Key Takeaways
- Stifel reduced NOW price target from $180 to $135 while maintaining Buy rating
- Shares have plummeted 43% in the last six months, trading near annual lows
- Declining U.S. federal government spending and typical Q1 weakness drive concerns
- Federal segment revenue experiencing significant year-over-year decline against robust prior-year comparison
- First quarter 2026 results scheduled for April 22; analysts anticipate $3.75B in revenue
Stifel analysts have reduced their price target for ServiceNow (NOW) from $180 down to $135, pointing to challenges in the U.S. federal spending landscape and a sluggish beginning to the calendar year. Despite the downgrade, the firm maintained its Buy recommendation on the enterprise software company.
The revised target follows channel checks conducted by Stifel’s research team, headed by analyst Brad Reback, with system integrator partners that revealed a modest deterioration in quarterly sentiment. Multiple industry sources attributed the weakness to typical seasonal patterns following an intense year-end sales cycle that requires pipeline reconstruction.
The federal government segment has experienced a substantial year-over-year contraction, particularly notable when measured against the exceptionally robust comparable period from last year that delivered 30% expansion. Stifel’s analysis highlights that this weakness incorporates a $15 million de-obligation connected to the Deferred Resignation initiative, although analysts suspect this adjustment was likely already factored into management’s initial projections.
“It appears the Fed business is down meaningfully Y/Y vs. what was a very strong year-ago comp,” Reback noted in his research commentary. The analyst emphasized that the deterioration appears more severe than company leadership had originally forecast.
Stifel now anticipates approximately 50 basis points of first quarter current remaining performance obligation (cRPO) beat potential — a reduction from the roughly 100 basis points projected last quarter. This revised outlook positions expected cRPO expansion at about 20.5% year-over-year in constant currency terms, marginally exceeding the company’s 20% guidance framework.
Government Sector Challenges Take Center Stage
The lowered price objective also accounts for an evolving revenue mix as enterprise clients increasingly adopt ServiceNow’s artificial intelligence-powered solutions. This transition introduces consumption-based revenue streams and possible gross margin pressure, although the company maintains a healthy 77.5% gross profit margin over the trailing twelve-month period.
Stifel projects improvement in the federal business during Q2 2026, observing that this quarter absorbed the most significant DOGE-related disruptions in 2025, creating a more favorable year-over-year comparison.
System integrator partners expressed greater confidence regarding the Q2 opportunity pipeline, providing some encouraging signals for the second half of the fiscal year.
First Quarter Results Approaching
ServiceNow plans to announce Q1 2026 financial results on April 22 following the market close. Wall Street consensus forecasts call for adjusted earnings per share of $0.97, GAAP earnings per share of $0.53, and total revenue of $3.75B. Management’s official guidance projected revenue in the range of $3.650B to $3.655B.
Notwithstanding three consecutive quarters of revenue growth exceeding 20%, the stock has experienced persistent downward pressure, declining more than 40% over the preceding six-month period.
Several other Wall Street firms have similarly lowered their price objectives in recent weeks. FBN Securities reduced its target to $160 from $220 while keeping an Outperform rating. BNP Paribas Exane maintained its Outperform stance with a $140 price target.
Citizens analysts remain decidedly more optimistic, preserving a Market Outperform rating with a $260 price objective and forecasting Now Assist annual contract value to reach $1 billion by 2026.
NOW currently hovers near its 52-week low of $98, with shares trading at $104.04 at press time.
