Goldman Sachs maintains a Buy rating on ServiceNow; a stock re-rating depends on growth stabilization and the realization of AI contributions

Overview

This is a Goldman Sachs earnings preview report for ServiceNow Inc.'s 2Q26 EPS. The report's core judgment is that NOW's near-term stock re-rating depends not only on a quarterly beat, but also on whether the company can demonstrate its relevance within the enterprise AI technology stack and alleviate market concerns about slowing growth and reliance on acquisitions through stabilizing organic revenue, AI product contributions and upward revisions to WholeCo revenue.

Core views

Goldman Sachs maintains a positive view of ServiceNow. First, the 2Q setup is more attractive than the previous quarter, with management's guidance for 2Q organic cRPO growth at approximately 17.25%, already incorporating additional conservatism following Middle East geopolitical volatility. Second, the ITSM Level 1 automation, 100-day ROI guarantee, and customer use cases from NVIDIA, FedEx and CVS Health launched at the Knowledge conference help address systems integrators' earlier feedback that AI implementation use cases were unclear. Third, newly acquired assets such as Moveworks, Veza and Armis remain in the early stages of cross-selling, training and enablement and could provide incremental contributions to the growth algorithm.

Analysis framework

The report analyzes the earnings preview, upside potential for cRPO and subscription revenue, workflow ACV and market share, AI ACV targets, the long-term revenue and margin framework, GAAP EPS discounted valuation, and peer valuation multiples. The target price applies a 27x P/E multiple to ServiceNow's SNTM, namely Q5-Q8 non-GAAP earnings forecasts, and adjusts 2026-2028 EPS forecasts based on the post-acquisition margin trajectory.

Methodology notes

• Valuation methodsP/E multiple on SNTM non-GAAP EPS

  P/E multiple valuation

  Goldman Sachs applies a 27x P/E multiple to ServiceNow's SNTM (Q5-Q8) non-GAAP EPS and sets a 12-month target price of $145 accordingly.

• operating_metricscRPO and subscription revenue growth preview

  cRPO and subscription revenue growth preview

  The report uses 2Q cRPO, 3Q cRPO guidance and subscription revenue growth as key indicators for assessing the pace of growth deceleration, core business quality and the potential for a stock re-rating.

• factor_analysisGS Factor Profile

  Goldman Sachs factor profile

  The GS Factor Profile compares the stock with Goldman Sachs-covered stocks and industry peers across growth, financial returns, valuation multiples and composite factors.

• strategic_analysisworkflow market share and AI monetization analysis

  Workflow market share and AI monetization analysis

  The report breaks down ACV and market share across technology, customer and industry, employee, developer and security workflows, and assesses the contribution of AI capabilities, acquired assets and cross-selling to long-term growth.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• ServiceNow Inc. / NOW.N

  Research subject and recommended security

  Strengths

  Buy rating, 30.9% implied upside, expansion of CRM and security workflows beyond core workflows, increased AI product ACV target, and a long-term subscription revenue target of $30bn+.

  Weaknesses

  Slowing core business growth remains the primary market concern; recent acquisition contributions have made investors more focused on organic growth quality, and the target price was reduced from $163 to $145 due to lower peer multiples.

  Comparison

  The report indicates that based on discounted 2030 GAAP EPS estimates, ServiceNow trades at approximately 21x EPS with a 2027-2030 GAAP EPS CAGR of approximately 32%, versus approximately 22x EPS and a 17% three-year GAAP EPS CAGR for the S&P 500, giving NOW a lower GAAP PEG.

  Risks

  Insufficient AI adoption, competitive AI technology substitution, higher-than-expected expense growth, slowing growth and constrained margin expansion.

• Moveworks, Veza, Armis

  Newly acquired assets and sources of growth contributions

  Strengths

  Cross-selling, training and enablement can address functionality gaps in AI, identity governance, security and enterprise workflows.

  Weaknesses

  Acquisition contributions could heighten market concerns about organic growth quality, while near-term integration effects remain to be validated.

  Comparison

  The report believes recent M&A was not driven by business weakness, but was intended to fill functionality gaps through acquisitions as the technology landscape changes.

  Risks

  Acquisition integration and cross-selling progress may fall short of expectations or fail to translate effectively into sustainable ACV and revenue growth.

Key data

• RatingBUYGoldman Sachs maintains a Buy rating.
• 12-month target price$145.00Reduced from $163 to $145, using a 27x P/E multiple.
• Current price$110.73Price disclosed on the report cover.
• Implied upside30.9%Calculated based on the target price and current price.
• 2Q cRPO upside scenario20.5%-21.5% yoy ccAbove guidance and the market expectation of approximately 19.5% cc, representing an approximately 150-basis-point beat.
• 2Q subscription revenue upside scenario22%-22.5% yoy ccAbove company guidance of 21%-21.5% and the market expectation of 21.4%, representing an approximately 100-basis-point beat.
• FY26 Now Assist ACV target$1.5bnRaised from the previous $1bn target; 1Q26 ACV already exceeded $750mn.
• FY30 AI ACV target$9bn-$9.6bnThe AI target is 30% of FY30 ACV, implying approximately 60% CAGR from the FY26 level of $1.5bn.
• Long-term subscription revenue target$30bn+ by 2030The upside scenario is $32bn+ in subscription revenue.
• 2026/2027/2028 EPS forecasts$4.14 / $5.17 / $6.44Slightly reduced from $4.16 / $5.20 / $6.47 to reflect post-acquisition margin progress.

Impact & implications

The report's investment implication is that if ServiceNow demonstrates cRPO and subscription revenue resilience in 2Q26 and proves that AI revenue is not merely displacing core workflow budgets but instead drives deeper workflow penetration, higher-value use cases and stronger data stickiness, the market may reassess NOW's position at the enterprise AI platform layer. At the same time, the target price reduction indicates that valuation multiples are affected by peer comparisons and the competitive environment, leaving the stock dependent on earnings and guidance validation in the near term.

Risks

• Slowing momentum in new-market expansion, causing the growth trajectory to move lower.
• Insufficient adoption of AI solutions, or competitive AI technology from rivals replacing existing solutions.
• Higher-than-expected expense growth limiting expansion in operating and free cash flow margins.
• AI revenue growth may come from budget reallocation rather than net-new budgets, thereby suppressing core workflow growth.
• Intensifying software competition and pricing pressure may make the path to achieving the 2030 targets less linear.

What to watch

• Whether actual 2Q26 cRPO growth falls within the 20.5%-21.5% upside scenario.
• 3Q26 cRPO guidance and its implications for the pace of growth deceleration.
• Whether subscription revenue reaches the 22%-22.5% upside scenario and whether organic growth stabilizes.
• Customer acceptance of Now Assist ACV, AI use-case implementation and the 100-day ROI guarantee.
• Cross-selling, training and revenue contributions from acquired assets such as Moveworks, Veza and Armis.
• Whether the target of approximately 100 basis points of annual non-GAAP operating margin and free cash flow margin expansion from 2027 onward can be achieved.