ServiceNow Earnings: AI Buzzing Within Good Results; Guidance Is Solid Even After Normalization

Key Morningstar Metrics for ServiceNow

• Fair Value Estimate: $200.00
• Morningstar Rating: ★★★★
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: High

What We Thought of ServiceNow’s Earnings

ServiceNow’s NOW fourth-quarter revenue grew by 19.5% year over year in constant currency to $3.57 billion, driven by broad-based demand. Non-GAAP operating margin was 30.9% for the quarter. Results topped the high end of guidance on key measures.

Why it matters: Fourth-quarter results and guidance continue to reinforce that ServiceNow has separated itself from its enterprise software peers and is leading on AI monetization. The firm topped our revenue and margin estimates for the quarter, which also supports our long-term view.

• Subscription revenue topped the high end of guidance and grew 19.5% year over year in constant currency to $3.47 billion. We see strength across workloads and geographies, with healthy large deals. Demand from US federal accounts remained strong, but the government shutdown slowed bookings growth.

The bottom line: We lower our fair value estimate for wide-moat ServiceNow to $200 per share from $212, reflecting slightly lower medium-term growth and margins. We view the stock as undervalued and believe it offers the best combination of growth and profitability in software.

• Generative AI remains a key lever, one that should extend the growth story over the next five years. ServiceNow hit $600 million in annual contract value from AI solutions for the year, ahead of its $500 million goal, and it’s on its way to $1 billion in ACV in 2026.
• AI monetization continues, supporting our positive outlook on the company’s AI positioning and growth. Now Assist net new ACV more than doubled year over year, and AI Control Tower deal volume tripled sequentially, and Now Assist deals saw over 70% upsell expansion in the quarter.

Coming up: The full-year 2026 outlook is solid after normalizing for special items. Adjusting for a 1.0 point benefit from currency, a 0.5-point headwind from a shift to cloud service providers, and a 1.0-point benefit from Moveworks, growth is 18.75% at the midpoint.