ServiceNow NOW shares have declined 10.7% since the company reported fourth-quarter 2024 earnings results on Jan. 29. Although both revenues and earnings beat the Zacks Consensus Estimate comfortably, shares fell due to modest subscription revenue growth projection for 2025.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

NOW’s 2025 subscription revenue growth is now expected to be between 19.5% and 20% at constant currency (cc) over 2024. ServiceNow reported 2024 subscription revenues of $10.639 billion, up 22.5% over 2023.

Can NOW’s strong generative artificial intelligence (Gen AI) portfolio, expanding clientele, and rich partner base help the stock recover in the rest of 2025 amid a challenging macroeconomic environment? Let’s dig deep to find out.

NOW’s Subscription Growth to Hurt From Unfavorable Forex

For 2025, NOW expects subscription revenues to be $12.635-$12.675 billion, which suggests a rise of 18.5% to 19% from 2024 on a GAAP basis and 19.5% to 20% on a non-GAAP basis. 

Unfavorable forex impact of roughly $175 million and back-end loaded federal business negatively impacted the growth rate.

ServiceNow’s strategy to accelerate the adoption of its Agentic AI by foregoing immediate revenues is expected to negatively impact the subscription revenue growth rate in 2025.

For the first quarter of 2025, subscription revenues are projected between $2.995 billion and $3 billion, suggesting an improvement in the range of 18.5-19% year over year on a GAAP basis. At cc, subscription revenues are expected to grow in the 19.5-20% range. Unfavorable forex is expected to hurt revenues by $40 million.

Sequentially, these figures imply modest revenue growth. Subscription revenues improved 21.2% year over year, on a reported basis, to $2.866 billion in the fourth quarter of 2024. On a cc basis, revenues increased 21% to $2.859 billion.

Can NOW’s Strong Portfolio Push the Stock Higher?

ServiceNow shares have returned 30.1% over the trailing 12-month period, outperforming both the Zacks Computer & Technology sector and the Zacks Computers – IT Services industry’s appreciation of 25.1% and 8.6%, respectively.

NOW Stock’s Performance

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The strong portfolio is helping NOW win clients regularly. Exiting fourth-quarter 2024, ServiceNow had 2,109 total customers with more than $1 million in annual contract value (ACV), which represents 14% year-over-year growth in customers. 

NOW had 19 deals greater than $5 million in net new ACV. It closed 170 deals greater than $1 million net new ACV. The number of customers contributing more than $20 million or more grew nearly 35% year over year.

ServiceNow is extensively leveraging AI and machine learning technologies to boost the potency of its solutions. Pro Plus AI grew 150% sequentially. The number of customers who bought two or more of NOW’s GenAI capabilities doubled quarter over quarter.

Rich Partner Base Bolsters NOW’s Prospects

Amazon AMZN, Microsoft MSFT and NVIDIA NVDA are major partners of ServiceNow. Apart from these, ServiceNow has inked several other partnership deals with Five9, Visa, Snowflake, Zoom, Siemens, Rimini Street, IBM, Genesys, Fujitsu, Equinix, Boomi and Infosys, which are expected to boost its growing market share.

ServiceNow and Amazon Web Services are connecting Amazon Bedrock models to ServiceNow, which will help enterprises boost the development and deployment of GenAI solutions.

NOW inked an expanded partnership with Microsoft to modernize front-office business processes with a Microsoft Copilot and ServiceNow AI agent collaboration. The much anticipated Now Assist integration with Microsoft Copilot for Microsoft 365 is generally available with the Xanadu update. 

NVIDIA and NOW are collaborating to develop out-of-the-box use cases for AI agents on the Now platform using NVIDIA NIM Agent Blueprints.

NOW’s Earnings Estimate Shows Downward Trend

The Zacks Consensus Estimate for 2025 earnings is pegged at $16.37 per share, down 0.5% over the past seven days, indicating a 17.60% year-over-year increase.

NOW’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 7.02%.
 

The consensus mark for 2025 revenues is pegged at $13.07 billion, suggesting growth of 18.96% over 2024’s reported figure.

ServiceNow Post Q4 Results: Buy, Sell or Hold?

ServiceNow stock is overvalued, as suggested by the Value Score of F.

In terms of the forward 12-month Price/Sales, NOW is trading at 15.8X, higher than its median of 14.03X and the industry’s 11.24X.

Price/Sales Ratio (F12M)

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Technically, ServiceNow shares are displaying a mixed trend as they trade above the 200-day moving average but below the 50-day moving average.

NOW Trades Above 200-day SMA

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ServiceNow’s robust GenAI portfolio and strong partner base are expected to drive its clientele, boosting subscription revenues. However, unfavorable forex amid a challenging macroeconomic environment is a concern. NOW stock’s stretched valuation makes the stock unattractive for value investors.

ServiceNow currently has a Zacks Rank #3 (Hold), which implies that investors should wait for a more favorable time to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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