Key Takeaways
- ServiceNow’s price target reduced by Oppenheimer from $175 to $130, though Outperform rating remains unchanged
- The stock has tumbled 43% since the beginning of the year, hovering near $88
- First quarter results scheduled for April 22; analysts project $3.74 billion in revenue, representing ~21% annual growth
- Federal government commitments dropped 72% annually during Q1, creating pressure on cRPO metrics
- Analysts predict NOW could achieve 10%+ AI-driven revenue contribution by late 2026, potentially leading enterprise software peers
ServiceNow has experienced a turbulent start to 2026. Trading near $88 on Tuesday, the enterprise software provider has shed approximately 43% of its value this year as investor anxiety around artificial intelligence disruption continues to impact the sector.
Brian Schwartz from Oppenheimer has adjusted his price objective for NOW downward from $175 to $130, reflecting compressed valuation multiples throughout the software industry. Despite this reduction, he maintains his Outperform recommendation.
Schwartz dismisses concerns that AI will disrupt ServiceNow‘s business model. Instead, he believes the company stands to gain significantly from the enterprise AI revolution.
According to InvestingPro analysis, NOW’s intrinsic value sits at $130, indicating the shares are trading below fair value at present price levels.
First Quarter Results Expected April 22
Oppenheimer forecasts first quarter revenues will reach $3.74 billion, marking approximately 21% growth compared to the previous year, alongside pro forma earnings of $0.96 per share. Schwartz noted his research suggests “some upside to consensus estimates.”
The investment firm highlighted weakness in the federal government vertical. Oppenheimer’s analysis indicates federal contract obligations plummeted 72% year-over-year during Q1, totaling roughly $48 million — significantly below the three-year seasonal norm of $99 million.
Both a temporary government shutdown and challenging prior-year comparisons contributed to this decline. This weakness presents a challenge for ServiceNow’s current remaining performance obligation (cRPO) figure, which investors monitor closely as a forward-looking revenue indicator.
Beyond federal sector challenges, market intelligence revealed reduced large transaction volume and broader public sector weakness compared to the previous quarter.
Conversely, the same industry sources indicated “accelerating usage growth and expansion activity for ServiceNow’s AI business,” Schwartz reported.
Artificial Intelligence Momentum Building
ServiceNow maintains a robust 77.5% gross profit margin and produced $4.6 billion in free cash flow during the trailing twelve-month period.
The organization has embedded AI capabilities throughout its product suite, including improvements to data integration, workflow automation, and security features — all delivered without incremental charges to existing customers.
Additionally, the company introduced its Context Engine, a technology that leverages ServiceNow’s proprietary data architecture to enhance AI agent performance and decision-making.
Wall Street opinions remain divided. Bernstein continues with an Outperform stance. JMP Securities elevated its rating to Market Outperform. Conversely, UBS downgraded the stock to Neutral from Buy citing questions about the company’s AI competitive position. BTIG reduced its price objective while maintaining its Buy recommendation.
Schwartz conceded that AI disruption concerns “may keep ServiceNow as a ‘show-me-stock’ post earnings.” However, with market sentiment depressed and shares down 43%, he believes the current valuation presents compelling value for patient investors.
He projects ServiceNow will become the first major enterprise software company to derive more than 10% of total revenue from AI-related products, potentially reaching this milestone by the fourth quarter of 2026.
The company reports quarterly results on April 22.
