Stocked Growth Declining by 22% for Prompt Immediate Purchase
ServiceNow's Stock Retreat and Future Prospects
ServiceNow, a leading digital workflow company, has seen a dip in its adjusted subscription gross margin, expected to reach 83.5% in 2025. Despite this, the company has shown resilience, continuing to grow despite inflation, rising interest rates, geopolitical conflicts, tariffs, and other macro headwinds that have rattled the global economy.
The company's revenue, cRPO, and adjusted EPS have grown at high double-digit rates over the past four years. In fact, ServiceNow served 528 larger customers with an annual contract value (ACV) of over $5 million in Q2 of 2025, and the number of customers with an ACV of over $20 million grew by over 30% year over year.
ServiceNow's platform, which helps large companies organize unstructured work patterns into streamlined digital workflows, is well insulated from macro headwinds, making it a useful tool for streamlining expenses and workflows during economic downturns. The company's subscription and free-cash-flow margins have held steady as its revenue kept rising.
ServiceNow's CEO, Bill McDermott, declared that "AI is the new UI" during the Q2 2025 conference call. The company's Now Assist AI platform uses AI chatbots and automation tools to accelerate the process, a testament to its commitment to leveraging AI technology.
The pullback in ServiceNow's stock could be a good buying opportunity. ServiceNow's stock closed at a record high of $1,170.39 on Jan. 28, 2025, but has since retreated to $907 a share. The stock might seem pricey at 55 times its forward adjusted earnings, but its evergreen business model, robust growth rates, and high exposure to the booming AI market justify its premium valuation.
Analysts expect ServiceNow's revenue and adjusted EPS to both grow 19% in 2026. ServiceNow expects its FCF margin to expand to 32% in 2025, and the company expects to generate at least $15 billion in subscription revenue in 2026, representing more than 17% growth from its 2025 estimates.
The new generative AI company acquired by ServiceNow in 2025 is not explicitly named in the provided search results. Investigating the reasons for ServiceNow's stock retreat and its future prospects could provide valuable insights for investors.
In conclusion, ServiceNow's resilience, commitment to AI, and robust growth prospects make it an interesting investment option, despite the recent dip in its stock price.
