ServiceNow, Inc. (NOW): A Bull Case Theory

We came across a bullish thesis on ServiceNow, Inc. on Penny Insight. In this article, we will summarize the bulls’ thesis on NOW. ServiceNow, Inc.'s share was trading at $996.18 as of July 24^th. NOW’s trailing and forward P/E were 125.31 and 59.88 respectively according to Yahoo Finance.

ServiceNow (NOW) delivered a robust Q2 2025, with total revenue rising 22% year-over-year to $3.22 billion, about 3% ahead of consensus, driven by surging AI-led demand and expansion into large enterprise deals. Subscription revenue grew 22.5% to $3.11 billion, supported by 89 new contracts exceeding $1 million in annual contract value (ACV) and a record 528 customers with over $5 million in ACV.

Adjusted EPS climbed 30% to $4.09, surpassing expectations by over 14%, while operating margin expanded to 29.5%, exceeding guidance by 2.5 percentage points. Free cash flow margin improved to 16.5%, up nearly three points year-over-year, reflecting AI-enabled productivity gains and disciplined hiring. CRPO advanced 24% to $10.92 billion, signaling strong forward visibility, while renewal rates remained near 98% and the balance sheet held with no significant leverage concerns.

Management raised full-year 2025 subscription revenue guidance to $12.775–12.795 billion, above both prior guidance and Street estimates, and projected Q3 subscription revenue of $3.26–3.265 billion. On the call, leadership emphasized AI as “the new UI,” highlighting 50% sequential growth in AI-driven deals and $100 million in internal cost savings from its Now Assist platform. The company plans selective hiring in go-to-market roles to sustain enterprise adoption momentum.

Analysts were focused on the accelerating AI demand curve and efficiency in scaling deployments. While shares trade at a premium valuation that embeds high expectations, ServiceNow’s accelerating growth, expanding margins, and AI-driven operational leverage underpin confidence in sustained performance and position it as a key beneficiary of enterprise automation trends.

Previously, we covered a bullish thesis on ServiceNow, Inc. (NOW) by Compounding Your Wealth in April 2025, which highlighted its dominance in enterprise digital transformation, sticky customer base, and durable AI-driven growth tailwinds. The company’s stock has appreciated approximately 31.30% since our coverage, as the thesis played out with accelerating adoption and margin expansion. The thesis still stands, and Penny Insight shares a similar view, emphasizing strong Q2 results and raised guidance.

ServiceNow, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 106 hedge fund portfolios held NOW at the end of the first quarter which was 110 in the previous quarter. While we acknowledge the potential of NOW as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.