Key Takeaways
- Stifel has reduced its NOW price target from $180 down to $135, though maintains a Buy recommendation
- Shares have plummeted 43% during the last six-month period, hovering close to annual lows
- Sluggish U.S. government contract spending and typical Q1 seasonality are primary concerns
- Government sector revenue has declined substantially compared to exceptionally strong year-ago performance
- First quarter 2026 financial results scheduled for April 22; Wall Street forecasts $3.75B in revenue
Investment firm Stifel has reduced its price objective for ServiceNow (NOW) shares to $135 from a previous $180 target, pointing to challenging conditions in U.S. federal government spending and sluggish momentum entering 2026. Despite the reduction, the firm maintains its Buy recommendation on the enterprise software company.
The downward revision follows research conducted by Stifel’s team, headed by analyst Brad Reback, which included discussions with system integration partners revealing a modest deterioration in quarterly sentiment. Multiple sources attributed the softness to typical seasonal dynamics as sales pipelines are rebuilt after an intense fourth-quarter push.
Government-related business has experienced a significant year-over-year contraction, particularly stark when measured against the previous year’s exceptional 30% expansion. Stifel’s analysis also accounts for a $15 million contract de-obligation connected to the Deferred Resignation initiative, although analysts believe company management had already factored this into their original projections.
“Federal business appears notably weaker on a year-over-year basis versus what represented an exceptionally robust comparison period,” Reback stated. The analyst emphasized that the deterioration seems more pronounced than company leadership had initially projected.
Stifel has adjusted its expectations to approximately 50 basis points of first-quarter current remaining performance obligation (cRPO) outperformance — a reduction from the roughly 100 basis points anticipated last quarter. This revision suggests cRPO growth of around 20.5% year-over-year in constant currency terms, marginally exceeding the company’s 20% forecast.
Government Sector Challenges Take Center Stage
The lowered price objective also accounts for ServiceNow’s evolving business dynamics as enterprise clients increasingly adopt its artificial intelligence-powered solutions. This transition introduces usage-based revenue streams and potential pressure on gross margin performance, although the company maintains a healthy 77.5% gross profit margin over the trailing twelve months.
Stifel anticipates improvement in the federal government segment during Q2 2026, noting that this period experienced the most severe DOGE-related disruptions in 2025, creating an easier year-over-year comparison framework.
System integration partners expressed greater confidence regarding the Q2 opportunity pipeline, providing grounds for cautious optimism as the year progresses into its second half.
First Quarter Results Approaching
ServiceNow plans to unveil its Q1 2026 financial performance on April 22 following the market close. Analyst consensus anticipates adjusted earnings per share of $0.97, GAAP earnings of $0.53, and total revenue reaching $3.75B. Company guidance previously indicated revenue expectations between $3.650B and $3.655B.
Despite delivering revenue growth exceeding 20% across three consecutive quarters, the stock has experienced persistent selling pressure, declining over 40% throughout the past half-year period.
Several Wall Street firms have recently lowered their price objectives. FBN Securities reduced its target to $160 from $220 while keeping an Outperform rating. BNP Paribas Exane maintained its Outperform stance with a $140 price target.
Citizens JMP Securities presents a more optimistic outlook, sustaining a Market Outperform rating alongside a $260 price objective and forecasting Now Assist annual contract value will reach $1 billion during 2026.
NOW shares currently trade near their 52-week low of $98, with the stock priced at $104.04 as of this writing.
