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On Thursday, Bernstein analysts maintained an Outperform rating for ServiceNow shares, with a steady price target of $1,003.00. Currently trading at $1,014.76, the stock sits between analysts’ targets ranging from $724 to $1,300. According to InvestingPro data, ServiceNow maintains impressive gross profit margins of 79% and has demonstrated strong financial health. The focus of their analysis was on the potential impact of the company’s Pro Plus (GenAI) products on future revenue growth.
ServiceNow, which trades on the New York Stock Exchange under the ticker (NYSE:NOW), has been under the scrutiny of Bernstein analysts, who have been evaluating the GenAI tailwind for over a year. With revenue growing at 21% year-over-year to $11.47 billion and a robust five-year revenue CAGR of 26%, the company has established itself as a prominent player in the software industry. They recently reviewed insights from the latest quarter and analyst day, refining their revenue model based on these findings.
The Bernstein team addressed key uncertainties, such as customer adoption rates and whether the revenue would be incremental or simply a reallocation of existing budgets. Their findings indicate that customer adoption is currently outpacing previous projections, although revenue growth starts slower due to proof-of-concept purchase options before ramping up. They also concluded that the revenue appears to be mostly incremental and that a 30%+ realized price lift has been sustained so far.
Based on their detailed assumptions, Bernstein expects the Pro Plus offering to contribute approximately 3% in tailwinds to ServiceNow’s revenue through 2027. They estimate that the Plus SKU, which had an annual contract value (ACV) of over $200 million in Q4 of 2024, will grow to approximately $650 million by the end of 2025. Furthermore, they project that it will add over $500 million incrementally in 2026 and 2027, reaching around $1,200 million and $1,700 million by the end of those respective years. These projections are in line with ServiceNow’s own expectations of surpassing $1 billion by approximately 2026. For deeper insights into ServiceNow’s valuation and growth prospects, including 15 additional ProTips and comprehensive financial analysis, visit InvestingPro.
In other recent news, ServiceNow Inc. has announced a reshuffle in its sales division, with two top executives, Erica Volini and Ulrik Nehammer, set to leave the company. This change follows the earlier resignation of another key sales executive, Paul Smith, as the company focuses on AI-related products, projecting $1 billion in annual business from its flagship AI tool by next year. In terms of financial outlook, BMO Capital has increased its price target for ServiceNow to $1,150, maintaining an Outperform rating, citing the company’s growth prospects and product portfolio expansion. Cantor Fitzgerald also reiterated its confidence with an Overweight rating and a $1,048 price target, highlighting ServiceNow’s strategic position in the AI landscape.
At its recent Knowledge 2025 event, ServiceNow introduced AI agents for enterprise security, aiming to enhance cybersecurity measures and streamline workflows. The company announced partnerships with Microsoft (NASDAQ:MSFT) and Cisco (NASDAQ:CSCO) to develop AI-to-AI ecosystems, enhancing security and governance. Additionally, ServiceNow has launched its Workflow Data Network to improve data connectivity and intelligence, supported by a partnership with Amazon (NASDAQ:AMZN) Web Services. This initiative is further bolstered by ServiceNow’s intent to acquire data.world, enhancing data cataloging and governance capabilities. These developments underscore ServiceNow’s commitment to advancing AI and data-driven solutions across industries.
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