ServiceNow's AI Efficiency Push Has Analysts Targeting Big Gains

Despite recently posting better-than-expected Q3 2025 earnings, shares of tech giant ServiceNow (NYSE: NOW) keep taking hits. Shares rose around 2.5% the day after the Oct. 29 release. The stock has given back all of that gain and much more. Overall, shares are down 5% since the company reported, as of the Nov. 10 close.

However, interestingly, sell-side Wall Street analysts don’t appear deterred by the stock’s decline. They are now forecasting hefty upside in shares. Below, we’ll break down the latest data coming from ServiceNow and from analysts covering the stock. Ultimately, is there a compelling opportunity for investors in ServiceNow shares?

ServiceNow’s Q3: Growth Comes in Strong; Margins Expand

ServiceNow’s Q3 2025 was strong across the board. Revenues grew by 21.8% (20.5% in constant currency) to around $3.41 billion. This was slightly better than expected, with analysts forecasting a growth rate of approximately 19.8%. Adjusted earnings per share (EPS) of $4.82 equated to a growth rate of nearly 30%. It beat estimates by 61 cents, or 13% growth.

The company’s expanding margins were particularly impressive. Operating margin increased by 180 basis points to 16.8%, and adjusted operating margin rose 230 basis points to 33.5%. Notably, adjusted operating margin came in 300 basis points higher than ServiceNow’s guidance.

Even more importantly, the firm’s free cash flow (FCF) increased by 26%, significantly faster than revenue. Aiding this was a 50-basis-point expansion in adjusted FCF margin, which rose to 17.5%. This is key, as FCF growth is vital to creating value for shareholders.

Additionally, ServiceNow raised its full-year 2025 guidance on revenue, adjusted operating margin, and adjusted FCF margin. It expects the adjusted FCF margin to come in at 34%, a 200-basis-point increase over previous expectations. This would represent a 250-basis-point increase over 2024, lending significant support to a bullish thesis on ServiceNow.

How AI Is Powering Improvement and Growth at ServiceNow

The fact that ServiceNow’s margins are expanding is great, but one of the key reasons behind this is particularly noteworthy. The company says it is using artificial intelligence (AI) to drive operational expense efficiency. In other words, it is lowering costs using AI, helping margins increase.

Furthermore, the company is using the same AI tools it is selling or plans to sell to clients to drive this efficiency. It calls this its “ServiceNow for NOW” strategy, where it uses its own products internally before releasing them to the broader market. ServiceNow says that 90% of its internal IT, customer service, and HR processes are now performed by AI agents. This strategy has several benefits. First, it drives efficiency at the company itself. Second, it helps work out issues with these tools before clients get their hands on them. Lastly, the fact that ServiceNow’s margins are expanding provides evidence that these tools can do the same for clients. This helps validate the utility of the tools, supporting the idea that they will continue gaining traction.

Among customers, AI products are in fact gaining traction. It’s Now Assist tool beat annual contract value (ACV) expectations in Q3. The company says it is on pace to exceed its target of $500 million in AI product ACV in 2025. Additionally, its AI Control Tower product saw deal volume more than quadruple in one quarter. AI agent-assist consumption is also up by 55 times since May. All of these data points support the idea that ServiceNow’s AI product demand can continue growing strongly for multiple years.

Analysts Support a Positive Outlook on NOW

The MarketBeat consensus price target on ServiceNow is approximately $1,160, implying strong upside of 34% versus the Nov. 10 close. Price targets released after the company’s Oct. 29 earnings report are even more encouraging. MarketBeat tracked targets released on Oct. 30 average out to $1,191. This figure suggests that shares could rise by 37.5%. That is a bullish number, especially for a stock with extensive analyst coverage.

Overall, this price target data, combined with the impressive improvement that ServiceNow is seeing in its business, provides solid support for a bullish outlook on ServiceNow shares. Still, the company will need to avoid a significant deceleration in growth over the next few years to please investors.

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The article "ServiceNow's AI Efficiency Push Has Analysts Targeting Big Gains" first appeared on MarketBeat.