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You are reading view 1 of ServiceNow, published 2026-11-01.This is the latest view

NOW · view 1

Own below$151.31

A rare enterprise platform still growing above 20% with high retention; the free cash flow is real but stock pay takes a large share of it.

Bear value
$72.17
Base value
$189.13
Bull value
$287.72
Price then
–
AssumptionBearBaseBull
Revenue growth a year10.0%18.0%22.0%
Free cash flow margin, final year28.0%35.0%38.0%
Share count change a year+1.0%+0.5%0.0%
Exit multiple of free cash flow20.0x30.0x35.0x
Discount rate10.0%10.0%10.0%
Years555
Value per share today$72.17$189.13$287.72
How these values are computed

Starting from FY2025: revenue $13.3B, 1.05B diluted shares, net cash $4.8B. Final-year free cash flow at the exit multiple, per final share, discounted to today, plus today's net cash per share.

  • Bear: Growth halves as AI agents erode the platform's role.
  • Base: High-teens growth continues and margins widen slowly.
  • Bull: AI agents run on ServiceNow and expand what each customer buys.

Scorecard then

Scorecard: NOW510Technology edge7/10Switching costs9/10Growth runway8/10Profitability7/10Capital allocation6/10Valuationneeds a price
NOW7.4Pick an axis to read the reasons.

The business

ServiceNow sells a platform for running internal work as structured workflows. It began with IT service management (tickets, incidents, change approvals) and expanded to IT operations, security operations, HR service delivery, customer service and custom apps built on the same platform. AI agents are now sold on top, automating the steps the workflows describe.

Customers buy multi-year subscriptions, mostly large enterprises and governments. Revenue in FY2025 was $13.3B, up 20.9%.

Moat and switching costs

Once IT runs every incident and change through ServiceNow, the platform holds the company's operational history, its approvals and its integrations. Replacing it means re-implementing processes across thousands of employees. The single data model is a technical advantage: every new product sees the same data, which makes cross-selling easier than for competitors stitching acquisitions together.

The risk to the moat is AI: if agents can work across systems without a central workflow platform, the platform matters less.

How the technology shows up in the numbers

Gross margin near 78% and free cash flow of $4.6B (35% of revenue) in FY2025. But stock-based compensation was $2.0B, about 15% of revenue, so owner earnings were $2.6B. GAAP operating margin was 13.7%.

The diluted share count still rises slightly each year (0.4% in FY2025) despite growing buybacks ($1.8B). The share counts here reflect the 2025 five-for-one split.

Thesis

ServiceNow can compound revenue near 18 to 20% for years because it keeps adding products for the same customers, and its margins should keep widening as stock pay grows slower than revenue.

We would own it below our stated price, which accounts for the dilution in a way the adjusted margins do not.

Risks

  • Stock pay staying near 15% of revenue, keeping owner earnings far below reported free cash flow.
  • AI agents from model vendors or hyperscalers reducing the need for a workflow platform.
  • Large-deal timing with governments and big enterprises.

What would change our mind

  • Subscription growth falling below 15%.
  • Net revenue retention declining meaningfully.
  • Stock pay rising as a share of revenue.