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NOW is Overvalued at 28.92X P/E: Buy, Sell or Hold the Stock?
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Key Takeaways
ServiceNow shares have dropped 24.6% YTD amid premium valuation, AI competition and acquisition risks.
ServiceNow AI surpassed $1 billion in ACV in Q2 2026, with net new AI ACV rising more than 40% sequentially.
NOW's 28.92X forward P/E, acquisition costs and margin pressures warrant caution despite strong AI adoption.
ServiceNow (NOW - Free Report) shares are trading at a premium, as suggested by a Value Score of F. In terms of the forward 12-month price/earnings (P/E), NOW is trading at 28.92X, higher than the broader Zacks Computer and Technology sector’s 21.39X. ServiceNow is trading at a higher multiple compared with peers, including Oracle’s (ORCL - Free Report) 15.78X, Microsoft’s (MSFT - Free Report) 25.70X and Salesforce’s (CRM - Free Report) 13.91X.
NOW Stock’s Valuation
Image Source: Zacks Investment Research
Technically, ServiceNow is trading above the 50 and 200-day moving averages (SMAs), indicating a bullish trend.
NOW Stock Trades Above 50 & 200-Day SMAs
Image Source: Zacks Investment Research
Is ServiceNow worth buying at current prices? Let’s dig deep to find out.
NOW Drops 25% YTD: What’s Plaguing the Stock?
ServiceNow has been suffering from investor concerns about increasing AI competition, premium valuation, execution risks around acquisitions and elevated expectations. NOW’s SaaS business model has suffered from strong adoption of AI-native solutions. Intensifying competition from Microsoft, Oracle and Salesforce has been a headwind for the company. NOW shares have dropped 24.6% year to date (YTD), while shares of Oracle have plunged 50.3%. Microsoft shares have returned 0.9%, while Salesforce has declined 6.6%.
NOW Stock’s Price Performance
Image Source: Zacks Investment Research
ServiceNow is facing stiff competition from Microsoft, Oracle and Salesforce as these players are investing significantly to deliver enterprise AI agents, workflow orchestration, governance, security, AI copilots and enterprise data integration.
ServiceNow faces near-term margin pressure as it expands its AI and cybersecurity capabilities. The company expects fiscal 2026 subscription gross margin of 81%, with higher usage of hyperscaler partnerships and accelerating AI adoption weighing on profitability. The Armis acquisition alone is expected to reduce full-year subscription gross margin by roughly 25 basis points (bps), operating margin by around 75 bps and free cash flow margin by approximately 200 bps.
Acquisition-related execution and balance-sheet risks have also increased. ServiceNow acquired Armis for approximately $7.6 billion and Veza for roughly $1.2 billion, substantially expanding its security portfolio. To help finance Armis, ServiceNow issued $4 billion of senior notes, while commercial paper outstanding totaled $2.1 billion as of June 30, 2026. Acquisition-related costs totaled $101 million in the first six months of 2026, while the transactions substantially increased goodwill and intangible assets.
Growing AI Monetization Opportunity to Aid NOW’s Prospects
ServiceNow AI surpassed $1 billion in Annual Contract Value (ACV) during the second quarter of 2026, with net new AI ACV growing more than 40% sequentially. Deals involving five or more ServiceNow AI products increased significantly year over year, while the number of customers running Agentic AI in production increased ninefold over the past nine months. First-time Agentic AI buyer deal volume rose more than 45% year over year, while upgrades to AI-native SKUs are generating price uplifts in the company’s targeted 20-30% range.
ServiceNow’s expanding Agentic AI portfolio is expected to remain the primary catalyst over the long term. Products such as Otto, AI Control Tower, Autonomous Workforce AI specialists, Context Engine, Autonomous Data Analytics and Action Fabric broaden the company’s ability to automate complete enterprise workflows rather than merely provide AI assistance. It is already tracking ahead of its long-term objective for AI to account for 30% of ACV by 2030, suggesting considerable room for higher consumption and cross-selling as enterprise deployments move from pilots into production.
ServiceNow is benefiting from expanding demand across multiple domains. ITOM featured in 18 of the top 20 second-quarter deals, while security and risk solutions were included in 16. CRM and Industry workflows were also represented in 16 of the top 20 deals, supported by momentum in CPQ, sales and order management. EmployeeWorks deal volumes surged more than 150% sequentially, while RaptorDB Pro deal volume climbed 80% year over year. A 98% renewal rate and increasing adoption of multiple products by large customers underscore the platform’s expanding wallet share.
Cybersecurity represents another important growth avenue for NOW. Integrating Armis’ cyber-asset intelligence and Veza’s identity-governance capabilities with ServiceNow Security Operations creates a broader platform spanning asset visibility, identity security, risk controls and automated responses. NOW’s strong partner base that includes NVIDIA, Microsoft, AWS and Accenture extends AI Control Tower and Agentic AI capabilities across major enterprise ecosystems, while collaborations with Experian, Lenovo, FedEx and TeamViewer broaden industry use cases.
The Zacks Consensus Estimate for NOW’s 2026 earnings has been steady at $4.06 per share over the past 60 days and indicates 15.7% growth from 2025’s reported figure. The consensus mark for NOW’s third-quarter 2026 earnings estimate is currently pegged at $1.03 per share, steady over the past 60 days and suggests 7.3% growth over the figure reported in the year-ago quarter.
The Zacks Consensus Estimate for NOW’s 2026 revenues is pegged at $16.17 billion and indicates 21.8% growth from 2025’s reported figure. The consensus mark for NOW’s third-quarter 2026 revenues is currently pegged at $4.09 billion, suggesting 20% growth over the figure reported in the year-ago quarter.
Conclusion
ServiceNow’s expanding AI monetization opportunities, strong subscription revenue growth, high renewal rates and broadening cybersecurity portfolio support its long-term growth prospects. The company’s growing Agentic AI adoption and cross-selling opportunities across enterprise workflows remain encouraging. However, premium valuation, intensifying competition from Microsoft, Oracle and Salesforce, acquisition-related execution risks and near-term margin pressure warrant caution. Although steady earnings estimates and bullish technical indicators provide some support, the stock’s elevated valuation limits near-term upside potential. Hence, investors may consider holding NOW shares while awaiting greater clarity on AI monetization, acquisition integration and margin improvement.
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NOW is Overvalued at 28.92X P/E: Buy, Sell or Hold the Stock?
Key Takeaways
ServiceNow (NOW - Free Report) shares are trading at a premium, as suggested by a Value Score of F. In terms of the forward 12-month price/earnings (P/E), NOW is trading at 28.92X, higher than the broader Zacks Computer and Technology sector’s 21.39X. ServiceNow is trading at a higher multiple compared with peers, including Oracle’s (ORCL - Free Report) 15.78X, Microsoft’s (MSFT - Free Report) 25.70X and Salesforce’s (CRM - Free Report) 13.91X.
NOW Stock’s Valuation
Image Source: Zacks Investment Research
Technically, ServiceNow is trading above the 50 and 200-day moving averages (SMAs), indicating a bullish trend.
NOW Stock Trades Above 50 & 200-Day SMAs
Image Source: Zacks Investment Research
Is ServiceNow worth buying at current prices? Let’s dig deep to find out.
NOW Drops 25% YTD: What’s Plaguing the Stock?
ServiceNow has been suffering from investor concerns about increasing AI competition, premium valuation, execution risks around acquisitions and elevated expectations. NOW’s SaaS business model has suffered from strong adoption of AI-native solutions. Intensifying competition from Microsoft, Oracle and Salesforce has been a headwind for the company. NOW shares have dropped 24.6% year to date (YTD), while shares of Oracle have plunged 50.3%. Microsoft shares have returned 0.9%, while Salesforce has declined 6.6%.
NOW Stock’s Price Performance
Image Source: Zacks Investment Research
ServiceNow is facing stiff competition from Microsoft, Oracle and Salesforce as these players are investing significantly to deliver enterprise AI agents, workflow orchestration, governance, security, AI copilots and enterprise data integration.
ServiceNow faces near-term margin pressure as it expands its AI and cybersecurity capabilities. The company expects fiscal 2026 subscription gross margin of 81%, with higher usage of hyperscaler partnerships and accelerating AI adoption weighing on profitability. The Armis acquisition alone is expected to reduce full-year subscription gross margin by roughly 25 basis points (bps), operating margin by around 75 bps and free cash flow margin by approximately 200 bps.
Acquisition-related execution and balance-sheet risks have also increased. ServiceNow acquired Armis for approximately $7.6 billion and Veza for roughly $1.2 billion, substantially expanding its security portfolio. To help finance Armis, ServiceNow issued $4 billion of senior notes, while commercial paper outstanding totaled $2.1 billion as of June 30, 2026. Acquisition-related costs totaled $101 million in the first six months of 2026, while the transactions substantially increased goodwill and intangible assets.
Growing AI Monetization Opportunity to Aid NOW’s Prospects
ServiceNow AI surpassed $1 billion in Annual Contract Value (ACV) during the second quarter of 2026, with net new AI ACV growing more than 40% sequentially. Deals involving five or more ServiceNow AI products increased significantly year over year, while the number of customers running Agentic AI in production increased ninefold over the past nine months. First-time Agentic AI buyer deal volume rose more than 45% year over year, while upgrades to AI-native SKUs are generating price uplifts in the company’s targeted 20-30% range.
ServiceNow’s expanding Agentic AI portfolio is expected to remain the primary catalyst over the long term. Products such as Otto, AI Control Tower, Autonomous Workforce AI specialists, Context Engine, Autonomous Data Analytics and Action Fabric broaden the company’s ability to automate complete enterprise workflows rather than merely provide AI assistance. It is already tracking ahead of its long-term objective for AI to account for 30% of ACV by 2030, suggesting considerable room for higher consumption and cross-selling as enterprise deployments move from pilots into production.
ServiceNow is benefiting from expanding demand across multiple domains. ITOM featured in 18 of the top 20 second-quarter deals, while security and risk solutions were included in 16. CRM and Industry workflows were also represented in 16 of the top 20 deals, supported by momentum in CPQ, sales and order management. EmployeeWorks deal volumes surged more than 150% sequentially, while RaptorDB Pro deal volume climbed 80% year over year. A 98% renewal rate and increasing adoption of multiple products by large customers underscore the platform’s expanding wallet share.
Cybersecurity represents another important growth avenue for NOW. Integrating Armis’ cyber-asset intelligence and Veza’s identity-governance capabilities with ServiceNow Security Operations creates a broader platform spanning asset visibility, identity security, risk controls and automated responses. NOW’s strong partner base that includes NVIDIA, Microsoft, AWS and Accenture extends AI Control Tower and Agentic AI capabilities across major enterprise ecosystems, while collaborations with Experian, Lenovo, FedEx and TeamViewer broaden industry use cases.
NOW’s Earnings Estimate Revision Shows Steady Trend
The Zacks Consensus Estimate for NOW’s 2026 earnings has been steady at $4.06 per share over the past 60 days and indicates 15.7% growth from 2025’s reported figure. The consensus mark for NOW’s third-quarter 2026 earnings estimate is currently pegged at $1.03 per share, steady over the past 60 days and suggests 7.3% growth over the figure reported in the year-ago quarter.
ServiceNow, Inc. Price and Consensus
ServiceNow, Inc. price-consensus-chart | ServiceNow, Inc. Quote
The Zacks Consensus Estimate for NOW’s 2026 revenues is pegged at $16.17 billion and indicates 21.8% growth from 2025’s reported figure. The consensus mark for NOW’s third-quarter 2026 revenues is currently pegged at $4.09 billion, suggesting 20% growth over the figure reported in the year-ago quarter.
Conclusion
ServiceNow’s expanding AI monetization opportunities, strong subscription revenue growth, high renewal rates and broadening cybersecurity portfolio support its long-term growth prospects. The company’s growing Agentic AI adoption and cross-selling opportunities across enterprise workflows remain encouraging. However, premium valuation, intensifying competition from Microsoft, Oracle and Salesforce, acquisition-related execution risks and near-term margin pressure warrant caution. Although steady earnings estimates and bullish technical indicators provide some support, the stock’s elevated valuation limits near-term upside potential. Hence, investors may consider holding NOW shares while awaiting greater clarity on AI monetization, acquisition integration and margin improvement.
ServiceNow currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.