ServiceNow (NOW) Stock Forecast & Price Target

ServiceNow Inc has demonstrated robust growth, with a notable increase in its cohort of large customers, which has led to projected full-year subscription revenue growth of approximately 20%. The company has strengthened its dominance in the IT service management (ITSM) market, increasing its market share from 34% in 2020 to 40% in 2024, while also showing significant advancements in emerging areas such as AI and application development platforms. Furthermore, ServiceNow's subscription revenue reached $3,299 million, growing 21.5% year-over-year and exceeding the upper guidance limit, reflecting a strong performance particularly within the federal sector.

ServiceNow's financial outlook reveals a concerning trend, as its Rule of 40 score has declined to 54 from above 60, indicating a slowdown in revenue growth despite improvements in profitability. Furthermore, the company has experienced a year-to-date share price drop of 23%, significantly underperforming compared to broader software indices, suggesting an unfavorable market sentiment. Additionally, the guidance for subscription revenue growth indicates a sequential deceleration, coupled with operating margin forecasts falling below consensus expectations, which may hinder future growth prospects and negatively impact investor confidence.