Federal spending cuts due to DOGE (presumably Dogecoin) have boosted this "Strong Buy" stock, outperforming others.

Federal spending cuts due to DOGE (presumably Dogecoin) have boosted this "Strong Buy" stock, outperforming others.

Take a Closer Look at ServiceNow's Rise in the Federal Government Modernization Drive

Over the past few months, efficiency in government spending has become a top priority. This year, President Donald Trump introduced the Department of Government Efficiency (DOGE) to intensify oversight and eliminate "waste." As part of this push, agencies are turning to modern tech providers to streamline operations. Among the biggest beneficiaries of this trend is ServiceNow (NOW).

ServiceNow's cloud-based workflow automation platform is revamping legacy systems and tightening controls for federal departments – all while reducing costs without impacting essential services. The company's public-sector bookings have soared, leading to an impressive Q1 2025 earnings beat that surpassed Wall Street's expectations. ServiceNow's solutions help agencies manage procurement, IT operations, and case management more efficiently, perfectly aligning with the DOGE mandate.

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What's ServiceNow All About?

Headquartered in California, ServiceNow is a trailblazer in cloud-based digital workflow automation. Its solutions revolutionize IT service management (ITSM), IT operations management (ITOM), and process optimization, helping organizations improve efficiency, reduce costs, and boost user experiences.

Recently, ServiceNow rolled out new AI agents across CRM, HR, IT, and other workflow platforms, aiming to deliver higher productivity and predictable outcomes by leveraging vast enterprise datasets. The company is also embracing artificial intelligence (AI) by integrating both generative AI and agent-based AI into its platform. Its Now Assist generative AI tool offers an AI chatbot for inquiries, a text-to-code generator, and a case-summarization feature.

ServiceNow's stock currently boasts a market cap of $194 billion. Shares have rallied 31% over the past 52 weeks, despite a 11% decline in 2025 due to a broader selloff driven by tariffs.

From a valuation standpoint, ServiceNow trades at premium levels, with a forward adjusted earnings ratio of 57x and a forward sales ratio of 15x, significantly higher than the sector medians of 20x and 2.5x.

Q1 Earnings that Impressed

In early April, shares of ServiceNow experienced a 15% surge following the release of robust Q1 earnings and optimistic guidance. The company reported revenue of $3.09 billion, up 18.5% year-over-year and barely missing the $3.08 billion consensus estimate. Adjusted EPS skyrocketed 18.5% from $3.41 a year ago to $4.04, comfortably beating the $3.83 Street estimate.

In this quarter, U.S. public-sector revenue soared over 30% year-over-year as agencies tapped ServiceNow to streamline procurement, case management, and IT operations.

Speaking about the DOGE initiative, CEO Bill McDermott referred to it as the driving force behind an unprecedented pace of modernization in federal agencies. He emphasized that ServiceNow was built for this moment, ready to aid federal clients in streamlining operations and cutting costs. McDermott highlighted a recent deployment in Raleigh, North Carolina, where ServiceNow's solutions eliminated redundant tasks, reduced IT staffing needs, and saved the city $315,000 annually.

McDermott also spotlighted 72 new deals above $1 million in net new annual contract value, up from 63 in the year-ago quarter. He also reported strong adoption in manufacturing and healthcare verticals.

Looking ahead, management has made a modest upward revision to its full-year subscription revenue guidance, now anticipating subscription revenue between $12.64 billion and $12.68 billion. This represents an expected growth rate of between 19% and 19.5%.

The Analyst Verdict on NOW Stock

Analysts expect ServiceNow's earnings to grow by around 20% annually, promising robust returns for shareholders over the next few years as both revenue and profitability compound.

In general, analysts maintain a unanimous “Strong Buy” rating on ServiceNow. Of the 37 analysts covering the stock, 29 rate it as a "Strong Buy," three as a "Moderate Buy," four as a "Hold," and one as a "Strong Sell." The average 12-month price target of $1,039.69 implies potential upside of about 10% from current levels.

Wrapping it Up

The Trump administration's focus on efficiency and the booming demand for AI are providing powerful tailwinds for ServiceNow. With proven success across federal agencies and consistent double-digit growth in the public sector, ServiceNow is experiencing a significant surge.

For investors seeking opportunities in the software sector, ServiceNow's expanding role in government modernization initiatives makes it an attractive "Strong Buy" investment.

1. ServiceNow's rise in the federal modernization drive aligns perfectly with the DOGE mandate, as its solutions help agencies manage procurement, IT operations, and case management more efficiently.
2. As a trailblazer in cloud-based digital workflow automation, ServiceNow revolutionizes IT service management (ITSM), IT operations management (ITOM), and process optimization, boosting efficiency, reducing costs, and enhancing user experiences.
3. ServiceNow's stock currently boasts a market cap of $194 billion, with shares having rallied 31% over the past 52 weeks, despite a 11% decline in 2025 due to a broader selloff driven by tariffs.
4. Analysts expect ServiceNow's earnings to grow by around 20% annually, offering robust returns for shareholders over the next few years as both revenue and profitability compound.
5. For investors seeking opportunities in the software sector, the Trump administration's focus on efficiency and ServiceNow's expanding role in government modernization initiatives make it an attractive "Strong Buy" investment.

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