (ACV) in Q4 2025, representing nearly 40% year-over-year growth. ServiceNow ended the quarter with 603 customers with over $5 million in ACV, reflecting approximately 20% year-over-year growth [4]. - AI-powered products such as Now Assist and Raptor significantly contributed to the growth in net new ACV, with RaptorDB Pro tripling its net new ACV year over year. The number of workflows and transactions grew over 33%, increasing from $60 billion to $80 billion and from $4.8 trillion to $6.4 trillion, respectively [5][6]. Operating Metrics - In Q4 2025, the non-GAAP gross margin was 80.3%, down 160 basis points year over year. The subscription gross margin was 82.7%, also contracting by 160 basis points year over year. Professional services reported a gross loss of $2 million compared to a gross income of $7 million in the previous year [7]. - Operating expenses as a percentage of revenues decreased by 180 basis points year over year to 64.2%, while the non-GAAP operating margin expanded by 140 basis points year over year to 30.9% [9]. Cash Flow and Share Repurchase - As of December 31, 2025, the company had cash and cash equivalents and marketable securities totaling $6.28 billion, up from $5.41 billion as of September 30, 2025. Cash from operations was $2.24 billion, compared to $813 million in the previous quarter, with free cash flow reaching $2.03 billion, up from $592 million in the prior quarter [10]. - The company repurchased 3.6 million shares in Q4 2025 and announced a new share repurchase authorization worth $5 billion, along with plans for a $2 billion accelerated share repurchase program [11]. Guidance for 2026 - For 2026, ServiceNow expects subscription revenues to be between $15.53 billion and $15.57 billion, indicating a rise of 20.5% to 21% from 2025. The guidance includes a 1% contribution from Moveworks. The non-GAAP subscription gross margin is anticipated to be 82%, with a non-GAAP operating margin of 32% and a free cash flow margin expected to be 36% [12]. - For Q1 2026, subscription revenues are projected to be between $3.65 billion and $3.67 billion, suggesting year-over-year growth of 21.5% on a GAAP basis [13][14].

ServiceNow (NYSE:NOW) Q4 2025 Earnings call January 28, 2026 05:00 PM ET Company ParticipantsAmit Zavery - President, Chief Product Officer, and COOBill McDermott - Chairman and CEODarren Yip - SVP of Investor Relations and Market InsightsGina Mastantuono - President and CFOKeith Weiss - Managing DirectorPatrick Walravens - Managing DirectorSamad Samana - Managing DirectorConference Call ParticipantsAlex Zukin - Managing Director and Senior AnalystBrian Schwartz - Managing Director and Senior AnalystGabriel ...

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]

Financial Data and Key Metrics Changes - Q4 subscription revenue reached $3.466 billion, growing 19.5% year-over-year in constant currency, exceeding guidance by 150 basis points [29] - Full year 2025 free cash flow margin was 35%, up 350 basis points year-over-year, and total free cash flow was $4.6 billion, up 34% year-over-year [35][36] - Operating margin for Q4 was 31%, 100 basis points above guidance, while full year operating margin was also 31%, up 150 basis points year-over-year [34][35] Business Line Data and Key Metrics Changes - Net new ACV growth accelerated both quarter-over-quarter and year-over-year, with emerging product areas like Now Assist, Workflow Data Fabric, and Raptor outperforming [29] - Now Assist surpassed $600 million in ACV, tracking towards a $1 billion-plus target for 2026, with deals greater than $1 million nearly tripling quarter-over-quarter [33] - RaptorDB Pro more than tripled NNA CV year-on-year in Q4, including 13 deals over $1 million [5] 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% and financial services at over 40% [30] - The number of customers contributing $20 million or more in ACV rose over 30% year-over-year, reflecting strong demand [31] 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 to enhance business processes [11][12] - ServiceNow's strategy includes opportunistic M&A to expand into a larger total addressable market (TAM), which is now beyond $600 billion [10] - The company emphasizes organic growth, stating it has the fastest organic growth in enterprise software history, reaching significant revenue milestones without relying solely on acquisitions [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand environment, noting that customers are increasingly looking for platforms that can deliver cross-functional AI capabilities [44][45] - The company anticipates a subscription revenue growth of 19.5%-20% for 2026, including contributions from recent acquisitions [36] - Management highlighted the importance of AI in driving operational efficiencies and improving margins, with expectations for continued margin expansion [37] Other Important Information - The company announced a $5 billion share repurchase authorization, with an immediate $2 billion accelerated share repurchase program [11][36] - The company closed the largest quarter ever for operational technology (OT) in Q4, indicating strong customer interest in expanded security capabilities [24] Q&A Session Summary Question: Can you provide insights on the demand environment and AI monetization? - Management noted that customers are recognizing the need for platforms that deliver positive ROI and are looking to consolidate their tools, leading to increased demand for ServiceNow's offerings [44][45] Question: How did the federal business perform in Q4? - Despite the government shutdown, the federal business saw significant deals and a strong pipeline, with growth in both federal and global government sectors [57][58] Question: What is the outlook for gross margins considering LLM costs? - Management indicated that while there are temporary headwinds due to strategic moves towards hyperscalers, overall margins are expected to improve as these deals scale [61][62] Question: What is the future of M&A for ServiceNow? - Management clarified that while there are no large-scale M&A plans, recent acquisitions were strategic for talent and technology, and they will focus on integrating these assets into their existing platform [70][71]

Core Insights - ServiceNow (NOW) is set to announce its fourth-quarter 2025 results on January 28, with expected revenues of $3.52 billion, reflecting a 19.2% year-over-year growth [1] - The consensus estimate for earnings per share is 87 cents, indicating a 19.2% increase from the previous year [1] Revenue and Earnings Estimates - The Zacks Consensus Estimate for fourth-quarter 2025 subscription revenues is $3.43 billion, suggesting a year-over-year growth of 19.5% on a GAAP basis [6] - Subscription revenues are projected to be between $3.42 billion and $3.43 billion, with constant currency growth estimated at 17.5% to 18% [6] Performance Trends - ServiceNow has consistently beaten the Zacks Consensus Estimate in the last four quarters, with an average surprise of 9.79% [4] - The company’s stock has declined by 41.7% over the past year, which is better than the Zacks Computer & Technology sector's return of 28.4% and the Computers – IT Services industry's decline of 22.6% [12] Strategic Developments - ServiceNow's AI products are expected to exceed $0.5 billion in Annual Contract Value (ACV) in 2025, with a target of reaching $1 billion in 2026 [18] - The acquisition of Veza enhances ServiceNow's security portfolio by focusing on identity security, which is crucial for managing access to sensitive data [18] - The $7.75 billion acquisition of Armis will strengthen ServiceNow's offerings in cyber exposure management and is expected to drive greater AI adoption [19] Partnerships and Integrations - ServiceNow has expanded its partnerships with major companies like NVIDIA and Microsoft, enhancing its AI capabilities and integration with enterprise workflows [10] - The collaboration with NVIDIA has led to the development of Apriel 2.0, which aims to improve AI reasoning and capabilities for enterprises [8] Valuation Insights - ServiceNow's current valuation is considered stretched, with a forward price/sales ratio of 8.73X compared to the sector's 7.32X [15] - The company holds a Zacks Rank 3 (Hold), suggesting that investors may want to wait for a more favorable entry point [20]

Group 1 - ServiceNow, Inc. is considered one of the oversold fundamentally strong stocks to buy currently [1] - Piper Sandler analyst Rob Owens reduced the price target for ServiceNow's stock to $200 from $230 while maintaining an "Overweight" rating, indicating cautious optimism for 2026 [1] - Citi maintained a "Buy" rating on ServiceNow with a price objective of $250.60, highlighting the positive industrial logic behind the acquisition of Armis, which adds predictive security features to its AI Control Tower offering [2] Group 2 - The acquisition of Armis is noted as ServiceNow's largest deal, although it is not considered transformative [2] - ServiceNow offers a cloud-based solution for digital workflows, but there are opinions that certain AI stocks may present greater upside potential with less downside risk [3]