Can an Expanding Clientele Boost ServiceNow's Top-Line Growth?

ServiceNow NOW is benefiting from an expanding enterprise clientele, driven by rising AI-driven workflow demand. Deeper platform penetration across large organizations is a key catalyst. The company’s cloud-based Now Platform has been central to enterprise digital transformation initiatives, helping customers automate workflows across IT, employee services, CRM, security and risk operations.

In the first quarter of 2026, subscription revenues increased 22% year over year to $3.67 billion, while current remaining performance obligations (cRPO) rose 22.5%, reflecting strong visibility into future revenues. ServiceNow ended the quarter with 630 customers generating more than $5 million in annual contract value (ACV) and maintained a robust 97% renewal rate. The company also recorded 16 deals worth more than $5 million and five deals above $10 million in net new ACV, highlighting continued strength in enterprise spending.

Management noted that enterprises are increasingly consolidating vendors and adopting multiple ServiceNow products. The company’s top 20 deals in the reported quarter included seven or more products in 17 cases, underscoring the platform’s growing strategic importance. Rising adoption of AI-native offerings such as Now Assist, Context Engine, EmployeeWorks and Autonomous Workforce is further driving growth. Customers are moving beyond AI experimentation and increasingly deploying AI across mission-critical workflows.

The company’s recent acquisitions are also expanding its growth runway. Moveworks is strengthening conversational AI capabilities, while Veza and Armis add identity governance, cyber exposure management and real-time asset visibility to ServiceNow’s security portfolio. Management believes these acquisitions will significantly expand the company’s addressable market and support cross-selling opportunities within existing enterprise accounts.

ServiceNow expects demand for AI governance, workflow automation and enterprise security to remain strong. Partnerships with Google Cloud and NVIDIA are helping scale enterprise AI deployments, positioning the company for continued revenue acceleration despite competitive and macroeconomic challenges.

NOW Faces Stiff Competition

Salesforce CRM and Microsoft MSFT are major competitors of ServiceNow.

Salesforce remains a strong rival in CRM, workflow automation and AI-powered enterprise applications through its expanding Agentforce platform. The company continues to expand its enterprise clientele base as global organizations accelerate digital transformation and adopt cloud-based CRM solutions. Strong demand for its integrated platform has driven consistent deal wins across international markets, further broadening its customer footprint. Nearly 90% of Fortune 100 companies already use Salesforce tools, underscoring deep enterprise penetration. Strategic partnerships and acquisitions have enhanced its offerings, helping attract new large-scale clients while strengthening retention across its existing global enterprise base.

Microsoft’s expanding enterprise clientele continued to drive growth in second-quarter fiscal 2026 results. The company reported strong adoption of AI-powered offerings, particularly Microsoft 365 Copilot, Azure AI and Foundry. Management noted that the number of customers with more than 35,000 Microsoft 365 Copilot seats tripled year over year. Major organizations, including Fiserv, ING, NASA, the University of Manchester and Publicis expanded deployments. Publicis purchased more than 95,000 Copilot seats, while more than 80% of Fortune 500 companies now use Microsoft’s low-code and no-code AI agent tools, reflecting broad enterprise adoption across industries.

NOW’s Share Price Performance, Valuation & Estimates

ServiceNow’s shares have declined 39% year to date, underperforming the broader Zacks Computer and Technology sector’s rise of 18.8%.

NOW’s YTD Price Performance

Image Source: Zacks Investment Research

ServiceNow stock is overvalued, with a forward 12-month price/earnings (P/E) of 20.29X compared with the industry’s 17.45X. NOW has a Value Score of D.

NOW’s Valuation

Image Source: Zacks Investment Research

The Zacks Consensus Estimate for ServiceNow’s 2026 earnings is pegged at $4.14 per share, unchanged over the past 30 days. The figure indicates a 17.95% increase year over year. 

ServiceNow, Inc. Price and Consensus

ServiceNow, Inc. price-consensus-chart | ServiceNow, Inc. Quote

ServiceNow currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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