Key Takeaways:
- AI Momentum: ServiceNow’s AI products are on track to exceed $500 million in ACV this year, doubling next year’s $1 billion target.
- Price Projection: Based on current growth, the stock could reach $188 by December 2027.
- Potential Gains: This target implies a total return of 32% from the current price of $141.80.
- Annual Return: Investors could see roughly 15% growth per year over the next 24 months.
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ServiceNow (NOW) has become the enterprise AI success story of recent years. While competitors struggle to monetize artificial intelligence, ServiceNow is delivering real results.
The company processed 75 billion workflows in Q3 and handled over 1 trillion transactions, proving its platform can scale AI across entire organizations.
The stock is up 800% over the past decade but down 30% over the past year. allowing you to buy the dip.
Subscription revenue grew 20.5% year-over-year in constant currency, beating guidance by a full percentage point. Operating margins hit 33.5%, three points above expectations. Most importantly, customers are actually using the AI features they’re paying for.
AI Assist consumption has surged 55x since May. That’s not a typo. Customers are running billions of AI-powered assists through the platform, creating a monetization flywheel that’s just getting started.
With 1,700 customers already live on Now Assist and adoption accelerating, ServiceNow is building the foundation for years of growth.
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What the Model Says for ServiceNow Stock
We built our valuation around ServiceNow’s position as the “AI workflow company.” Unlike chatbots or standalone AI tools, ServiceNow integrates AI across every business function, from IT operations to customer service to HR.
Using assumptions of 19.2% annual revenue growth and 32.3% operating margins, our model projects the stock will reach $188 within two years. This assumes a 35x price-to-earnings multiple at exit.
That’s well below ServiceNow’s historical average of 73.6x over the past decade. But it reflects the company’s evolution from a hypergrowth startup to a mature enterprise software leader.
The 35x multiple still commands a premium because ServiceNow is winning the AI race in ways most software companies aren’t.
Our Valuation Assumptions
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Our Valuation Assumptions
TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.
Here’s what we used for ServiceNow stock:
1. Revenue Growth: 19.2%
ServiceNow delivered 20.5% subscription revenue growth in Q3, and the momentum is building across multiple fronts:
Now Assist Scaling: The AI product suite closed 12 deals over $1 million in Q3, including one over $10 million. Customers like Lenovo are resolving cases 35% faster and achieving 100% satisfaction. Bell Canada is deflecting 3 million customer support calls annually and automating 90% of dispatch tasks. These aren’t pilot projects. They’re production deployments driving real ROI.
AI Control Tower Exploding: Deal volume quadrupled quarter-over-quarter. Every enterprise needs governance over its AI investments, and ServiceNow’s configuration management capabilities provide a single pane of glass to track, manage, and secure all AI activity. Companies like AstraZeneca are using it to manage AI initiatives at scale across their entire organization.
CRM Disruption: ServiceNow is attacking legacy CRM vendors with an AI-first approach. The company’s new CPQ solution is winning displacement deals globally, with multiple million-dollar transactions. One global tech company tripled its CPQ commitment after seeing results with one product line.
2. Operating margins: 32.3%
ServiceNow achieved 33.5% operating margins in Q3, demonstrating AI isn’t just a revenue story. The company is using its own platform to drive internal efficiency. Ninety percent of IT, customer service, and HR processes now run on AI agents rather than human staff.
This frees employees to focus on higher-value work while the platform handles routine tasks. The company is growing, hiring, and expanding margins simultaneously, proving AI can create value for employees and shareholders at the same time.
Our forecast of 32.3% margins assumes modest normalization from Q3’s exceptional performance. Management indicated they’ll invest in growth if ROI opportunities arise, which could slightly pressure margins. But the trajectory is clear: AI is unlocking structural margin expansion.
3. Exit P/E Multiple: 35x
ServiceNow currently trades at 52.3x trailing earnings. Our exit multiple of 35x reflects several factors:
Decelerating Growth: Revenue growth in the high-teens doesn’t command the same premium as the 32% growth ServiceNow posted over the past decade. As the company matures, multiples typically compress.
Federal Business Uncertainty: Management noted the government shutdown could impact Q4 deal timing. While demand remains strong, procurement processes take time. This introduces near-term uncertainty, even though ServiceNow’s federal business grew net-new ACV by over 30% year-over-year in Q3.
Re-rating Potential: If ServiceNow hits its $1 billion Now Assist target in 2026 and proves AI consumption scales as expected, the stock could command a higher multiple. But we’re staying conservative until the company demonstrates consistent execution over multiple quarters.
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What Happens If Things Go Better or Worse?
ServiceNow’s transformation into the AI platform for business is still unfolding. Outcomes depend on execution, competition, and macro conditions. Here’s how scenarios might play out through 2029:
- Low Case: If AI adoption slows and ServiceNow’s growth moderates to 16.5% annually with margins compressing to 25.4%, the stock would deliver 51% total returns over four years, or about 11% annually. Even in a disappointing scenario, the diversified business model provides downside protection.
- Mid Case: Our base case assumes 18.3% revenue growth and 27.3% margins. This delivers 99% total returns, or roughly 19% annually. This outcome requires ServiceNow to execute on its AI roadmap while maintaining pricing discipline and operational efficiency.
- High Case: If Now Assist adoption exceeds expectations and ServiceNow captures share from legacy CRM vendors, revenue growth could reach 20% with margins expanding to 29%. This scenario delivers 154% total returns, or about 26% annually, rewarded by a 21.5% EPS growth rate.
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The company has proven it can scale AI in production, but the full revenue impact won’t materialize for several more quarters as consumption ramps.
ServiceNow has established itself as the AI workflow company just as enterprises desperately need one.
With $500 million in AI ACV this year tracking toward $1 billion next year, 55x consumption growth, and structural margin expansion from internal AI adoption, the company is executing at an elite level.
At 35x forward earnings with 19% revenue growth, the stock offers compelling upside for investors who believe enterprise AI is just getting started.
How Much Upside Does ServiceNow Stock Have From Here?
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All it takes is three simple inputs:
- Revenue Growth
- Operating Margins
- Exit P/E Multiple
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
