ServiceNow’s AI business just surpassed $1 billion. Here’s what it means for stocks

quick read

• NOW’s AI business has seen a 9x spike in agent adoption and more than $1 billion in annual contract value, but the stock is down 50% from its peak.

• CRM is growing at half the pace of ServiceNow’s subscription revenue while maintaining a $133 billion market cap, confirming that NOW’s compressed multiple has room to grow again.

• Act now. Analysts who called NVIDIA in 2010 just listed their top 10 AI stocks, and ServiceNow didn’t make the list. Get your name for free now.

ServiceNow (NYSE:NOW) has accomplished something no enterprise software company has ever done at this pace. The company’s AI business has more than $1 billion in annual contract value, and agent adoption has increased 9x in 9 months. However, the stock price has fallen 50.4% over the past year. Our 24/7 Wall Street price target shows that disconnect is an opportunity.

ServiceNow’s price target for the next 12 months is $216.50, representing a 126.8% upside from the current price of $95.46. Our model gives a bullish signal with 90% confidence.

Reasons why stock prices plummeted and stock prices plummeted

ServiceNow is down 37.69% year-to-date, down 8.85% over the past week, and is 33% below its 52-week high of $210.20. Second quarter 2026 EPS was $0.90 compared to estimates of $0.8564, and revenue was $3.987 billion, up 24% year-over-year. Subscription revenue increased 24.5%, with total RPO reaching $29 billion.

“ServiceNow’s excellent second quarter results solidify our position as a leading, fast-growing enterprise software and cybersecurity company,” said CEO Bill McDermott. Management raised its fiscal 2026 subscription revenue outlook from $15.76 billion to $15.78 billion. This selloff reflects sector-wide multiple compression across software while corporate execution continues to be strong.

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Why bulls are predicting a breakout

The bull case hinges on AI Control Tower becoming the governance layer for enterprise agent AI. ServiceNow has closed 123 net new ACV deals of over $1 million (up almost 40% year-over-year) and currently has 658 customers spending over $5 million in ACV. partnership with Nvidia Project Arc’s (NASDAQ:NVDA), Action Fabric’s Anthropic, and nearly all 50 U.S. states running the ServiceNow AI platform are strengthening their moats.

The analyst consensus target of $141.64 is backed by 43 buy or strong buy ratings to every sell, suggesting significant upside potential. If margin expansion and AI attach rate continue, the bullish scenario would reach $229.69. Management is targeting $30 billion in subscription revenue and AI reaching 30% of ACV by 2030.

what is wrong

Operating income decreased 54.75% year over year to $162 million, and GAAP subscription gross margin decreased from 80% to 73.5%. This reflects amortization from the Armis and Veza acquisitions. Free cash flow still increased 20.53% to $634 million. Non-GAAP operating margin guidance remains at 31.5% for fiscal 2026.

The second quarter benefited from the US federal government’s on-premises reduction from the third quarter, but the third quarter faces a $35 million currency headwind on cRPO. Our bearish scenario is fixed at $173.48.

How ServiceNow compares to Salesforce and Workday

Salesforce (NYSE:CRM) has a P/E ratio of 18x and Q1 2027 earnings growth of 13.3%. ServiceNow is growing subscription revenue nearly twice as fast, but its $98 billion market cap lags Salesforce’s $133 billion. This gap makes our goals conservative.

Workday (NASDAQ:WDAY) has a P/E ratio of 38x, but its subscription revenue growth is 14.3% year over year, slower than ServiceNow’s 24.5%. Investors are paying a premium for Workday’s slower growth, confirming that ServiceNow’s multiple has room to grow again.

ServiceNow Price Forecast 2026-2030

24/7 Wall Street’s price target of $216.50 reflects the company’s 9x expansion in AI business and 24% growth, which is in line with its slower-growing peers. This setup favors investors who can tolerate the volatility on the road to the Rule of 60. Stay on the sidelines only if Enterprise Software stock prices are further compressed by macroeconomic shocks.

Assuming the AI ​​monetization drive and $30 billion subscription revenue goal by 2030 stays on track, ServiceNow’s 24/7 Wall Street Price Targeting Model project could look like this:

These predictions assume that ServiceNow will run with AI Control Tower implementation and margin discipline. Extensive multiple software resets and slower monetization of enterprise AI than management guides can have significant downsides.

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