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On Thursday, Bernstein analysts adjusted their price target on ServiceNow (NYSE:NOW) shares, lowering it to $1,003 from the previous $1,021, while continuing to recommend the stock as Outperform. Currently trading at $924.81, InvestingPro analysis indicates the stock is trading above its Fair Value, with analyst targets ranging from $716 to $1,300. The revision follows ServiceNow’s first-quarter earnings for 2025, which, according to the analysts, showcased the company’s resilience in varying market conditions.
ServiceNow managed to slightly exceed revenue expectations, despite concerns of an economic downturn and potential revenue impacts from the Department of Defense Enterprise Office Solutions (DOGE). The company, which maintains impressive gross profit margins of 79.18% according to InvestingPro data, reported a constant currency (CC) revenue beat of approximately 40 basis points compared to the midpoint guidance and 13 basis points versus the high end of the range.
The analysts noted that prior to the earnings report, the market was curious about the company’s guidance. ServiceNow’s management has marginally revised its full-year CC revenue guidance downward by more than $35 million, including the in-quarter beat. This conservative approach aims to account for the possibility of flat growth in U.S. Federal net new Annual Contract Value (ACV) and weaker performance in certain sectors like manufacturing.
Despite the slight adjustment, Bernstein’s analysts believe that ServiceNow’s guidance sets the stage for potential strong future performance. With a current revenue growth rate of 22.44% and a strong financial health score of GOOD from InvestingPro, which offers 12+ additional exclusive insights about NOW, the management has reaffirmed its confidence in achieving $15 billion or more in revenue by 2026. Indicators of robust demand include a 30% year-over-year increase in U.S. Public Sector Q1 net new ACV, a doubling of manufacturing industry customers, and a sales pipeline that is fuller than usual.
ServiceNow’s GenAI offerings, referred to as the "Pro Plus SKU," are contributing to this positive momentum by driving up ACV per deal by one-third quarter over quarter and being adopted more quickly than previous products. The AI tools have also spurred an acceleration in the adoption of the Pro SKU, leading management to revise its target, suggesting that nearly all customers may upgrade to the Pro version eventually.
In other recent news, ServiceNow has reported strong first-quarter results, showcasing significant growth in its remaining performance obligations (RPO) and committed remaining performance obligations (cRPO). The company’s RPO grew by 25%, with net new annual contract value (ACV) growth of 30% in the first quarter, indicating robust demand and successful federal contract wins. Analysts from BMO Capital Markets, RBC Capital Markets, TD Cowen, and Cantor Fitzgerald have all expressed positive outlooks, with price targets ranging from $950 to $1,100. BMO Capital Markets raised its price target to $1,025, highlighting ServiceNow’s strong CRPO results and optimistic guidance for the June quarter. RBC Capital Markets increased its target to $1,060, noting ServiceNow’s momentum in AI and strategic execution. TD Cowen maintained a $1,100 target, emphasizing the company’s ability to manage risks while sustaining growth. Meanwhile, Cantor Fitzgerald reaffirmed a $1,048 target, crediting ServiceNow’s expansion into new workflow areas and AI technologies for its strong performance. Truist Securities maintained a $950 target, acknowledging ServiceNow’s cautious future outlook amid macroeconomic uncertainties while expressing enthusiasm for upcoming products.
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