Noah
Stock Investor & Trader, US Equities
ServiceNow looks cheap because its own guidance implies roughly 7x free cash flow three years forward. LongGameEquity expects agentic spending to hit free cash flow over the next one to two years; that damage is not permanent, making the three-year horizon central to the valuation. x.com x.com x.comÂ
ServiceNow's unexpected expense surge makes its rich valuation more vulnerable in a struggling software sector. Revenue rose 21%, but spending drove an EPS miss and one quarter of guided cRPO deceleration; wider market conditions could hurt near term. The 20% selloff looks excessive, and few software companies should benefit as much from AI. Management could deliver over 3-5 years, though the stock is only close to a buy again now; below $100 looks good for the long term. x.com x.com x.com x.comÂ
ServiceNow's third-quarter subscription revenue, cRPO and operating-margin beats make its double-digit selloff look overdone. After a 77% rise from April lows, it needed a big beat and raise; lower fourth-quarter cRPO guidance and back-loaded implications for $30-$32 billion in subscription growth by 2030 leave the stock in show-me mode. x.comÂ
ServiceNow's costs are rising far faster than revenue without the RPO acceleration management promised. Q3 revenue rose 21%, while total cost of revenue climbed 56% and net income fell 45%; stock compensation appears to be using about half of free cash flow. The selloff looks deserved, though the shares are now closer to fair value. Sustainable margins and measurable returns remain the test. x.com x.com x.com x.com x.com x.comÂ
ServiceNow's AI contract growth and improving free cash flow margin make the 18% selloff excessive and its shares a massive discount among leading enterprise AI companies. AI net-new ACV rose 65%; its 2026 AI ACV target rose to $1.7B, up 70% from the start of the year. Adjusted operating margin slipped to 32.5% from 33.5%, but free cash flow margin rose to 20% from 17.5%. Acquisition costs, stock compensation and severance largely drove the GAAP decline. x.com x.com x.comÂ
ServiceNow looks like a buy below $100, trading at its lowest multiple in over a decade despite 20%+ growth, gross margins above 75% and a 40% free cash flow margin. Heavy insider buying and a sticky customer base add to the case that the market is being inefficient. x.comÂ
Investors dislike ServiceNow scaling up forward-deployed engineers, even though it is directionally right for customer outcomes. That aversion is the main reason the SaaS selloff is back. x.comÂ
ServiceNow should revalue from a silly low price because it is a blue-chip software company with a sticky customer base and big insider buying. Fears that frontier AI models will replace it are completely overblown. x.com x.comÂ
ServiceNow looks oversold at about 4x sales and under 20x forward earnings with revenue still growing over 20%. It never deserved the 18x sales multiple it once carried, which justified staying away until the compression @BradoCapital highlights brought it here. x.comÂ
ServiceNow's growth and deteriorating margins do not justify its valuation. It grew 3% quarter over quarter against a 107x trailing GAAP P/E, and its margins continue to deteriorate. It remains a great company, but is mostly saturated relative to that valuation. x.com x.com x.comÂ
Constellation Software offers the same growth rate as ServiceNow at half its multiple when ServiceNow's after-tax stock-based compensation is factored in. x.comÂ