The ServiceNow story

What drives the business

• ServiceNow is extending its enterprise workflow platform into AI execution and governance, connecting existing systems so AI can route approvals, update records and complete tasks rather than only generate information.
• Its products span Technology, Customer Relationship Management and Industry, Core Business, and Creator and Other, with Now Assist adding AI capabilities and the Moveworks acquisition strengthening enterprise search and virtual agents.
• At the end of June 2026, contracted revenue not yet recognized totaled $29.0 billion, including $13.20 billion expected to become revenue over the next twelve months.
• In the quarter to June 2026, ServiceNow recorded 123 transactions exceeding $1 million in net new annual contract value and ended the period with 658 customers exceeding $5 million in annual contract value.
• Leidos is deploying the platform for autonomous workflows, while collaborations with NVIDIA, Microsoft and AWS extend AI governance and deployment, and FedEx is integrating logistics intelligence into ServiceNow workflows.

What the price assumes

At $131.45, the reverse DCF implies free cash flow after stock pay grows 21.9% a year for ten years, using a 10.2% discount rate.

That compares with 44.7% annual growth over the last 5 years and the TenQ check's 24.4% bar, which slows the historical record halfway toward 4%.

The implied growth clears that check, but the earnings yield of 1.2% falls below the 10-year Treasury yield of 5.2%.

Value NOW on your own assumptions

What could change the story

• Strong federal demand brought some on-premise subscription revenue forward from the quarter to September 2026 into the quarter to June 2026, so the June growth rate includes a timing benefit.
• The quarter to June 2026 produced a GAAP operating margin of 4% against a non-GAAP margin of 29.5%, while management said greater AI adoption and use of cloud infrastructure partners affected its full-year gross margin guidance.
• Stock compensation represented 16% of revenue in the quarter to June 2026 and accounts for most of the gap between adjusted and GAAP profit.
• Total debt of $7.5 billion exceeded cash and short-term investments of $4.7 billion, and the near-term liquidity check failed at 0.70 against a 1.50 bar.
• Changing AI competition, security failures and difficulty integrating acquisitions could weaken the platform's role in customers' critical workflows.

What to watch next

• For the quarter to September 2026, management expects subscription revenue growth of 20.5% and growth in contracted revenue due within twelve months of 19.5%, including an estimated $35 million foreign exchange headwind for the latter.
• For full-year 2026, the raised subscription outlook calls for 22.5% growth, alongside non-GAAP subscription gross margin of 81%, operating margin of 31.5% and free cash flow margin of 35%.
• AI annual contract value and the number of large customer commitments will show whether deployment growth is translating into additional contracted business.
• Stock compensation as a share of revenue will measure progress toward management's commitment to bring it below 10% by 2029.

Sources

• ServiceNow's earnings release, filed with the SEC
• Its latest 10-Q or 10-K, for the risk factors
• The NOW stock report, for every figure and check