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Investing.com - Wolfe Research has reiterated an Outperform rating and $1,210.00 price target on ServiceNow (NYSE:NOW) following the company’s strong third-quarter performance despite government shutdown concerns. Currently trading at $911.70, the stock is fairly valued according to InvestingPro analysis, with analysts maintaining a strong consensus recommendation of 1.45 (Buy).
ServiceNow delivered subscription revenue growth of 20.5% year-over-year on a constant currency basis, exceeding expectations by 1 percentage point. The company’s current remaining performance obligations (cRPO) also grew 20.5% year-over-year, beating forecasts by 2.5 percentage points, partly due to early renewals contributing 1.25 percentage points. This performance aligns with the company’s impressive 21.12% revenue growth over the last twelve months, with total revenue reaching $12.06 billion.
The software provider raised its fiscal year 2025 guidance across key metrics, including subscription revenue growth to 20% from 19.75%, operating margin to 31% from 30.5%, and free cash flow margin to 34% from 32%. Federal business showed particular strength with 30% growth in net new annual contract value (NNACV). InvestingPro data shows ServiceNow maintains impressive gross profit margins of 78.52%, confirming its operational efficiency as a prominent player in the Software industry.
ServiceNow reported robust large deal momentum with 103 deals exceeding $1 million in NNACV, including six deals over $10 million. The company’s AI offerings gained significant traction, with Now Assist securing 12 deals over $1 million and AI Control Tower deal volume increasing more than four times quarter-over-quarter. With a market capitalization of $189.2 billion, ServiceNow operates with a moderate level of debt and sufficient cash flows to cover interest payments.
For the fourth quarter, ServiceNow has embedded 50-100 basis points of conservatism in its cRPO guidance and reduced subscription revenue projections by 150 basis points, primarily due to less self-managed federal business, while maintaining comfort with projected organic subscription revenue growth of approximately 18.5% for fiscal year 2026. Despite trading at a high P/E ratio of 115.09, InvestingPro rates the company’s overall financial health as GOOD with a score of 2.94. Discover 14 more exclusive ProTips and comprehensive analysis in ServiceNow’s Pro Research Report, available with an InvestingPro subscription.
In other recent news, ServiceNow reported its third-quarter earnings for 2025, surpassing market expectations. The company achieved an earnings per share of $4.82, exceeding the forecasted $4.26, and reported revenue of $3.41 billion, which was higher than the expected $3.35 billion. Additionally, ServiceNow’s subscription revenue grew by 21.5%, outperforming the 19.5% guidance. This strong financial performance led Goldman Sachs to raise its price target for ServiceNow to $1,250, maintaining a Buy rating. The firm noted that ServiceNow achieved its highest current remaining performance obligation growth since the third quarter of 2023. Despite these positive results, ServiceNow’s stock experienced a decline in trading. These developments reflect the company’s robust financial health and investor interest.
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