Philip
Founder & CEO of Intrinsiqq, Value & Growth Investor
ServiceNow's Q2 beat the top of guidance on every metric, and its backlog and AI momentum are the real signal. cRPO reached $13.2 billion and total RPO $29.0 billion, both up 21%, while deals over $1 million in net new ACV rose nearly 40%. ServiceNow AI passed $1 billion in ACV, with agentic deployments up ninefold in nine months. Full-year subscription guidance rose to $15.76-15.78 billion. Watch the weak 16% Q2 free cash flow margin and federal revenue pulled forward from Q3. 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 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
ServiceNow keeps selling more to existing customers over time, one of the biggest reasons to be bullish long term. Its 2011 customer cohort's annual contract value grew from an indexed $100 to $3,730 by Q3 2026, or 37.3x, even including customer losses. x.comÂ
ServiceNow looks set up for a move now, framed simply as: if not now, then when? x.comÂ
ServiceNow's guidance growth is set to fall by another fifth next quarter, a poor trajectory rather than a buying opportunity after earnings. 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
Cost fears and CRPO misunderstandings caused ServiceNow's selloff. The stock is definitely undervalued; the market's reaction is ridiculous. 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 ranks among the favored stock picks in a list of top ideas. x.comÂ