We came across a bullish thesis on ServiceNow, Inc. on Compounding Your Wealth’s Substack by Sergey. In this article, we will summarize the bulls’ thesis on NOW. ServiceNow, Inc.'s share was trading at $822.07 as of December 1st. NOW’s trailing and forward P/E were 98.24 and 39.53 respectively according to Yahoo Finance. Analysts Diverge on GitLab as AI DevSecOps Push Meets Market Uncertainty Copyright: welcomia / 123RF Stock Photo ServiceNow (NOW) has established itself as a leading AI platform for ent ...

Core Insights - Sands Capital's Q3 2025 investor letter indicates a recovery in U.S. large-cap growth equities driven by strong corporate earnings, AI enthusiasm, and expectations for Federal Reserve policy easing [1] - The portfolio achieved a net return of 6.3% in the quarter, underperforming the benchmark's 10.5% gain [1] Company Analysis: ServiceNow, Inc. (NYSE:NOW) - ServiceNow is recognized as the leading provider of enterprise workflow automation software, holding a significant market share [3] - The stock experienced a one-month return of -11.95% and a 52-week decline of 22.92%, closing at $802.72 with a market capitalization of $167.087 billion on November 26, 2025 [2] - Despite concerns over potential government spending cuts and AI disruption, ServiceNow's fundamentals remain strong, with subscription revenue increasing by 22.5% year-over-year and operating margins expanding by 230 basis points [3] - The company reported a 50% year-over-year growth in its AI-enabled Pro Plus product, alongside increased adoption of other AI offerings [3] - In Q3 2025, ServiceNow's subscription revenues reached $3.299 billion, reflecting a 20.5% year-over-year growth in constant currency [4] - The stock is not among the 30 most popular stocks among hedge funds, with 106 hedge fund portfolios holding it at the end of Q2 2025, unchanged from the previous quarter [4]

Core Insights - ServiceNow (NYSE: NOW) has announced a five-for-one stock split following strong business performance driven by AI, indicating positive momentum in AI-assisted workflows [1][7] - The company reported a 22% year-over-year increase in total revenue to $3.4 billion, with subscription revenue rising by 21.5% to $3.3 billion, highlighting robust demand [4] - ServiceNow signed over one hundred new transactions exceeding $1 million in annual contract value, contributing to a 24% year-over-year increase in remaining performance obligations (RPOs) to $24.3 billion [5] Financial Performance - The third quarter performance exceeded the company's own guidance, showcasing the effectiveness of its AI platform for business transformation [6] - AI-related products are growing significantly faster than the overall business, with predictions that annual contract value (ACV) for AI products will exceed $1 billion next year, up from over $0.5 billion this year [10] - The AI Control Tower deal volume quadrupled sequentially in Q3, and AI Agent Assist consumption increased 55 times since the end of May, indicating strong growth potential [10] Market Outlook - Despite a recent stock price pullback, shares are considered expensive, suggesting cautious investor sentiment [9] - The company noted potential near-term uncertainties related to U.S. federal budgets amid a government shutdown, although federal business remains a strong area for AI-powered automation [6]

Core Insights - ISG has initiated a research study to evaluate providers within the ServiceNow ecosystem that assist enterprises in streamlining workflows across various industries [1][15] - The study will culminate in a series of ISG Provider Lens reports, focusing on AI-powered workflow transformation and the latest developments among ServiceNow partners, set to be published in April 2026 [2][5] ServiceNow Ecosystem and AI Integration - Enterprises are increasingly adopting AI agents, with ServiceNow positioned as a central control tower for these agents, as companies seek specialized, outcome-driven services for secure and scalable AI deployment [2][5] - ServiceNow's cloud-native platform is evolving rapidly, featuring recent releases like Yokohama and Zurich, which facilitate the transition to autonomous, multi-agent systems [4][5] Research Methodology and Quadrants - The research will involve surveys distributed to over 120 providers, leading to the creation of three quadrants that represent typical enterprise purchases related to ServiceNow [5] - The three quadrants include: 1. **ServiceNow Consulting and Implementation Services**: Evaluating providers that design and implement outcomes on the Now Platform [5] 2. **ServiceNow Managed Services**: Assessing providers that manage and optimize the Now Platform through various operational frameworks [5] 3. **Innovation on ServiceNow**: Covering providers that operationalize innovations using the ServiceNow AI Platform [5] Geographic Focus and Authors - The reports will analyze the global ServiceNow ecosystem market, with a focus on products and services available in regions such as the U.S., Brazil, Europe, and Asia Pacific [6] - Lead authors for the reports include ISG analysts specializing in different geographic regions [6] Customer Experience Data - The 2026 ISG Provider Lens evaluations will incorporate expanded customer experience data, reflecting actual enterprise experiences with specific provider services [8]

Financial Data and Key Metrics Changes - Subscription revenue for Q3 2025 was $3.299 billion, growing 20.5% year over year in constant currency, exceeding guidance by 100 basis points [20] - Remaining performance obligations (RPO) ended at approximately $24.3 billion, representing 23% year over year constant currency growth [20] - Current RPO was $11.35 billion, reflecting 20.5% year over year constant currency growth, beating guidance by 250 basis points [20] - Non-GAAP operating margin was 33.5%, 300 basis points above guidance, driven by top-line outperformance and operational efficiencies [23] - Free cash flow margin was 17.5%, up 50 basis points year over year [23] Business Line Data and Key Metrics Changes - Now Assist had 12 deals over $1 million in net new ACV, including one over $10 million, indicating strong performance [22] - IT Service Management (ITSM) and HR Plus net new ACV doubled quarter over quarter, while IT Operations Management (ITOM) Plus net new ACV surged more than 5x quarter over quarter [22] - Customer Service Management (CSM) Plus deal volume tripled year over year [22] Market Data and Key Metrics Changes - The transportation and logistics sector led growth with over 90% year over year increase in net new ACV, followed by retail, hospitality, and education sectors, both growing over 50% [21] - The U.S. Federal business grew net new ACV over 30% year over year, showcasing strong demand in the government sector [21] Company Strategy and Development Direction - The company is focusing on AI business transformation, with a target of exceeding $1 billion in AI products ACV by 2026 [7][22] - ServiceNow is positioning itself as a leader in enterprise AI, integrating various technologies to provide comprehensive solutions [10][19] - The company is raising guidance for Q4 and full-year 2025, reflecting confidence in its growth trajectory and market opportunities [7][24] Management's Comments on Operating Environment and Future Outlook - Management expressed strong confidence in the future, highlighting the significant market opportunity for the platform and the ongoing demand for AI solutions [6][7] - The company acknowledged potential impacts from the ongoing government shutdown on deal timing in the U.S. Federal business for Q4 [26] Other Important Information - The Board of Directors approved a five-for-one stock split to make shares more accessible to a broader base of investors [24] - The company ended Q3 with $9.7 billion in cash and investments, indicating a robust balance sheet [23] Q&A Session Summary Question: Integration and Implementation of Agentic Technology - Bill McDermott discussed the importance of integration expertise and the role of external partners in successfully implementing agentic technology [30][31] Question: Broader Sales Organization and AI Solutions - Amit Zavery confirmed that the sales organization is becoming more adept at selling AI solutions, with a growing number of customers live on the platform [41] Question: Federal Government Shutdown Impact - Gina Mastantuono explained that while demand remains strong, the government shutdown has led to a more prudent approach in guidance [45][46] Question: Demand Trends and AI Consumption - Bill McDermott highlighted strong demand trends and the significant growth in AI consumption, particularly in the context of customer engagement [50][51] Question: MoveWorks Acquisition Update - Gina Mastantuono provided an update on the expected closing of the MoveWorks deal, emphasizing that current successes are independent of this acquisition [75] Question: AI Control Tower Demand - Amit Zavery noted that the AI Control Tower is gaining significant interest from customers concerned about managing AI security and compliance [80]

Financial Data and Key Metrics Changes - Subscription revenue for Q3 2025 was $3.299 billion, growing 20.5% year over year in constant currency, exceeding guidance by 100 basis points [20] - Remaining Performance Obligations (RPO) ended at approximately $24.3 billion, representing 23% year over year constant currency growth [20] - Current RPO was $11.35 billion, reflecting 20.5% year over year constant currency growth, beating guidance by 250 basis points [20] - Non-GAAP operating margin was 33.5%, 300 basis points above guidance, driven by top-line outperformance and operational efficiencies [23] - Free cash flow margin was 17.5%, up 50 basis points year over year [23] Business Line Data and Key Metrics Changes - Now Assist had 12 deals over $1 million in net new ACV, including one over $10 million, indicating strong performance [22] - IT Service Management (ITSM) and HR Plus net new ACV doubled quarter over quarter, while IT Operations Management (ITOM) Plus net new ACV surged more than 5x quarter over quarter [22] - Customer Service Management (CSM) Plus deal volume tripled year over year [22] Market Data and Key Metrics Changes - The transportation and logistics sector led growth with over 90% year over year increase in net new ACV, followed by retail, hospitality, and education sectors, both growing over 50% [21] - The U.S. Federal business grew net new ACV over 30% year over year, demonstrating strong demand [21] Company Strategy and Development Direction - The company is focused on AI business transformation, with a target of exceeding $1 billion in AI products ACV by 2026 [7][22] - ServiceNow aims to integrate AI into enterprise workflows, emphasizing the importance of governance and management of AI technologies [8][10] - The company is raising guidance for Q4 and full-year 2025, reflecting confidence in market opportunities and operational execution [7][24] Management's Comments on Operating Environment and Future Outlook - Management expressed strong confidence in the future, highlighting the significant market opportunity for the ServiceNow platform [6][7] - The ongoing government shutdown may impact deal timing in the U.S. federal business, but demand remains strong [26][45] - The company is optimistic about the trajectory of its business, with a robust pipeline heading into Q4 [53] Other Important Information - The Board of Directors approved a five-for-one stock split to make shares more accessible to a broader base of investors [24] - The company ended Q3 with $9.7 billion in cash and investments, indicating a strong balance sheet [23] Q&A Session Summary Question: Integration and Implementation of Agentic Technology - Bill McDermott discussed the importance of integration expertise and the role of external partners in implementing agentic technology [30][31] Question: Broader Sales Organization and AI Solutions - Amit Zavery confirmed that the sales organization is becoming more adept at selling AI solutions, with a growing number of customers live on the platform [41] Question: Federal Government Impact on Guidance - Gina Mastantuono explained that the company has factored in prudence regarding the federal government shutdown, affecting deal timing [45][46] Question: Demand Trends and AI Consumption - Bill McDermott noted that demand is stronger than ever, with significant growth in AI consumption and utilization [50][51] Question: MoveWorks Acquisition Update - Gina Mastantuono indicated that the MoveWorks deal is expected to close towards the end of Q4, enhancing ServiceNow's AI capabilities [75] Question: AI Control Tower Demand - Amit Zavery highlighted the strong interest in the AI Control Tower, which addresses customer concerns about managing AI technologies [80]

Core Insights - AI is fundamentally reshaping the global economy, impacting both consumers and companies, as stated by Bill McDermott, CEO of ServiceNow [1][2] - The current AI spending boom is significant, with trillions being invested in AI infrastructure, although many digital transformation projects are failing to deliver returns [10] Company Developments - ServiceNow is experiencing a surge in demand for its AI-powered offerings, leading to a strong third-quarter performance with subscription revenue of $3.3 billion, a 22% year-over-year increase [15] - The company has raised its full-year guidance for subscription revenue, operating margin, and free cash flow, reflecting confidence in its AI capabilities [15][16] - ServiceNow is actively hiring in areas such as sales, technology architecture, and engineering to support its AI initiatives and is also focusing on re-skilling existing employees [4][5] Market Trends - The rise of generative AI poses a potential threat to the software industry, with concerns that companies may develop their own software instead of purchasing from vendors like ServiceNow [11] - Despite these concerns, McDermott asserts that ServiceNow's long-established platform cannot be easily replicated by customers [12][14] Product Innovations - ServiceNow's AI products, including Now Assist and Workflow Data Fabric, have shown strong uptake among both new and existing customers, with 103 deals exceeding $1 million in net new annual contract value [16] - The company is also investing in AI innovations and partnerships, enhancing its integration of AI into enterprise workflows [17]

Core Insights - ServiceNow (NOW) and Figma (FIG) utilize SaaS and PaaS technologies to assist enterprises in business transformation, with ServiceNow focusing on AI-powered workflow solutions and Figma on collaborative design-prototyping [1] Group 1: ServiceNow (NOW) Overview - ServiceNow's Workflow Data Fabric is gaining traction, included in 17 of the top 20 largest deals, combining data, analytics, and AI for improved enterprise outcomes [2] - The Zurich platform enhances AI adoption with multi-agentic AI, enterprise-grade security, and autonomous workflows, featuring tools like Build Agent and Developer Sandbox for application development [3] - ServiceNow's partnerships with companies like NVIDIA and Amazon Web Services are enhancing its AI capabilities and data integration solutions [4] - For Q3 2025, ServiceNow anticipates subscription revenues between $3.26 billion and $3.265 billion, reflecting a year-over-year growth of 19.5% at constant currency [5] Group 2: Figma (FIG) Overview - Figma launched four new products at its annual conference, expanding its portfolio and enhancing developer workflows with the Dev Mode MCP server [6] - New features have been introduced to improve user engagement, including integration with ChatGPT for AI-generated diagrams [7] - Figma expects Q3 2025 revenues between $263 million and $265 million, indicating a 33% year-over-year growth, but slower than the 41% growth in Q2 2025 [9] Group 3: Performance and Valuation Comparison - In the last three months, NOW shares decreased by 4.7%, while FIG shares fell by 56.4% [10] - Both NOW and FIG shares are currently considered overvalued, with a Value Score of F [13] - The Zacks Consensus Estimate for NOW's 2025 earnings is $16.82 per share, indicating a 20.8% rise year-over-year, while FIG's estimate is 30 cents per share, reflecting a 108% increase year-over-year [14][15] Group 4: Competitive Landscape - ServiceNow's strong AI portfolio and partner ecosystem are expected to drive its growth, while Figma faces competition from established players like Adobe and Microsoft, which have more advanced AI initiatives [16][17]

Group 1 - ServiceNow, Inc. (NYSE:NOW) is recognized as one of the most promising AI stocks, with a "Buy" rating and a price target of $1,200.00 from TD Cowen analyst Derrick Wood [1][2] - The company is expected to report strong Q3 2025 results, driven by robust US federal bookings and a positive outlook on AI adoption, which may mitigate concerns over government spending uncertainties [1] - ServiceNow has shown strength in the enterprise segment, with increased demand for AI-related workloads and larger average deal sizes due to product bundling and successful upgrades [2] Group 2 - Innovations such as Workflow Data Fabric and AI Experience, along with strategic acquisitions, position ServiceNow well for future opportunities in CRM and AI monetization [2] - ClearBridge Investments highlighted ServiceNow as a leader in the monetization of generative AI, targeting $1 billion in annual contract value from AI-related products by 2026 [3] - While ServiceNow is acknowledged for its potential, some analysts believe other AI stocks may offer greater upside potential with less downside risk [3]

Core Insights - ServiceNow (NOW) is experiencing significant growth with its AI Platform, securing 21 deals with five or more Now Assist products in Q2 2025, and over 50% sequential growth in deals including AI Pro Plus across ITSM, CSM, and HR [1][10] Group 1: Enterprise Adoption and Product Offerings - Major enterprises such as Adobe, Aptiv, Visa, EY, ExxonMobil, and Standard Chartered are utilizing ServiceNow AI to enhance sales cycles, service delivery, and operational efficiency [2] - The Workflow Data Fabric is included in 17 of ServiceNow's top 20 deals, combining data, analytics, and AI to deliver faster outcomes for enterprises [3][10] - The new Zurich platform and AI Experience are expected to drive rapid AI adoption through multi-agentic AI development and autonomous workflows [4][10] Group 2: Competitive Landscape - ServiceNow faces intense competition from Atlassian, Salesforce, and Oracle, with Atlassian seeing a 20 times year-over-year increase in AI interactions [6] - Salesforce is expanding its platform adoption by integrating various workflows, while Oracle leverages a strong partner ecosystem to enhance its offerings [7][8] Group 3: Financial Performance and Valuation - ServiceNow shares have declined by 14.8% year-to-date, underperforming the broader Zacks Computer and Technology sector's return of 21.6% [9] - The stock is considered overvalued with a forward price/sales ratio of 12.49X compared to the sector's 6.83X, and it carries a Value Score of F [12] - The Zacks Consensus Estimate for Q3 2025 earnings is $4.21 per share, indicating a 13.2% year-over-year growth, while Q4 2025 earnings are estimated at $4.40 per share, suggesting a 19.9% year-over-year improvement [14]