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Stock Analyst Note

We came away from wide-moat ServiceNow’s investor day incrementally more confident in the company’s long-term financial trajectory and competitive position driven by continued product innovation, proliferating use cases, an expanded target customer pool, a growing market, and efficient go-to-market execution. We think investors should be excited about the new sales order management solution, the company’s generative artificial intelligence roadmap, and the financial target update for 2026. Based on this event, we are maintaining our fair value estimate of $790 per share. We see the stock as undervalued.
Stock Analyst Note

Wide-moat ServiceNow delivered good first-quarter results, including strong profitability, coupled with in-line guidance for the second quarter. As a consequence, we are modestly raising our fair value estimate to $790 per share from $770 previously, and we see shares as slightly undervalued. Trends from last quarter continued into 2024 as strong artificial intelligence, or AI, adoption was once again the key story, with the Pro Plus version seeing very strong uptake. Remaining performance obligation, or RPO, growth was impressive and supports our midterm growth estimates. Results serve to reinforce our thesis that ServiceNow is leading the charge to automate and simplify processes for enterprise customers throughout their businesses.
Company Report

ServiceNow has been successful so far in executing a classic land-and-expand strategy. First, it built a best-of-breed SaaS solution for IT service management, or ITSM, based on being modular and flexible, having a superior familiar user interface, offering a way to automate a wide variety of workflow processes, and becoming a platform to serve as a single system of record for the IT function within the enterprise. Having established itself in ITSM and the IT operations management, or ITOM, market, the firm moved beyond the IT function. The same set of product design features and technologies allowed ServiceNow to bring its process automation approach to HR service delivery, customer service, finance, and operations. The firm then introduced more sophisticated and industry-specific versions of its core solutions. In September 2023, ServiceNow was one of the first software companies to release generative artificial intelligence solutions. Each of these products carries higher pricing to help drive incremental growth and boost margins.
Company Report

ServiceNow has been successful so far in executing a classic land-and-expand strategy. First, it built a best-of-breed SaaS solution for IT service management, or ITSM, based on being modular and flexible, having a superior familiar user interface, offering a way to automate a wide variety of workflow processes, and becoming a platform to serve as a single system of record for the IT function within the enterprise. Having established itself in ITSM and the IT operations management, or ITOM, market, the firm moved beyond the IT function. The same set of product design features and technologies allowed ServiceNow to bring its process automation approach to HR service delivery, customer service, finance, and operations. The firm then introduced more sophisticated and industry-specific versions of its core solutions. In September 2023, ServiceNow was one of the first software companies to release generative artificial intelligence solutions. Each of these products carries higher pricing to help drive incremental growth and boost margins.
Stock Analyst Note

Wide-moat ServiceNow closed 2023 with a bang as it delivered results that came in ahead of guidance for both revenue and profitability for its fourth quarter, and provided better-than-expected guidance. Our key takeaway was that the Pro Plus stock-keeping units, or SKUs, which include generative artificial intelligence, showed very strong demand since their September release and accounted for more net new annual contract value, or ACV, in the first full quarter of availability than any other previous ServiceNow solution. Management was careful to note that macroeconomic conditions have not changed despite a variety of positive indicators. Based on results and guidance, we have raised our estimates, particularly around profitability. We lift our fair value estimate to $770, from $640 previously. Given the run in the shares since late October, we see the stock as fairly valued.
Company Report

ServiceNow has been successful so far in executing a classic land-and-expand strategy. First, it built a best-of-breed SaaS solution for IT service management, or ITSM, based on being modular and flexible, having a superior familiar user interface, offering a way to automate a wide variety of workflow processes, and becoming a platform to serve as a single system of record for the IT function within the enterprise. Having established itself in ITSM and the IT operations management, or ITOM, market, the firm moved beyond the IT function. The same set of product design features and technologies allowed ServiceNow to bring its process automation approach to HR service delivery, customer service, finance, and operations. The firm then introduced more sophisticated and industry-specific versions of its core solutions. In September 2023, ServiceNow was one of the first software companies to release generative artificial intelligence solutions. Each of these products carries higher pricing to help drive incremental growth and boost margins.
Company Report

ServiceNow has been successful thus far in executing a classic land-and-expand strategy. First, it built a best-of-breed SaaS solution for IT service management, or ITSM, based on being modular and flexible, having a superior familiar user interface, offering a way to automate a wide variety of workflow processes, and becoming a platform to serve as a single system of record for the IT function within the enterprise. Having established itself in ITSM and then the much larger IT operations management, or ITOM, market, the firm moved beyond the IT function. The same set of product design features and technologies has allowed ServiceNow to bring its process automation approach to human resources, or HR, service delivery, customer service, finance, and operations. More recently, ServiceNow has been offering higher pricing tiers with an increasing array of features, along with industry specific vertical solutions, which have higher average selling prices, or ASPs, and help drive revenue growth.
Stock Analyst Note

Wide-moat ServiceNow once again delivered results that came in better than our expectations for both revenue and profitability for its third quarter. Guidance was also a little better than we were anticipating. The key takeaway involves impressive U.S. Federal strength. Solid results in other areas should not be overlooked, nor should the building momentum in generative artificial intelligence in Pro Plus versions of the platform, which was released at the end of the quarter. While macroeconomic conditions remain largely unchanged, we see initial signs of improvement. Based on results and guidance, we raise our fair value estimate to $640 from $625 previously, and see shares as attractive.
Company Report

ServiceNow has been successful thus far in executing a classic land-and-expand strategy. First, it built a best-of-breed SaaS solution for IT service management, or ITSM, based on being modular and flexible, having a superior familiar user interface, offering a way to automate a wide variety of workflow processes, and becoming a platform to serve as a single system of record for the IT function within the enterprise. Having established itself in ITSM and then the much larger IT operations management, or ITOM, market, the firm moved beyond the IT function. The same set of product design features and technologies has allowed ServiceNow to bring its process automation approach to human resources, or HR, service delivery, customer service, finance, and operations. More recently, ServiceNow has been offering higher pricing tiers with an increasing array of features, along with industry specific vertical solutions, which have higher average selling prices, or ASPs, and help drive revenue growth.
Stock Analyst Note

ServiceNow exceeded our expectations for both revenue and profitability for its second quarter, provided good guidance for the third quarter, and raised its full-year outlook. Strong revenue paired with disciplined operations drove good margins. The firm’s performance is impressive, especially as the macro environment is unchanged. We also see a burgeoning artificial intelligence opportunity with substantially higher pricing than Pro versions that should contribute to revenue later this year.
Stock Analyst Note

ServiceNow highlighted a variety of new solutions at its analyst day that broadly focused on product innovation. We think important new product announcements and the introduction of proprietary generative artificial intelligence models further support the company’s wide moat. The firm also announced its first-ever stock buyback, for $1.5 billion, which we think should please investors. Unsurprisingly, ServiceNow lowered its subscription revenue target for 2026 to $15-plus billion, from $16 billion previously, to account for about $900 million in unexpected currency headwinds experienced in 2022. This is largely in line with our model, and we therefore maintain our fair value estimate of $600 per share. The stock looks attractive and remains one of our top picks.
Stock Analyst Note

ServiceNow exceeded our expectations for both revenue and profitability for its first quarter, provided solid guidance and raised its full-year outlook approximately in line with outperformance in the quarter. Robust demand coupled with continued tightly focused operations drove outperformance. We are impressed with the company’s performance overall and view guidance as prudent, and are maintaining our fair value estimate of $600 per share for wide-moat ServiceNow. We continue to favor the stock as one of our top picks for both its resilient near-term performance and its long-term organic-driven growth—this is as it leverages its strength in workflow automation to bring its existing customers more deeply into IT, and more broadly with human resources and customer service-specific products, as well as its continued push into industry segment-specialized versions and operating efficiency.
Stock Analyst Note

ServiceNow reported upside relative to revenue and margin guidance for its fourth quarter and provided a surprisingly robust outlook for 2023. Currency headwinds improved, which drove most of the revenue upside, while disciplined expense management led to better margins. We view guidance as being about in line, which is surprisingly good in this environment. While we view the quarter as good overall, we have nonetheless lowered our estimates for this year and next as we have become more cautious based on macroeconomic conditions, and are therefore reducing our fair value estimate to $600 per share from $640. We continue to favor ServiceNow as one of our top picks for its long-term organic-driven growth—this is as it leverages its strength in workflow automation to bring its existing customers more deeply into IT, and more broadly with human resources and customer service-specific products, as well as its continued push into industry segment-specialized versions and operating efficiency.
Company Report

ServiceNow has been successful thus far in executing a classic land-and-expand strategy. First, it built a best-of-breed SaaS solution for IT service management, or ITSM, based on being modular and flexible, having a superior familiar user interface, offering a way to automate a wide variety of workflow processes, and becoming a platform to serve as a single system of record for the IT function within the enterprise. Having established itself in ITSM and then the much larger IT operations management, or ITOM, market, the firm moved beyond the IT function. The same set of product design features and technologies has allowed ServiceNow to bring its process automation approach to human resources, or HR, service delivery, customer service, finance, and operations. More recently, ServiceNow has been offering higher pricing tiers with an increasing array of features, along with industry specific vertical solutions, which have higher average selling prices, or ASPs, and help drive revenue growth.
Stock Analyst Note

On a constant-currency basis, ServiceNow reported upside relative to guidance for its third quarter. Currency headwinds continued to worsen, which pushed reported results below our expectations. Guidance was also below our model, although once again currency is the culprit. While we view the quarter as good overall—and very good in the current environment—we have lowered our near-term estimates to account for reported results and guidance and are therefore reducing our fair value estimate to $640 per share from $675. Despite this, we view the stock as attractive. We continue to favor ServiceNow as one of our top picks for its long-term organic-driven growth as it leverages its strength in workflow automation to bring its existing customers more deeply into IT and more broadly with human resources and customer service-specific products, as well as its continued push into industry segment-specialized versions.
Company Report

ServiceNow has been successful thus far in executing a classic land-and-expand strategy. First, it built a best-of-breed software-as-a-service solution for IT service management based on being modular and flexible, having a superior familiar user interface, offering a way to automate a wide variety of workflow processes, and becoming a platform to serve as a single system of record for the IT function within the enterprise. Having established itself in ITSM and then the much larger IT operations management market, the firm moved beyond the IT function. The same set of product design features and technologies has allowed ServiceNow to bring its process automation approach to human resources service delivery, customer service, and finance. More recently, ServiceNow has been offering higher pricing tiers with an increasing array of features, along with industry-specific solutions, which have higher average selling prices and help drive revenue growth.
Company Report

ServiceNow has been successful thus far in executing on a classic land and expand strategy. First, it built a best-of-breed SaaS solution for IT Service Management (ITSM) based on being modular and flexible, having a superior familiar user interface, offering a way to automate a wide variety of workflow processes, and becoming a platform to serve as a single system of record for the IT function within the enterprise. Having established itself in ITSM and then the much larger IT operations management, or ITOM, market, the firm moved beyond the IT function. The same set of product design features and technologies has allowed ServiceNow to bring its process automation approach to HR service delivery, customer service, and finance. More recently, ServiceNow has been offering higher pricing tiers with an increasing array of features, along with industry specific solutions, which have higher ASPs and help drive revenue growth.
Company Report

ServiceNow has been successful thus far in executing on a classic land and expand strategy. First, it built a best-of-breed SaaS solution for IT Service Management (ITSM) based on being modular and flexible, having a superior familiar user interface, offering a way to automate a wide variety of workflow processes, and becoming a platform to serve as a single system of record for the IT function within the enterprise. Having established itself in ITSM and then the much larger IT operations management, or ITOM, market, the firm moved beyond the IT function. The same set of product design features and technologies has allowed ServiceNow to bring its process automation approach to HR service delivery, customer service, and finance. More recently, ServiceNow has been offering higher pricing tiers with an increasing array of features, along with industry specific solutions, which have higher ASPs and help drive revenue growth.
Stock Analyst Note

We lower our fair value estimate for wide-moat ServiceNow to $675 per share from $700 with a nod to macroeconomic conditions after the company reported results that would have been ahead of consensus if not for a greater-than-anticipated headwind from currency. The subscription revenue growth outlook for the year was lowered by 50 basis points to account for elongating sales cycles. Our main takeaway, however, involves current remaining performance obligation, or CRPO, where guidance for the third quarter is decelerating and below what we were expecting. CRPO growth should reaccelerate in the fourth quarter but is a risk. All things considered, we view shares as attractive after a severe selloff in software stocks and believe that macro factors are not unique to ServiceNow. We continue to favor ServiceNow as one of our top picks for its long-term organic-driven growth as it continues to leverage its strength in workflow automation to bring its existing customers more deeply in IT, and more broadly with human resources and customer service-specific products, as well as its continued push into industry segment-specialized versions.
Stock Analyst Note

Wide-moat ServiceNow had a great story to tell at its investor day, focusing on product innovation, its emphasis on being a platform company, and growth. Spoiler alert—the company also raised its 2026 subscription revenue target to more than $16 billion, from $15 billion previously. Despite the increased outlook, we were already estimating $15.6 billion in revenue and are not ready to raise our long-term outlook in the face of mounting macro pressures. Still, we are maintaining our fair value estimate of $700 per share. Given the profound selloff in software stocks and an upside bias to our forecast, we see shares as attractive.

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