NOW
ServiceNow, Inc.
AI Workflow Software
~$93
Post-5:1 split (Dec 18, 2025) · Mkt Cap ~$192B
Down ~40% from split-day; down ~30% YTD
✦ STRONG ADD — MOST COMPELLING RERATING
Entry zone: $85–100
Forward P/E compressed from 95-110× historical to 21-25× — same 22% revenue growth, accelerating AI ACV. Iran war FX headwind caused non-fundamental 14-17% post-print selloff. Institutional PT consensus $182 (105% upside from $93).
Fwd P/E
21–25×
vs 95-110× hist avg
PEG
0.84
Q1 Rev Growth
+22%
Sub $3.67B, +22%
FCF Margin
44%
Q1 2026
Rule of 40
57
22% + 35% FCF
cRPO
$12.64B
+22.5% YoY
Consensus PT
$182
105% upside
Next Earnings
~Jul 23
Q2 2026 · Est.
Valuation vs Growth
A+
Fwd P/E 21-25× vs 3Y/5Y avg 111×/180×. Deepest discount to own history in NOW's 14-year public life. Same 22% growth rate, same quality business, same FCF generation — stock just fell 40%. PEG 0.84. Only 18% above peer software median. 2030 subscription target $30-32B (from $15.7B 2026).
Most compelling rerating opportunity in the universe.
Fundamentals vs Hype
A
Rule of 40 = 57 (22% growth + 35% FCF). Now Assist ACV target raised $1B → $1.5B mid-year. Customers spending $1M+ on Now Assist grew 130%+ YoY. RPO $27.7B (+25%). Beat Q1 revenue and sub guide. Stock fell on Iran FX headwind (75bps growth drag) — non-fundamental. Armis acquisition adds margin pressure near-term.
Grounded — non-fundamental derate creating opportunity.
Institutional vs Retail
B+
~88% institutional ownership. Mixed Q1 13F — some trimming after sell-off. Short interest 3.78% (elevated for large-cap software — bears are positioned). Consensus PT $182 vs spot $93. Wide PT dispersion ($85 KeyBanc → $236 Bernstein). Retail demoralized post-selloff.
Mixed flow — institutional accumulation thesis vs near-term derate.
Verdict
Strong Add. This is the most mathematically compelling setup in the universe right now: a 14-year compounder that has never had a bad year trading at its lowest valuation relative to own history, while its AI revenue (Now Assist) is accelerating and management raised full-year guidance on the same print that crashed the stock. The Iran war FX headwind (75bps) is the mechanism, not a structural deterioration. The business is exactly what it was when it traded at 95-110× forward earnings.
Entry zone: $85–100 (current ~$93 is within range — start building)
⚠ Key Risks
- 01Iran war FX headwind persistence — 75bps Q1 drag; every additional 25bps = $50M ARR impact into Q2/Q3
- 02$7.75B Armis acquisition — margin dilution and integration risk; gross margin already down from 79% to 75%
- 03DOGE federal budget pressure — government revenue segment facing headwinds; unclear magnitude
- 04AI agent disintermediation (UBS Neutral thesis) — if AI agents bypass workflow platforms, NOW's $30B 2030 target is at risk
- 05cRPO deceleration below 20%: if Q2 subscription growth prints below 19% cc, sentiment turns negative again