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NOW Expands Legacy Replacement Push With AI Platform: What's Ahead?
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Key Takeaways
ServiceNow's CRM ACV reached about $2B as net new ACV growth accelerated year over year and sequentially.
NOW's Level 1 ITSM AI specialists resolve about 80-85% of service requests without human interaction.
ServiceNow AI ACV topped $1B as deals with five or more AI products grew 5.5 times.
ServiceNow (NOW - Free Report) is expanding its addressable market by helping enterprises replace fragmented legacy systems and point solutions with its unified Artificial Intelligence (AI) platform. The platform connects AI, data and workflows across technology, customer relationship management (CRM - Free Report) , core business and creator functions, while integrating with existing systems and cloud environments. This strategy is strengthening NOW’s position against Microsoft (MSFT - Free Report) and Salesforce (CRM - Free Report) across enterprise workflows, CRM, information technology (IT) service management and AI automation.
Legacy replacement is gaining traction, particularly in CRM. In the second quarter of 2026, NOW’s CRM business reached roughly $2 billion in annual contract value (ACV), while CRM net new ACV growth accelerated both year over year and sequentially. Sales CRM average deal size doubled year over year and ServiceNow expects to process more than 2 billion service CRM cases this year. Partners are increasingly positioning NOW as an operational CRM platform, increasing competition with Salesforce.
Recent wins highlight the opportunity. In the second quarter of 2026, a partner completed a full front-office replacement of a major CRM deployment in two months. A North American automotive marketplace selected ServiceNow after outgrowing its legacy CPQ provider, while a financial institution replaced legacy point solutions by consolidating loan-origination workflows on NOW’s platform. ServiceNow is targeting the broader “Fortune 500,000” with AI-native offerings designed to displace legacy products.
AI automation strengthens NOW’s challenge to Microsoft and Salesforce. ServiceNow’s Level 1 ITSM AI specialists can resolve roughly 80-85% of service requests without human interaction, while some requests that previously took two days can be completed in about 20 minutes. The strategy is supporting customer expansion and revenues. NOW ended the second quarter of 2026 with 658 customers generating more than $5 million in ACV. ServiceNow AI ACV surpassed $1 billion, while deals involving five or more AI products grew 5.5 times year over year. In the second quarter of 2026, subscription revenues increased 24.5% to $3.88 billion, while total revenues rose 24% to $3.99 billion.
NOW Faces Tough Competition
Microsoft is challenging NOW through Microsoft 365, Dynamics 365, Foundry and Agent 365. In the fourth quarter of fiscal 2026, Microsoft’s enterprise AI momentum strengthened. Microsoft Foundry reached 100,000 customers, with revenues more than doubling year over year, while Agent 365 registered nearly 40 million agents across tens of thousands of companies within two months. Nearly 90% of Fortune 500 companies were grounding agents using Foundry, Fabric and Work IQ. Dynamics 365 exposed more than 650,000 Model Context Protocol actions across key functions, while customer-service usage-based consumption increased fourfold sequentially. Hundreds of enterprises purchased millions of seats of the E7 suite, combining Copilot, E5, Entra and Agent 365.
Salesforce presents more direct pressure on ServiceNow. In the second quarter of fiscal 2027, Salesforce’s Agentforce IT Service had already surpassed 450 customers, including conversions from ServiceNow. Agentforce annual recurring revenues reached $1.5 billion, while the number of accounts with agents in production increased 70% sequentially. Agentforce usage continued to expand, with customers generating 3.2 billion Agentic Work Units in the quarter, up 97% sequentially. Salesforce is extending Agentforce beyond CRM into IT services, back-office operations and supply-chain workflows, increasing its overlap with ServiceNow’s expansion across enterprise workflows and automation.
Shares of ServiceNow have declined 8.1% year to date against the broader Zacks Computer and Technology sector’s 23.4% growth.
NOW’s Stock Price Performance
Image Source: Zacks Investment Research
NOW stock is trading at a premium, with a forward 12-month price-to-earnings ratio of 29.75 compared with the broader sector’s 21.45. ServiceNow has a Value Score of D.
NOW’s Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for NOW’s earnings is currently pegged at $1.03 per share, unchanged over the past 30 days, suggesting 7.29% year-over-year growth.
View the Zacks #1 Rank List
Image: Bigstock
NOW Expands Legacy Replacement Push With AI Platform: What's Ahead?
Key Takeaways
ServiceNow (NOW - Free Report) is expanding its addressable market by helping enterprises replace fragmented legacy systems and point solutions with its unified Artificial Intelligence (AI) platform. The platform connects AI, data and workflows across technology, customer relationship management (CRM - Free Report) , core business and creator functions, while integrating with existing systems and cloud environments. This strategy is strengthening NOW’s position against Microsoft (MSFT - Free Report) and Salesforce (CRM - Free Report) across enterprise workflows, CRM, information technology (IT) service management and AI automation.
Legacy replacement is gaining traction, particularly in CRM. In the second quarter of 2026, NOW’s CRM business reached roughly $2 billion in annual contract value (ACV), while CRM net new ACV growth accelerated both year over year and sequentially. Sales CRM average deal size doubled year over year and ServiceNow expects to process more than 2 billion service CRM cases this year. Partners are increasingly positioning NOW as an operational CRM platform, increasing competition with Salesforce.
Recent wins highlight the opportunity. In the second quarter of 2026, a partner completed a full front-office replacement of a major CRM deployment in two months. A North American automotive marketplace selected ServiceNow after outgrowing its legacy CPQ provider, while a financial institution replaced legacy point solutions by consolidating loan-origination workflows on NOW’s platform. ServiceNow is targeting the broader “Fortune 500,000” with AI-native offerings designed to displace legacy products.
AI automation strengthens NOW’s challenge to Microsoft and Salesforce. ServiceNow’s Level 1 ITSM AI specialists can resolve roughly 80-85% of service requests without human interaction, while some requests that previously took two days can be completed in about 20 minutes. The strategy is supporting customer expansion and revenues. NOW ended the second quarter of 2026 with 658 customers generating more than $5 million in ACV. ServiceNow AI ACV surpassed $1 billion, while deals involving five or more AI products grew 5.5 times year over year. In the second quarter of 2026, subscription revenues increased 24.5% to $3.88 billion, while total revenues rose 24% to $3.99 billion.
NOW Faces Tough Competition
Microsoft is challenging NOW through Microsoft 365, Dynamics 365, Foundry and Agent 365. In the fourth quarter of fiscal 2026, Microsoft’s enterprise AI momentum strengthened. Microsoft Foundry reached 100,000 customers, with revenues more than doubling year over year, while Agent 365 registered nearly 40 million agents across tens of thousands of companies within two months. Nearly 90% of Fortune 500 companies were grounding agents using Foundry, Fabric and Work IQ. Dynamics 365 exposed more than 650,000 Model Context Protocol actions across key functions, while customer-service usage-based consumption increased fourfold sequentially. Hundreds of enterprises purchased millions of seats of the E7 suite, combining Copilot, E5, Entra and Agent 365.
Salesforce presents more direct pressure on ServiceNow. In the second quarter of fiscal 2027, Salesforce’s Agentforce IT Service had already surpassed 450 customers, including conversions from ServiceNow. Agentforce annual recurring revenues reached $1.5 billion, while the number of accounts with agents in production increased 70% sequentially. Agentforce usage continued to expand, with customers generating 3.2 billion Agentic Work Units in the quarter, up 97% sequentially. Salesforce is extending Agentforce beyond CRM into IT services, back-office operations and supply-chain workflows, increasing its overlap with ServiceNow’s expansion across enterprise workflows and automation.
NOW’s Share Price Performance, Valuation & Estimates
Shares of ServiceNow have declined 8.1% year to date against the broader Zacks Computer and Technology sector’s 23.4% growth.
NOW’s Stock Price Performance
Image Source: Zacks Investment Research
NOW stock is trading at a premium, with a forward 12-month price-to-earnings ratio of 29.75 compared with the broader sector’s 21.45. ServiceNow has a Value Score of D.
NOW’s Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for NOW’s earnings is currently pegged at $1.03 per share, unchanged over the past 30 days, suggesting 7.29% year-over-year growth.
ServiceNow, Inc. Price and Consensus
ServiceNow, Inc. price-consensus-chart | ServiceNow, Inc. Quote
ServiceNow currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.