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On Thursday, ServiceNow (NYSE:NOW) shares were positively impacted following a reaffirmation of an Overweight rating and a steady price target of $1,048.00 by Cantor Fitzgerald. The endorsement came after ServiceNow reported first-quarter results for 2025 that surpassed expectations, despite concerns about economic headwinds and efficiency issues related to DOGE (a cryptocurrency) in the U.S. Federal sector. The company, with its impressive $192.07 billion market capitalization, continues to demonstrate strong financial performance with a remarkable gross profit margin of 79.18%, according to InvestingPro data.
ServiceNow’s reported remaining performance obligations (RPO) growth was a notable 25% (25.5% in constant currency), exceeding forecasts. The current RPO (cRPO) also showed strength, growing at 22% (22% in constant currency). This robust growth was attributed to significant federal contract wins, with net new annual contract value (ACV) growth of 30% in the first quarter, and expansion in large customer contracts exceeding $5 million in ACV, which saw a 29% increase. The company’s revenue growth of 22.44% in the last twelve months aligns with these strong operational metrics. InvestingPro analysis reveals 14+ additional key insights about ServiceNow’s growth trajectory and financial health.
The company’s expansion into new workflow areas such as customer relationship management (CRM) and the uptake of artificial intelligence (AI) technologies were credited for the strong performance. The AI technology demonstrated widespread strength across different workflows and continued to gain traction quarter over quarter in various segments.
In contrast to the fourth quarter of 2024, where foreign exchange (F/X) was a $175 million headwind, the first-quarter slide deck for 2025 highlighted a $39 million F/X benefit for the current year. After adjusting for prudence by $34 million, the net potential benefit from F/X was calculated to be $180 million, an improvement from the previous guidance provided in the fourth quarter of 2024.
Looking ahead, Cantor Fitzgerald analysts project a 17% growth in reported cRPO for the third quarter of 2025, or 22% after adjusting for a 200 basis points F/X impact and a 300 basis points seasonality conservatism for larger cohorts. This outlook is slightly more optimistic than their previous forecast of 21.5% and better than anticipated by the market.
ServiceNow shares experienced a surge of over 10% in after-market trading to approximately $900 per share. Cantor Fitzgerald’s reiterated Overweight rating and unchanged price target suggest a potential upside of around 20% from the current after-hours trading level, aligning with the one-year average next twelve months enterprise value to revenue (NTM EV/R) multiple. Trading at $932, the stock currently shows signs of being overvalued according to InvestingPro Fair Value calculations, with a P/E ratio of 117.48. Investors seeking deeper insights can access ServiceNow’s comprehensive Pro Research Report, available exclusively to InvestingPro subscribers, which provides detailed analysis of the company’s valuation metrics and growth potential.
In other recent news, ServiceNow reported first-quarter earnings that exceeded expectations, particularly highlighting strong performance in its federal vertical and robust demand for new products. Despite this positive outcome, the company has adopted a cautious outlook due to macroeconomic uncertainties. Piper Sandler adjusted its price target for ServiceNow to $1,120, maintaining an Overweight rating, emphasizing the company’s impressive contract value and momentum with AI modules. Mizuho (NYSE:MFG) Securities raised its price target to $1,025, citing strong growth in ServiceNow’s performance obligations and demand for its GenAI product suite. Canaccord Genuity also raised its price target to $1,075, maintaining a Buy rating and acknowledging ServiceNow as a high-quality software entity with consistent growth. Meanwhile, Guggenheim increased its price target to $724 but maintained a Sell rating, noting potential challenges despite the company’s positive quarterly results. Analysts from these firms are closely watching ServiceNow’s developments, particularly in AI and workflow automation, as they navigate a challenging economic landscape.
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