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

We came across a bullish thesis on ServiceNow, Inc.  on Rijnberk InvestInsights’s Substack by Daan | InvestInsights. In this article, we will summarize the bulls’ thesis on NOW. ServiceNow, Inc. 's share was trading at $879.94 as of August 25^th. NOW’s trailing and forward P/E were 110.68 and 52.63 respectively according to Yahoo Finance.

ServiceNow (NOW) has established itself as one of the highest-quality compounders in enterprise software, with its NOW platform deeply embedded across IT, HR, customer service, and governance workflows. The company continues to defy the rule of large numbers, delivering Q2 revenue growth of 22.4% YoY to $3.22 billion, well above expectations, while maintaining a 98% renewal rate and accelerating remaining performance obligations to $24 billion, up 26% in constant currency.

This resilience underscores the platform’s mission-critical nature and customers’ willingness to expand usage even in tight IT budget environments. ServiceNow’s land-and-expand strategy remains its core engine, with 99% of new ACV from multi-module deals and 86% of customers now using five or more products, driving larger contract values and deepening stickiness. Platform expansion into new verticals such as CRM and IT asset management further illustrates its ability to extend relevance and win share, with CRM adoption already exceeding $1.4 billion ACV.

Financially, NOW operates with expanding margins, posting a 29.5% operating margin and 16.5% FCF margin in Q2, backed by a fortress balance sheet with $10.8 billion in cash versus $2.4 billion in debt. Beyond current performance, ServiceNow’s agentic AI capabilities represent a generational growth opportunity. Through its neutral platform-of-platforms architecture, NOW Assist is gaining strong traction, with ACV exceeding $250 million and adoption growing rapidly, creating significant uplift in deal size.

Management raised FY25 guidance, pointing to 20% subscription revenue growth and Rule of 50 metrics, with longer-term targets also conservative. While valuation remains premium at ~50x earnings, ServiceNow’s durable growth, expanding profitability, and unique AI positioning support a compelling risk/reward, with a 2027 target of $1,268 per share implying ~17% annualized returns.

Previously we covered a bullish thesis on ServiceNow, Inc. (NOW) by Compounding Your Wealth in April 2025, which highlighted its moat in workflow automation, customer stickiness, and long-term growth supported by AI and automation. The company’s stock price has appreciated approximately 12% since our coverage. This is because strong execution and durable demand have played out. The thesis still stands as secular tailwinds remain intact. Daan | InvestInsights shares a similar view but emphasizes accelerating RPO growth, multi-module adoption, and agentic AI traction.

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.