Key Takeaways
- Oppenheimer reduced ServiceNow’s price target from $175 down to $130, maintaining its Outperform rating
- Shares of NOW have plummeted 43% year-to-date, currently hovering near $88
- First quarter earnings release scheduled for April 22; Oppenheimer projects revenue of $3.74 billion, representing ~21% annual growth
- Federal government contract obligations plunged 72% year-over-year during Q1, creating pressure on the cRPO metric
- Oppenheimer’s analyst believes NOW could achieve 10%+ AI revenue contribution by Q4 2026, a first for enterprise software
ServiceNow has experienced a turbulent 2026 thus far. Shares have tumbled approximately 43% since the year began, hovering around $88 as of Tuesday’s trading session, as widespread fears regarding AI-driven disruption have pressured enterprise software stocks.
Brian Schwartz, an analyst at Oppenheimer, lowered his price objective on NOW shares from $175 to $130, pointing to compressed valuation multiples throughout the software sector. Despite the reduction, he maintained his Outperform rating.
Schwartz remains skeptical of the narrative suggesting AI will disrupt ServiceNow. Instead, he believes the enterprise could emerge as one of the primary winners in the enterprise AI landscape.
According to InvestingPro data, NOW’s fair value sits at $130, indicating the stock appears undervalued at present price levels.
First Quarter Results Due April 22
Oppenheimer anticipates Q1 revenue reaching $3.74 billion, marking approximately 21% growth compared to the same period last year, alongside pro forma earnings of $0.96 per share. Schwartz noted his research suggested “some upside to consensus estimates.”
The firm highlighted weakness within the federal government segment. Oppenheimer calculates that federal obligations contracted 72% year-over-year in Q1, totaling roughly $48 million — significantly below the three-year seasonal average of $99 million.
Both a partial government shutdown and a challenging year-ago comparison contributed to that decline. This continues to weigh on ServiceNow’s cRPO metric, an important indicator that investors monitor for revenue visibility.
Beyond federal headwinds, channel checks revealed reduced large deal activity and public sector weakness relative to the previous quarter.
However, those same industry sources indicated “accelerating usage growth and expansion activity for ServiceNow’s AI business,” Schwartz reported.
AI Revenue Potential Under Spotlight
ServiceNow maintains a robust 77.5% gross profit margin and produced $4.6 billion in free cash flow during the trailing twelve months.
The enterprise software provider has embedded AI capabilities throughout its entire product suite, including improvements to data connectivity, workflow automation, and security features — all provided at no extra charge to existing customers.
Additionally, it introduced the Context Engine, a framework that leverages ServiceNow’s proprietary data infrastructure to enhance AI agent decision-making.
Wall Street sentiment remains divided. Bernstein maintained an Outperform rating. JMP Securities elevated the stock to Market Outperform. UBS moved in the opposite direction, downgrading to Neutral from Buy due to concerns surrounding the company’s AI competitive position. BTIG reduced its price target while preserving its Buy rating.
Schwartz acknowledged that AI disruption concerns “may keep ServiceNow as a ‘show-me-stock’ post earnings.” Nevertheless, with sentiment depressed and shares down 43%, he considers the risk/reward profile appealing for investors with long-term horizons.
He projects ServiceNow will become the first enterprise software company achieving a 10%-plus AI revenue contribution, potentially by Q4 2026.
The earnings report is scheduled for April 22.
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