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

We came across a bullish thesis on ServiceNow, Inc. on Compounding Your Wealth’s Substack by Sergey. In this article, we will summarize the bulls’ thesis on NOW. ServiceNow, Inc.'s share was trading at $117.01 as of January 30th. NOW’s trailing and forward P/E were 70.07  and 27.93 respectively according to Yahoo Finance.

ServiceNow, Inc. provides cloud-based solution for digital workflows in the North America, Europe, the Middle East and Africa, Asia Pacific, and internationally. NOW delivered a strong “quality beat” quarter, marked by accelerating AI monetization, sustained demand, and expanding operating leverage. Q3 FY2025 subscription revenue reached $3.299 billion, growing 20.5% year over year in constant currency and exceeding guidance, while current RPO grew 20.5% to $11.35 billion and total RPO rose 23% to roughly $24.3 billion, both meaningfully ahead of expectations.

Profitability was a key highlight, with non-GAAP operating margin reaching 33.5%, well above guidance, and free cash flow margin at 17.5%. Management raised full-year subscription revenue guidance to approximately $12.84 billion, increased operating margin expectations to 31%, and lifted free cash flow margin outlook to 34%, reinforcing confidence in the company’s operating model.

IT service management remains the foundation of ServiceNow’s platform, but CRM is emerging as a credible and increasingly strategic growth vector. Rather than competing on feature parity with legacy CRM vendors, ServiceNow is positioning itself as a system of action that unifies sales, service, and fulfillment workflows.

CRM and industry workflows featured prominently in large deals, including multiple transactions above $1 million in net new ACV. AI-powered CPQ is becoming an important entry point, driving displacement wins and sizable expansions as customers scale across products, channels, and use cases.

Agentic AI is now central to both growth and margin expansion. AI products are on track to surpass $500 million in ACV in 2025, with a $1 billion target in 2026, supported by rapid adoption of agent-driven workflows. While AI revenue remains largely subscription-based today, consumption-based monetization is expected to become meaningful over time. Near-term risks relate mainly to timing, including potential Q4 volatility, but the broader outlook remains constructive as pilots convert into scaled platform deployments.

Previously, we covered a bullish thesis on ServiceNow, Inc. (NOW) by Compounding Your Wealth in April 2025, which highlighted the company’s dominance in enterprise workflow automation, strong platform stickiness, and long-term AI-driven growth opportunity. NOW’s stock price has depreciated by approximately 26.85% since our coverage (adjusted for stock split) due to valuation multiple compression amid broader software market volatility. Sergey shares a similar view but emphasizes accelerating AI monetization, CRM expansion through CPQ, and operating leverage.

ServiceNow, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 104 hedge fund portfolios held NOW at the end of the third quarter which was 106 in the previous quarter. While we acknowledge the risk and potential of NOW as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than NOW and that has 10,000% upside potential, check out our report about this cheapest AI stock.

READ NEXT: 30 Stocks That Should Double in 3 Years and 11 Hidden AI Stocks to Buy NOW 

Disclosure: None.