We came across a bullish thesis on ServiceNow, Inc. (NOW) on Substack by Compounding Your Wealth. In this article, we will summarize the bulls’ thesis on NOW. ServiceNow, Inc. (NOW)’s share was trading at $785.67 as of April 11th. NOW’s trailing and forward P/E were 114.86 and 47.85 respectively according to Yahoo Finance.
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ServiceNow (NOW) continues to solidify its position as a cornerstone of enterprise digital transformation through its powerful workflow automation platform. With over 7,400 customers—including 85% of the Fortune 500—the company is deeply embedded in mission-critical operations across IT, HR, customer service, and security. Its value proposition centers around eliminating manual processes and accelerating enterprise productivity through AI-driven automation. Backed by a massive $275 billion total addressable market projected by 2026 and supported by secular trends in digitization and IT automation, ServiceNow is strategically poised for long-term growth. The platform’s stickiness is unmatched, with more than 75% of customers using four or more product modules, and the high switching costs—stemming from complex onboarding and workflow customization—act as a formidable moat. Its brand leadership in IT Service Management, where it controls over a third of the market, further strengthens its defensibility. Strategic partnerships with firms like Microsoft, AWS, SAP, and Deloitte enhance its ecosystem and integration across enterprise environments.
The company’s four workflow segments—Technology, Customer and Industry, Employee, and Creator—are fueled by robust AI innovation and real-time data tools. Technology Workflows, including key offerings like ITSM and SecOps, drove major Q4 deals, including one worth over $15 million. Meanwhile, its Customer Workflows are evolving with AI agents automating complex functions, and Employee Workflows are integrating generative AI for streamlined workforce operations. The Creator Workflows segment enables low-code automation at scale, augmented by ServiceNow’s proprietary AI tools like Xanadu and Now Assist. Internally, the company showcases its own platform’s scalability by automating 37% of customer workflows and achieving a 20%+ gain in developer productivity.
Despite macro challenges, ServiceNow delivered 21% YoY revenue growth in Q4, with a subscription model that makes up nearly 97% of total revenue, providing stability. While current RPO growth slightly slowed to 19.4%, forward guidance remains strong at +18.9% YoY revenue growth for 2025. Profitability is sound, with a 29.5% operating margin and projected expansion to 30.5% in 2025. Efficiency metrics like a 19.2-month CAC payback and a high R&D return score reinforce a healthy growth profile. With $5.76 billion in cash, modest debt, declining dilution, and an expanded $3 billion buyback program, the balance sheet supports further innovation and shareholder value. Although valuation multiples have compressed, long-term guidance—$15B revenue by 2026 and $30B+ beyond—remains intact. ServiceNow presents a compelling investment case as a dominant, high-quality compounder with enduring tailwinds in AI and automation.
ServiceNow, Inc. (NOW) is on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 110 hedge fund portfolios held NOW at the end of the fourth quarter which was 78 in the previous quarter. While we acknowledge the risk and potential of NOW as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NOW but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.