Key Takeaways:
- Salesforce and ServiceNow are both trading at or near their lowest enterprise value-to-EBITDA multiples on record.
- ServiceNow’s forward revenue growth rate is nearly double Salesforce’s, but the valuation discount for CRM stock is much deeper.
- Using a three-year internal rate of return (IRR) model, ServiceNow projects a higher annualized return at 22.3% vs. 16.8% for Salesforce though CRM’s upside case is more dependent on multiple re-rating.
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Two of enterprise software’s biggest names, Salesforce (CRM) and ServiceNow (NOW), are sitting near multi-year valuation lows.
Both have pulled back sharply from their peaks. Both are integrating artificial intelligence across their platforms. And both are generating serious free cash flow.
So which one is the better buy right now?
The answer isn’t obvious. But the numbers offer some important clues.
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Why SaaS stocks can fall hard…..and bounce harder
To understand the opportunity here, it helps to analyze how software-as-a-service companies are valued.
SaaS businesses sell subscriptions. Customers pay monthly or annually, they rarely churn, and the revenue is highly predictable.
That creates strong, recurring free cash flow—the kind Wall Street typically rewards with premium multiples.
But when growth slows or macro uncertainty spikes, those multiples compress fast. That’s what’s happened to both CRM and NOW.
CRM vs. NOW: A side-by-side financial comparison
Salesforce is the world’s dominant customer relationship management (CRM) platform, with over $41 billion in revenue in fiscal year 2026. It’s now layering AI agents—called Agentforce—across its sales, service, and data products.
ServiceNow is the backbone of IT workflow automation for large enterprises, with $13.28 billion in revenue for the fiscal year ended Dec. 31, 2025. It’s expanding aggressively into human resources, finance, and AI-powered service management.
Here’s how the two compare on the metrics that matter most, according to TIKR.com estimates:
Revenue growth: ServiceNow is growing faster. Analysts project a revenue compound annual growth rate of 17.7% for NOW through fiscal 2030, versus 10.1% for CRM through fiscal 2029.
Operating margins: Both are profitable and expanding. Salesforce’s EBIT margin is expected to reach 36.7% by fiscal 2029. ServiceNow’s EBIT margin is projected to hit 36.4% by fiscal 2030. Essentially, a dead heat at maturity.
Free cash flow (FCF) margins: Salesforce runs at roughly 34%-35%. ServiceNow is in the 34%-36% range. Again, very similar.
Rule of 40: This is the go-to health check for SaaS stocks. Add revenue growth to the FCF margin—anything above 40 is considered strong.
Salesforce scores roughly 44-46 (10% growth plus 34% FCF margin). ServiceNow scores roughly 52-55 (20% growth plus 34% FCF margin). ServiceNow wins this round clearly.
Valuations are at historic lows but for different reasons
This is where it gets interesting.
Salesforce’s next-twelve-month (NTM) enterprise value-to-revenue multiple has fallen to 3.60x—its all-time low —versus a historical mean of 6.67x. Its NTM EV/EBITDA has dropped to 9.12x, against a mean of 27.21x.
ServiceNow tells a similar story. Its NTM EV/revenue sits at 5.84x, versus a mean of 13.14x. Its NTM EV/EBITDA is at 16.34x, versus a mean of 39.54x.
Both stocks are priced with very little optimism. The market is basically telling you: “prove it.”
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What the 3-year return models say
Using TIKR.com’s guided valuation tool, the numbers point to meaningful upside in both names—but ServiceNow looks slightly more compelling on a risk-adjusted basis.
The Salesforce model targets $264.36 per share by January 2029—a 54.7% total return from the current $170.85, or 16.8% annualized.
That assumes 10.3% revenue growth and a 36.4% operating margin, applied to a 12.9x price-to-earnings multiple.
ServiceNow’s model targets $155.71 per share by December 2028—a 73.4% total return from $89.81, or 22.3% annualized. That assumes 19.3% revenue growth and a 32.9% operating margin, applied to a 21.6x P/E multiple.
The higher growth justifies the higher multiple for NOW. And the larger absolute return potential reflects that.
See what analysts think about NOW stock right now (Free with TIKR) >>>
AI monetization is the wildcard for both SaaS stocks
Salesforce Chief Operating Officer Robin Washington said at the Morgan Stanley Technology, Media and Telecom Conference in March 2026 that the company saw “300% quarter-on-quarter adoption” of premium AI SKUs in the fourth quarter of fiscal 2026 and “real acceleration of ARR per customer” as enterprises move toward agentic deployments. She called for second-half acceleration in fiscal 2027.
ServiceNow is making similar moves, embedding AI into its platform to handle complex, multi-step workflows across departments. The faster it can convert AI adoption into higher contract values, the faster its already-strong Rule of 40 score climbs.
Both stocks need to deliver on AI monetization to justify a re-rating. For now, the market remains skeptical. But if either — or both — can prove the revenue inflection is real, the upside from these valuation floors could be substantial.
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How Much Upside Does CRM Stock Have From Here?
With TIKR’s new Valuation Model tool, you can estimate a stock’s potential share price in under a minute.
All it takes is three simple inputs:
- Revenue Growth
- Operating Margins
- Exit P/E Multiple
If you’re not sure what to enter, TIKR automatically fills in each input using analysts’ consensus estimates, giving you a quick, reliable starting point.
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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!
