AI Boom Accelerates: Is ServiceNow Stock the Next Big Bet for Investors?

AI hype is reaching fever pitch—and ServiceNow’s stock is riding the wave. But is it smart money or just FOMO?

Why ServiceNow’s AI play stands out

While every SaaS company slaps ‘AI-powered’ on their product, ServiceNow’s workflow automation actually delivers. Their latest earnings crushed estimates—proof enterprises are buying, not just browsing.

The bear case: Valuation vertigo

P/E ratios are stretching like a yoga instructor. At these levels, any stumble in AI adoption could trigger a nasty correction. Remember: even rockets need to refuel.

Wall Street’s love affair (for now)

Analysts are upgrading targets faster than ChatGPT generates code. But let’s be real—they’re the same folks who said ‘buy’ at the 2021 peak too.

Bottom line: ServiceNow’s executing flawlessly in the AI gold rush. Just don’t confuse a great company with a guaranteed stock winner—especially when the Fed’s still playing whack-a-mole with rates.

Image source: Getty Images.

AI growth continues

AI continued to be the biggest driver of ServiceNow's growth in the second quarter. Now Assist -- the company's generative AI suite of solutions -- continued to outperform expectations, with the company signing 21 deals that have five or more Now Assist products. Its number of Pro Plus deals -- which bundle Now Assist with other advanced tools -- climbed 50% sequentially. Eighteen of its 20 largest deals included Pro Plus.

The company also recently introduced AI Control Tower, which is a centralized platform for managing AI agents from both ServiceNow and third parties. The company is already using AI agents across its own business and sees AI agents as having a $350 million value this year. Meanwhile, it said it already surpassed its initial full-year net new annual contract value (ACV) expectations for AI Control Tower in just 60 days.

Turning to its results, revenue ROSE 22.5% year over year to $3.22 billion, while adjusted earnings per share (EPS) climbed 30.7% to $4.09. That easily topped the analyst consensus, which was looking for EPS of $3.57 on revenue of $3.12 billion, as compiled by the

Subscription revenue jumped 22.5% year over year to $3.11 billion, while professional services revenue climbed 19.5% to $102 million.

The company continues to do well in adding large customers, increasing its number of customers with a net ACV of $20 million or more by more than 30%. It had 89 deals greater than $1 million in net new ACV in the quarter. The company said transportation and logistics ACV soared more than 100% in the quarter, while technology, media, and telecom ACV surged 70%.

Another metric investors like to follow with ServiceNow is growth in remaining performance obligations (RPO), which is deferred revenue plus backlog growth, since it can be an indicator of future growth. In the quarter, the company saw RPO increase by 29% to $23.9 billion, while current RPO (cRPO) rose by 24.5% to $10.9 billion. ServiceNow's revenue growth accelerated in Q2, and this could be an indication that this could continue.

The company forecast its Q3 subscription revenue to grow between 20% to 20.5% to a range of $3.26 billion to $3.265 billion. It is expecting cRPO to also increase by 18.5%. Notably, its subscription revenue growth forecast for Q3 is higher than its forecast was for Q2.

For the full year, the company upped its subscription revenue guidance. It now anticipates subscription revenue of between $12.775 billion to $12.795 billion, up from previous guidance of $12.64 billion to $12.68 billion. The updated outlook represents growth of around 20%.

Source: ServiceNow.

Is the stock a buy?

ServiceNow's stock has been caught up in the narrative that there is a cautious enterprise-software spending environment. However, the company has continued to see strong growth, which accelerated in Q2 and could possibly accelerate next quarter as well. Given that its platform can improve operational efficiency and save costs, the company is in a solid position even during periods of economic uncertainty.

More importantly, though, the company looks well positioned to be an AI winner. Its already seeing solid growth stemming from AI, and now it's looking to become an AI agentic hub through its AI Control Tower. If agentic AI become the next big AI investment wave, ServiceNow looks set to be a big potential winner.

From a valuation perspective, the stock trades at a forward price-to-sales multiple of 13 based on 2026 analyst estimates. That's reasonable for a high-margin SaaS business with 20%-plus revenue growth, but it's also likely a part of the reason why the stock has been stuck in the mud this year despite posting strong results.

I think it is worth accumulating a small position in the stock at current levels, but I'd be a more aggressive buyer on a dip.