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On Tuesday, Goldman Sachs reiterated its Buy rating and $1,150 price target on ServiceNow (NYSE:NOW) stock, which currently trades at $978.05. With a market capitalization of $202.4 billion and analyst targets ranging from $724 to $1,300, the stock has garnered significant attention from Wall Street. According to InvestingPro data, ServiceNow has achieved an impressive 34.6% return over the past year. The firm’s analysts attended ServiceNow’s Analyst Day on May 5, held in conjunction with Knowledge 2025, and came away with reinforced confidence in the company’s strategic direction. ServiceNow is seen as making significant progress in its transition from IT-centric workflows to a broader array of applications including ERP, CRM, and HCM.
The analysts highlighted ServiceNow’s deepening integration of data and artificial intelligence as a key accelerator of this transition, which they believe is expanding the company’s total addressable market (TAM). The opportunity for cross-selling and upselling within ServiceNow’s existing customer base of over 8,000 is substantial, according to Goldman Sachs. This growth potential is reflected in the company’s strong financial metrics, with InvestingPro data showing a robust revenue growth of 21% and an impressive gross profit margin of 78.9%. The analysts also noted that ServiceNow’s product and go-to-market organizations are likely to grow in response to the expanding product portfolio.
ServiceNow’s strategy includes rationalizing SKUs through Core Business Workflows, which target back-office functions, and the launch of the Now Next (LON:NXT) AI program to facilitate business transformation through AI. The analysts at Goldman Sachs view ServiceNow as well-positioned to capture a significant share of the increasing AI budgets within enterprises, citing its capabilities in data readiness through Workflow Data Fabric and Agent Orchestration.
Furthermore, with AI being a top priority for C-suite executives, and ServiceNow offering an enterprise-grade AI stack, the company is expected to gain more organizational buy-in. The analysts also pointed out ServiceNow’s potential to move customers up to Pro+ from Standard/Pro levels and its hybrid consumption vehicle as advantageous for the company to meet its new $1 billion AI annual contract value target, up from the current $250 million, and to achieve its reasserted goal of over $15 billion in subscription revenue by FY26.
In conclusion, Goldman Sachs believes that ServiceNow is on a strong trajectory to become a prime example of high-growth at scale combined with robust free cash flow, a distinction they consider rare among large-cap software companies. InvestingPro analysis supports this view, with the company receiving a "GREAT" overall Financial Health score and maintaining moderate debt levels. For deeper insights into ServiceNow’s valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Microsoft (NASDAQ:MSFT) and Meta Platforms (NASDAQ:META) reported quarterly earnings that exceeded expectations, driving their shares up by 8.1% and 6.9%, respectively. Microsoft’s strong performance was largely attributed to its thriving cloud business, which is benefiting from increased demand for AI services. Meta not only surpassed earnings expectations but also raised its full-year capital expenditure forecast, focusing on AI investments. Meanwhile, ServiceNow received several noteworthy updates from analysts. Erste Group upgraded ServiceNow’s stock rating from Hold to Buy, citing positive revenue projections and expected growth in subscription-based software revenues. UBS also raised its price target for ServiceNow to $1,025, maintaining a Buy rating despite a slight adjustment in the company’s growth forecast. In contrast, Bernstein slightly reduced its price target to $1,003 but continued to rate the stock as Outperform, acknowledging ServiceNow’s resilience in challenging market conditions. BMO Capital Markets increased its price target for ServiceNow to $1,025, highlighting the company’s strong performance and commitment to future revenue growth.
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