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

We came across a bullish thesis on ServiceNow, Inc. on Business Invest’s Substack by Francesco Ferrari. In this article, we will summarize the bull’s thesis on NOW. ServiceNow, Inc.'s share was trading at $996.32 as of June 24^th. NOW’s trailing and forward P/E ratios were 135.19 and 60.24, respectively, according to Yahoo Finance.

ServiceNow (NOW), with a market cap of $209.4 billion, continues to demonstrate robust fundamentals and long-term compounding potential despite seemingly rich valuation metrics. Over the past three years, the company has delivered a 19.0% sales CAGR and an impressive 27.3% GAAP EPS CAGR, highlighting consistent top-line expansion paired with strong operational leverage. These figures are underpinned by a proven ability to generate free cash flow (FCF) consistently above 30%, reinforcing the quality and sustainability of its earnings.

Even under a conservative modeling approach using generous end multiple scenarios—30x, 40x, and 50x EPS—the implied net profit margin of 16.4% suggests that while current expectations may appear stretched, they remain anchored in a business with high-margin scalability. This places ServiceNow alongside other durable compounders like Duolingo, where the market often overlooks short-term valuation discomfort in favor of long-term FCF and margin trajectory.

Investors are thus likely focusing not just on headline multiples but on the company’s ability to maintain high retention rates, upsell across its growing enterprise base, and expand into adjacent verticals within digital workflows. While valuation can seem daunting at first glance, ServiceNow’s continued execution, operational efficiency, and strategic entrenchment across Fortune 500 clients position it as a structural winner.

For long-duration investors, the market is implicitly pricing in sustained FCF strength and margin durability, not just near-term earnings growth. The company offers a compelling case where premium valuation is justified by premium fundamentals, making it a core holding in high-quality growth portfolios.

Previously, we covered a bullish thesis on ServiceNow, Inc. by Compounding Your Wealth in April 2025, which highlighted the company’s leadership in digital workflows and strong enterprise integration. The stock has appreciated ~27% since the thesis played out. Francesco Ferrari shares a similar view but emphasizes long-term FCF strength and margin scalability despite premium valuations.

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 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 have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock.

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