Key Takeaways
- Stifel reduced NOW’s price target from $180 to $135 while maintaining its Buy recommendation
- Shares have declined 43% during the last six months, approaching 52-week lows
- Deteriorating U.S. federal spending and typical Q1 seasonality are primary concerns
- Federal segment revenue shows significant year-over-year decline against tough comparisons
- First quarter 2026 results scheduled for April 22; analysts project $3.75B in revenue
Stifel has reduced its price objective for ServiceNow (NOW) to $135 from a previous $180, pointing to challenging conditions in U.S. federal spending and a sluggish beginning to the year. Despite the downgrade, the firm maintained its Buy recommendation on shares.
The revision follows analysis by Stifel’s research team, headed by Brad Reback, who conducted discussions with system integrators revealing a slight deterioration in quarterly sentiment. Multiple sources attributed this to typical seasonal pipeline development after an intense fourth-quarter sales period.
The federal segment has experienced substantial year-over-year weakness when compared against an exceptionally robust prior-year period that delivered 30% expansion. Stifel highlighted that this deterioration includes a $15 million de-obligation associated with the Deferred Resignation initiative, although the firm suspects this factor was likely already incorporated into management’s initial projections.
“It appears the Fed business is down meaningfully Y/Y vs. what was a very strong year-ago comp,” Reback stated. The analyst further noted that the decline seems more severe than management had initially projected.
Stifel currently anticipates approximately 50 basis points of first-quarter current remaining performance obligation (cRPO) outperformance — a reduction from roughly 100 basis points in the previous quarter. This positions estimated cRPO expansion at around 20.5% year-over-year in constant currency terms, marginally above the company’s 20% target.
Federal Segment Challenges Take Center Stage
The lowered price objective also accounts for a transitioning business approach as clients progressively adopt ServiceNow’s artificial intelligence capabilities. This transformation brings consumption-oriented revenue streams and possible gross margin pressure, although the company maintains a healthy gross profit margin of 77.5% over the trailing twelve months.
Stifel anticipates federal performance will strengthen in the second quarter of 2026, observing that this period experienced the most substantial DOGE-related effects in 2025, creating an easier year-over-year benchmark.
System integrators expressed greater enthusiasm regarding the second-quarter opportunity pipeline, providing some encouragement for the latter portion of the year.
Upcoming Quarterly Results
ServiceNow will announce first-quarter 2026 financial results on April 22 following market closure. Wall Street consensus estimates call for adjusted earnings per share of $0.97, GAAP earnings per share of $0.53, and total revenue of $3.75B. Management’s guidance indicated revenue ranging between $3.650B and $3.655B.
Although the company has delivered revenue growth exceeding 20% for three consecutive quarters, shares have faced persistent selling pressure, declining more than 40% during the past six months.
Several other financial institutions have recently adjusted their price objectives downward. FBN Securities lowered its target to $160 from $220 while keeping an Outperform rating. BNP Paribas Exane maintained its Outperform stance with a $140 price target.
Citizens displays greater optimism, maintaining a Market Outperform rating with a $260 price objective and forecasting Now Assist annual contract value will reach $1 billion by 2026.
NOW presently trades close to its 52-week bottom of $98, with shares at $104.04 at the time of this report.
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