ServiceNow Stock Down 40% on Year Despite Strong Subscription Revenue Growth
Despite a strong Q2 performance with revenue up 24% year-over-year and subscription growth of 25%, ServiceNow stock remains down nearly 40% for the year. The company reported $3.99 billion in total revenue, exceeding analyst expectations, driven by robust demand across AI, cybersecurity, and CRM offerings. Subscription revenue reached $3.88 billion while remaining performance obligations (RPO) grew to $29 billion. ServiceNow raised its full-year subscription revenue guidance to between $15.76 billion and $15.78 billion, reflecting 22.5% growth. The company is also seeing rapid expansion in AI annual contract value, which rose 40% quarter-over-quarter to over $1 billion. Despite concerns about AI disruption affecting SaaS stocks broadly, ServiceNow's deep integration into customer workflows and diversification across key areas suggest resilience. The stock currently trades at a forward price-to-sales multiple of five based on 2027 estimates, suggesting potential undervaluation for its recurring revenue model with strong gross margins. Analysts remain cautious but note the company is well-positioned to capitalize on growth in AI and cybersecurity.
Tickers: $NOW
Topics: AI cybersecurity revenue_growth SaaS