/ServiceNow%20Inc%20logo%20on%20phone-by%20rafapress%20via%20Shutterstock.jpg)
The landscape for enterprise software faces a shake-up. Cuts driven by the Department of Government Expenditure (DOGE) could dampen growth, yet the increasing need for automation could serve as a powerful counterbalance. The push for leaner operations often brings a surge in technology adoption, making software solutions more critical than ever.
ServiceNow (NOW) finds itself in the thick of this evolving landscape. Analysts at Truist have singled it out as one of the most vulnerable infrastructure players, prompting a downward revision of its price target from $1,100 to $950. Adding to its exposure, as per Truist, 9% of ServiceNow’s revenue is tied to U.S. federal government contracts, making policy shifts a significant factor in its trajectory.
This is not an isolated blow. In the past few days, ServiceNow has seen other price target cuts as well. With such forces at play, let us see what the road ahead holds for ServiceNow.
About ServiceNow Stock
With a market cap of $151 billion, ServiceNow (NOW) stands at the forefront of cloud computing, automating digital workflows to enhance enterprise IT operations. Its flagship Now Platform streamlines system processes, allowing organizations to boost productivity.
With its headquarters in Santa Clara, California, the company serves diverse end-markets, including financial services, consumer products, IT services, healthcare, government, education, and technology.
Over the past 52 weeks, NOW stock has now fallen 7.4%. Investors took notice when Truist’s Joel Fishbein slashed his price target by $150 per share, prompting a reaction in the market. On March 31, NOW shares slipped 0.2%, diverging from the broader market trend as the S&P 500 Index ($SPX) rose by 0.6%.
ServiceNow Meets Q4 Earnings
On Jan. 29, ServiceNow reported fourth-quarter earnings that aligned with Wall Street’s expectations. Revenue surged 21.3% year-over-year to $2.96 billion, perfectly meeting analyst projections. Subscription revenue rose to $2.9 billion, marking a 21.2% increase.
The non-GAAP operating margin came in at 29.5%. Meanwhile, adjusted EPS edged up 18% to $3.67, surpassing consensus estimates of $3.66 by a penny. By the quarter’s close, ServiceNow held $10 billion in cash and investments.
A key operational metric, current remaining performance obligations (cRPO), reached $10.27 billion as of Q4 2024, reflecting 19% year-over-year growth, or 22% in constant currency. To put it into perspective, that is twice the growth rate forecast by IDC for the IT sector in 2024.
Looking ahead, the company expects first quarter subscription revenue between $2.995 billion and $3 billion, reflecting 20% year-over-year growth at the midpoint. CRPO growth is projected at 20.5%, with an operating margin of 30%.
For the full year, subscription revenue is expected between $12.64 billion and $12.68 billion, marking 20% growth at the midpoint. The company forecasts a 30.5% operating margin, up 100 basis points year over year, and a free cash flow margin of 32%.
Analyst forecasts are also largely positive. They project ServiceNow’s fiscal 2025 first-quarter EPS to rise by 9.9% year-over-year to $2, with the full year bottom line expected to grow by 23.8% to $8.91. Looking ahead, 2026 is forecast to see a surge of 29.2%, reaching $11.51 per share.
What Do Analysts Expect for ServiceNow Stock?
Despite Truist’s recent price target cut from $1,100 to $950, the firm has maintained a “Hold” rating on NOW. This adjustment has not overshadowed the company’s solid fundamentals, including a $3 billion stock repurchase program, which highlights its financial strength.
Analysts overwhelmingly lean bullish, maintaining a consensus rating of “Strong Buy.” Among 38 analysts covering the stock, 30 recommend a "Strong Buy," three suggest "Moderate Buy," four suggest “Hold” while one advises "Strong Sell."
The average price target of $1,110.54 represents potential upside of 52%, while the Street-high target of $1,426.00 suggests that the stock can climb as much as 96% from the current price level.
