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Earnings Analysis

Tech

Summary

Despite a violent post-earnings market reaction, ServiceNow actually reported a beat-and-raise quarter, with subscription revenues once again expected to grow in excess of 20% in fiscal 2026.

The deeply negative sentiment surrounding the software industry is creating the opportunity to acquire a wonderful business at the reasonable price of 18.0x consensus earnings of fiscal 2027.

Using management's guidance, ServiceNow is expected to generate free cash flows of approximately $5.5 billion this year, the equivalent of a ~6.0% yield at current market prices.

One element that could have prompted such a large post-earnings selloff is the narrative that ServiceNow is becoming increasingly dependent on acquisitions to maintain subscription revenue growth above 20%.

Artificial intelligence is a massive opportunity for the NOW platform rather than a disruptive threat.…