ServiceNow: Up 43%, is NOW still a BUY?

Since our last earnings review on 23 July, ServiceNow has rallied around 43% from USD91.94, yet the shares remain around -14% below where they started the year, against a 12% gain for the S&P 500. August’s move has unwound much of the AI-disruption discount and validates our thesis that ServiceNow is one of the clearer enterprise software beneficiaries of AI monetisation.

Following the recent pullback from the peak, the risk-reward has turned more attractive again. We raise our target price to USD161 from USD146 on higher FY2027E-FY2028E earnings assumptions, while keeping our fair P/E unchanged at 24x. Based on the recent share price of USD131.11, our revised target price implies 22.8% upside and reiterate our BUY call on ServiceNow.

Read more: ServiceNow 2Q26 Earnings Review: AI Monetisation Is Becoming Real

Figure 1: ServiceNow has rallied since late July but remains below its start-of-year level and continues to lag both the software sector and the broad market year-to-date.

Can AI bypass ServiceNow?

The re-rating reflects a shift in market narrative from "AI will disrupt SaaS" to "AI can expand demand for selected platforms". Over the past month the market has grown more selective, rewarding companies that embed AI into workflows, govern its usage and charge for productivity gains.

Software peers reinforced this. Microsoft showed enterprise AI demand remains healthy, with Azure growth accelerating. Salesforce's expanded Anthropic partnership showed that vendors with enterprise data, workflow logic and governance layers can monetise AI rather than be bypassed by it. Atlassian's results were the sharpest test, since developer seats were where AI substitution was most feared, yet Atlassian’s cloud revenue grew 31% y/y with seats still expanding.

This matters for ServiceNow because its platform sits in the workflow layer. As enterprises deploy more AI agents, they need systems to route tasks, manage approvals, govern actions and integrate AI into existing processes. The market is beginning to treat ServiceNow less as a generic software name exposed to AI disruption, and more as a workflow platform positioned to monetise AI adoption.

Security is the next monetisation layer

ServiceNow's own catalyst came on 4 August, when it launched Autonomous Security, six unified solutions spanning exposure management, vulnerability detection, cyber-physical security, identity and access, agentic incident response, and risk and compliance. This is where the Armis and Veza acquisitions surface as products, with Armis supplying continuous asset intelligence and Veza mapping effective permissions across human, machine and AI identities, both feeding the AI Control Tower.

Figure 2: Expanded system-integrator partnerships, such as the enlarged Tech Mahindra tie-up, extend ServiceNow’s distribution reach for deploying agentic AI in production at enterprise scale.

The logic follows directly from the agentic thesis. Each AI agent is a new identity to govern and each line of AI-generated code widens the attack surface, so security spending is a function of AI adoption rather than a casualty of it, reinforcing rather than diversifying the investment case. It also shifts revenue mix away from seats, since exposure management and identity governance are priced against assets, identities and actions rather than headcount. Gartner expects securing-AI spending to reach USD4.8Bn in 2027, up 68.7% on 2026, and roughly USD7.7Bn by 2028.

Figure 3: Gartner expects the global securing-AI market to grow from USD1.5Bn in 2025 to USD16.4Bn in 2030.

ServiceNow’s autonomous capabilities, including the Tier 2 SOC and Vulnerability Resolution AI Specialists, Continuous Control Monitoring and Cryptographic Asset Compliance, are guided to December 2026, so we assume security contributes meaningfully only from FY2027E. We treat ServiceNow's claim to be the fastest-growing major enterprise cybersecurity company as management's characterisation, and note that competing against Palo Alto Networks, CrowdStrike and Wiz is a materially different execution challenge from upselling workflows into an installed base.

We expect the market to remain selective. Further upside for ServiceNow will likely depend less on sector sentiment and more on company-specific evidence, particularly sustained AI ACV growth, resilient cRPO and margin defence near the guided 81% subscription gross margin. In the absence of stronger company-specific evidence, our conviction is reflected through higher earnings assumptions rather than a higher fair multiple.

Valuation upgraded, but near-term evidence remains key

Our FY2028E EPS assumption rises to USD6.71 from USD6.08, reflecting higher FY2027E–FY2028E revenue growth and modestly better operating margins. We raise revenue assumptions on stronger subscription demand, AI-led upsell and an assumed contribution from Autonomous Security as its December 2026 releases reach general availability. We also build in modest operating leverage, as scale and premium AI monetisation partly offset higher AI infrastructure costs.

We keep our fair P/E unchanged at 24x. Though conservative relative to ServiceNow’s historical range, we prefer not to embed a higher multiple before 3Q26. There has been no structural change over the past month that materially lifts the earnings base. The past month’s rally justifies greater confidence in earnings durability, but a multiple upgrade requires firmer confirmation that AI ACV growth, cRPO resilience and subscription gross margin near the guided 81% can be sustained.

Applying 24x to FY2028E EPS of USD6.71 gives a target price of USD161, implying 22.8% upside based on the recent share price of USD131.11. ServiceNow remains a high-quality compounder with resilient subscription demand, improving AI monetisation and strong free cash flow.

Table 1: ServiceNow’s Valuation

	FY2025	FY2026E	FY2027E	FY2028E
Revenue	13,278	16,208	19,714	23,886
Revenue Growth (%)		22.1%	21.6%	21.2%
P/E (x)	44.01	35.00	28.38	23.50
Earnings (EPS, $)	3.13	4.06	5.39	6.71
EPS growth (%)		29.9%	32.7%	24.5%
Fair P/E (x)				24
Current price (USD)				131.11
Target price (USD)				161
Upside potential (%)				22.8%
Source: Bloomberg Finance L.P., iFAST compilations. Data as of 9 September 2026.

Key takeaway

We reiterate our BUY call on ServiceNow. August’s software re-rating supports our view that AI will not disrupt all enterprise software equally, and ServiceNow remains one of the clearer platforms positioned to monetise AI through workflow orchestration, governance and security. Our revised USD161 target price implies 22.8% upside from USD131.11, with fair P/E unchanged at 24x. A further multiple re-rating would require stronger 3Q26 evidence on AI ACV growth, cRPO resilience and subscription gross margin defence.

Declaration:For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report hold a position in the abovementioned securities.

This research report was prepared with the assistance of artificial intelligence (AI) tools. iFAST Financial Pte Ltd does not rely exclusively on AI for content generation; the content of this report – including all investment theses, ratings, price targets and conclusions – has been independently reviewed and verified by the research analyst(s) to ensure accuracy and professional integrity.