ServiceNow Faces Valuation Scrutiny Amid Slower Backlog Growth and AI Shift
ServiceNow shares traded near $102 following a steep monthly drop, as analysts weighed valuation concerns, slowing backlog metrics, and growing competition in enterprise software.
ServiceNow, Inc. (NOW) opened at $102.85 on Thursday following a volatile period that saw its stock fall 29% over the past month and 40.5% over the past 12 months. The drop occurred amid a broader pullback in artificial intelligence software and emerging concerns that advanced AI tools, such as those from Anthropic, could increase competition across enterprise automation. On November 11, the stock gained 3.75% during a session marked by interest in large-cap enterprise cloud names.
The recent decline has intensified debate around the company's valuation. According to an assessment published by Yahoo Finance Singapore, ServiceNow trades at a price-to-earnings ratio of about 73.8x, well above the Software sector average of 31.2x and a peer group average near 25.7x. The report highlighted that despite new partnerships in agentic AI and autonomous operations, a Fair Ratio benchmark indicates the shares appear overvalued relative to current business earnings.
Investor sentiment has also been dampened by operational forecasts and profitability pressures. Fourth-quarter current remaining performance obligations (cRPO) growth is projected to decelerate to 18.5% in constant currency, down from 21% in the prior quarter. In addition, the company raised its 2026 subscription revenue target by $15 million at the midpoint to $15.785 billion, while fourth-quarter operating margin guidance fell to 32.0%. Rising costs from infrastructure outlays and the Armis acquisition have further pressured margins, alongside formal inquiries by shareholder rights law firms regarding past disclosures.
Despite these challenges, Wall Street analysts have largely retained an optimistic stance. TipRanks data shows a Strong Buy analyst consensus with an average target of $163.50. On Thursday, Piper Sandler analyst Billy Fitzsimmons reiterated a Buy rating with a $175.00 target, following an upgrade from TipRanks – Anthropic to Buy with a $176.00 target on October 27. MarketBeat also reported that Representative Gilbert Ray Cisneros, Jr. disclosed buying between $1,001 and $15,000 of ServiceNow stock on October 21.