ServiceNow Earnings: Solid Quarter With AI Galore; Guidance Light Based on Currency Pressure

Key Morningstar Metrics for ServiceNow

• Fair Value Estimate: $990.00
• Morningstar Rating: ★★
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium

What We Thought of ServiceNow’s Earnings

We are raising our fair value estimate for ServiceNow NOW to $990 per share from $900 after the company reported fourth-quarter results that were generally in line with or better than our expectations. While headline guidance was shy of our model on revenue, this is explained by worsening currency headwinds. Profitability was slightly better than anticipated.

Our fair value estimate moves higher based on slightly higher growth and profitability estimates for 2026 and 2027. Concurrent with earnings, the company made various announcements, including new agentic artificial intelligence features and expanded partnerships with Google and Oracle. The shares had appreciated about 80% from June until recent highs, which we thought was aggressive. Given the pullback after hours and our fair value estimate increase, we now see the shares as approximately fairly valued.

After an epic third quarter for revenue, we do not think a more “in line” fourth quarter suggests any demand or competitive issues. We do believe a steady topline quarter won’t help shares that were perhaps incorporating some momentum factor. Total revenue grew 21% year over year in constant currency to $2.96 billion, in line with our expectations, driven by solid renewals, generative AI, and customer workflow adoption, offset by slightly worse currency headwinds. Subscription revenue of $2.87 billion grew 21% year over year. Management called out the manufacturing, public, and transportation and logistics segments as performing well while reminding investors that macroeconomic conditions are unchanged.

ServiceNow’s margin performance remains impressive and supports our outlook for continued expansion throughout our long-term forecast. Non-GAAP operating margin was 29.5% for the quarter, compared with 29.4% last year and guidance of 29.0%. Strength was driven by spending discipline, revenue upside, and the timing of some expenses, not unlike other recent quarters.