Key Points

The stock decline does not align with business momentum.
ServiceNow revenue growth has sped up through the first half of 2026.
Management continues to project revenue will more than double by 2030.
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ServiceNow (NYSE: NOW) stock has dropped 37% this year as Wall Street expresses concern over agentic AI potentially disrupting traditional software pricing and sales. Still ServiceNow revenue growth has quickened each quarter this year which makes the discounted valuation an attractive chance for investors.

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ServiceNow gains from AI demand

ServiceNow positions itself as the AI Control Tower for the enterprise. AI agents need governance and security which may boost demand for ServiceNow offerings over time. The company posted a 24% year-over-year revenue rise in the second quarter up from 22% growth in Q1 and 20.5% in Q4 2025.

Wall Street worries that productivity gains from agentic AI will cut the need for SaaS customers to add seats or licensed users which could hurt revenues. Yet ServiceNow management noted that 50% of its net new business is non-seat-based indicating these worries may be overstated.

ServiceNow is shifting its model from per-seat pricing to a consumption approach where customers pay based on usage. The company is succeeding here as customers with agentic AI in production grew 9x over the last nine months signaling rising consumption ahead.

A major edge for ServiceNow is its data collection. Its platform handles over 100 billion workflows and trillions of transactions yearly. This helps ServiceNow provide more precise results for customers than rivals supporting long-term growth.

Growth and return outlook

With strong top-line growth so far in 2026 management lifted full-year guidance. Subscription revenue should fall between $15.755 billion and $15.77 billion for about 21% year-over-year growth on a constant-currency basis. It also forecasts an 81% gross margin and 35% free cash flow margin.

Management aims for $32 billion in revenue by 2030 roughly double the expected 2026 revenue. That should drive matching earnings and free-cash-flow increases. Yet the stock trades at a forward price-to-earnings multiple of 23 a notable discount to past multiples tied to its reliable subscription model.

If the stock holds its current multiple it could at least double in five years. Analysts forecast 24% annual earnings growth ahead which may lead to strong returns.

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John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ServiceNow. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.