Buy, Sell or Hold ServiceNow Stock? Key Tips Ahead of Q4 Earnings

ServiceNow NOW is scheduled to release its fourth-quarter 2025 results on Jan. 28.

The Zacks Consensus Estimate for fourth-quarter revenues is currently pegged at $3.52 billion, indicating 19.2% growth from the figure reported in the year-ago quarter.

The consensus mark for earnings is pegged at 87 cents per share, unchanged over the past 30 days and indicates growth of 19.2% from the figure reported in the year-ago quarter. 

Consensus Estimate Trend
 

ServiceNow’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 9.79%. 
 

ServiceNow, Inc. Price and EPS Surprise

ServiceNow, Inc. price-eps-surprise | ServiceNow, Inc. Quote

Let’s see how things are shaping up prior to this announcement.

NOW’s Q4 to Aid From Strong Subscription Revenue Growth

ServiceNow expects fourth-quarter 2025 subscription revenues between $3.42 billion and $3.43 billion, suggesting year-over-year growth in the range of 19.5% on a GAAP basis and in the 17.5% to 18% on a constant currency basis. The Zacks Consensus Estimate for fourth-quarter 2025 subscription revenues is pegged at $3.43 billion, indicating 19.5% year-over-year growth. 

ServiceNow’s workflows, including technology, ITSM, ITOM, ITAM, security and risk, CRM and industry, and core business workflows, continue to gain traction. The company is rapidly gaining traction among enterprises with its ServiceNow AI Platform. AI Control Tower deal volume
more than quadrupled sequentially in the third quarter of 2025. Increasing consumption of AI Agent Assist bodes well for NOW’s prospects.

ServiceNow’s expanding partner base includes the likes of NVIDIA NVDA, Microsoft MSFT, Figma FIG, Genesys and others. The expanded partnership with NVIDIA introduced Apriel 2.0, the next generation of NOW’s Apriel Nemotron open model family that is post???trained with NVIDIA and ServiceNow???provided data and engineered to deliver AI reasoning and multi-modal capabilities to enterprises in a faster, smaller, more cost???efficient footprint. ServiceNow workflows are now getting integrated with the NVIDIA AI Factory for Government reference design to reimagine data center operations.

ServiceNow expanded integrations with Microsoft, including a new one with Microsoft Agent 365 targeted at providing seamless, enterprise-grade orchestration, governance, and collaboration across AI agents and workflows. The expanded partnership connects ServiceNow’s AI Platform with Microsoft 365, Copilot, Foundry and GitHub. These integrations will help enterprises manage autonomous AI agents with unified controls, consistent policies and end-to-end visibility. The Figma partnership is helping enterprises bridge the gap between design intent and enterprise execution. Enterprises are linking Figma Design with the ServiceNow AI Platform, which will help teams move more smoothly from design to production, connecting creativity with governance, data and automation.

However, NOW shares have suffered from a worsening macroeconomic environment due to higher tariffs and trade uncertainty. Slowing growth prospects in the U.S. public domain have been a headwind for ServiceNow.

NOW Shares Lag Sector and Industry

NOW shares have dropped 41.7% in a year, outperforming the Zacks Computer & Technology sector’s return of 28.4% and the Zacks Computers – IT Services industry’s decline of 22.6%.

NOW Stock’s Performance

ServiceNow’s Value Score of F suggests a stretched valuation at this moment.

In terms of the forward 12-month price/sales (P/S), NOW is trading at 8.73X, higher than the sector’s 7.32X.

Valuation: NOW Shares Overvalued  

NOW Benefits From Strategic Acquisitions

ServiceNow’s AI products are expected to surpass $0.5 billion in ACV in 2025, and the company remains on track to achieve $1 billion in 2026. The announced acquisition of Veza is noteworthy in this regard. The deal strengthens NOW’s security and risk portfolios by expanding into identity security, which will help enterprises better understand and control who and what has access to sensitive data, systems, applications and AI assets, significantly reducing enterprise risks.

ServiceNow is expanding its security portfolio with the Armis acquisition. The company will pay a whopping $7.75 billion in cash for Armis, which is a dominant name in cyber exposure management and cyber-physical security across IT, Operational Technology (OT), medical devices and other fields for companies, governments and critical infrastructure (OT, IoT, Cloud, and IoMT) worldwide. Armis acquisition expands NOW’s security workflow offerings and will drive greater AI adoption by strengthening trust across a rapidly expanding threat surface. Armis currently generates more than $340 million in annual recurring revenues with over 50% year-over-year growth.

Conclusion

ServiceNow’s expanding portfolio, rich partner base and acquisitions are expected to drive its subscription revenues in the long term. However, macroeconomic headwind is a major concern along with a stretched valuation.

ServiceNow currently has a Zacks Rank #3 (Hold), which implies investors should wait for a favorable point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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