Key Takeaways
- Oppenheimer reduced ServiceNow’s price target to $130 from $175 but retained its Outperform rating
- Shares have plummeted 43% year-to-date, currently hovering near $88
- First-quarter results expected April 22; analysts project $3.74 billion revenue, representing ~21% annual growth
- Federal government contract obligations plunged 72% annually during Q1, pressuring the cRPO outlook
- Oppenheimer projects NOW could achieve 10%+ AI-driven revenue contribution by late 2026, a first among enterprise software peers
ServiceNow’s 2026 performance has been brutal. Shares have collapsed approximately 43% since January, settling around $88 during Tuesday’s session as investor anxiety over artificial intelligence disruption continues to batter enterprise software stocks.
Brian Schwartz, an analyst at Oppenheimer, slashed his ServiceNow price objective from $175 down to $130, attributing the reduction to compressed valuation multiples throughout the software industry. Despite the cut, he maintained his Outperform recommendation.
Schwartz rejects the narrative that AI poses an existential threat to ServiceNow. Instead, he believes the platform provider stands among the strongest candidates to capitalize on enterprise AI adoption.
According to InvestingPro analysis, NOW’s intrinsic value sits at $130, implying meaningful upside from present trading levels.
First Quarter Results Due April 22
Oppenheimer forecasts first-quarter sales reaching $3.74 billion, marking approximately 21% year-over-year expansion, alongside pro forma EPS of $0.96. Schwartz indicated his channel checks suggest “some upside to consensus estimates.”
The investment firm highlighted notable weakness within the federal government vertical. Oppenheimer’s analysis shows federal obligations collapsed 72% annually during the first quarter, declining to roughly $48 million — substantially below the three-year seasonal norm of $99 million.
Both a partial government shutdown and difficult prior-year comparisons contributed to this shortfall. The weakness represents a drag on ServiceNow’s current remaining performance obligations (cRPO), a key forward-looking revenue indicator Wall Street monitors closely.
Setting aside federal headwinds, channel feedback indicated diminished large enterprise deal flow and broader public sector softness compared to the previous quarter.
However, those same industry sources described “accelerating usage growth and expansion activity for ServiceNow’s AI business,” Schwartz noted.
Artificial Intelligence Momentum Takes Center Stage
ServiceNow maintains an impressive 77.5% gross margin while generating $4.6 billion in free cash flow during the trailing twelve months.
The platform has embedded AI capabilities throughout its product suite, delivering improvements to data integration, workflow automation, and security features — all without charging customers additional fees.
The company recently introduced its Context Engine, an architecture leveraging ServiceNow’s native data framework to enhance AI agent decision-making capabilities.
Wall Street opinion remains divided. Bernstein sustained its Outperform stance. JMP Securities elevated the stock to Market Outperform. Conversely, UBS downgraded to Neutral from Buy, citing reservations about the company’s AI competitive position. BTIG lowered its target while preserving a Buy recommendation.
Schwartz conceded that AI disruption concerns “may keep ServiceNow as a ‘show-me-stock’ post earnings.” Nevertheless, with investor sentiment depressed and shares down 43%, he considers the current risk-reward profile compelling for patient, long-term capital.
He anticipates ServiceNow will emerge as the first major enterprise software vendor deriving over 10% of total revenue from AI offerings, potentially reaching this milestone during the fourth quarter of 2026.
The company reports quarterly results on April 22.
