Stifel reiterates Buy rating on ServiceNow stock, citing improved selling environment

Stifel and Truist Securities reiterated Buy ratings and $1,200 price targets for ServiceNow (NOW), citing an improving enterprise and commercial selling environment, robust 78.5% gross margins, and 21.1% LTM revenue growth. Stifel anticipates Q3 2025 current remaining performance obligations (cRPO) upside to 20% year-over-year constant currency growth, exceeding guidance, with solid Q4 pipelines expected to support further upside, offsetting minor European public sector weakness with federal sector gains. The company is also aggressively expanding its AI capabilities through new offerings like the AI Experience and Zurich platform, aiming to enhance enterprise workflows and drive AI adoption in government.

Analysis

ServiceNow (NYSE:NOW) has received strong endorsements from Stifel and Truist Securities, both of which reiterated Buy ratings and $1,200 price targets, reflecting a positive outlook on the company's fundamentals and growth trajectory. This optimism is underpinned by an improving selling environment in the Enterprise and Commercial sectors, robust financial metrics including 78.5% gross profit margins and 21.1% revenue growth over the last twelve months, and strong performance from core workflow offerings. Stifel's channel checks suggest that while there is some weakness in the European Public Sector, it is expected to be more than offset by improving performance in the Federal sector. The firm projects a significant upside to ServiceNow's third-quarter 2025 guidance, forecasting current remaining performance obligations (cRPO) to grow 20% year-over-year, which is 200 basis points above the company's 18% guidance. Furthermore, the company's strategic initiatives are heavily focused on artificial intelligence, exemplified by the launch of its "AI Experience" conversational interface and the "Zurich" platform, which are designed to drive workflow automation and enterprise AI adoption. This push is being actively promoted in the public sector through aggressive software discounts of up to 70% for federal agencies.

Key Decisions for Investors

• Given the dual 'Buy' reiterations, strong fundamental metrics, and analyst expectations for guidance beats, the current information supports a bullish outlook on ServiceNow.
• Investors should closely monitor upcoming quarterly reports for cRPO growth, as achieving the 20% year-over-year rate forecasted by Stifel would serve as a key catalyst and validation of the positive thesis.
• The long-term growth narrative is increasingly dependent on the company's AI strategy; tracking the adoption and revenue impact of the new AI platforms and the federal discount program is critical for assessing future value.
• While the overall tone is positive, it is prudent to note the identified European Public Sector weakness as a potential risk factor to monitor in subsequent earnings releases to ensure it remains contained and does not signal a broader trend.