How ServiceNow’s Strategic AI Acquisitions Could Impact Its Share Price in 2025

Thinking about what to do with your ServiceNow shares, or whether now is the time to jump in? You're not alone, and there's a lot for investors to unpack. Over the past week, ServiceNow’s stock barely budged, slipping by just 0.5%. If you zoom out to the last month, it has quietly gained 4.6%. Year-to-date performance, however, tells a different story, with the stock down 12.0%. But let’s not lose sight of the long game. Over the last three years the price has soared 144.8%, and over five years it has notched up an impressive 90.1% return. Clearly, this is a company that has thrived in the cloud transformation era, and its reputation as a workflow automation leader keeps it relevant even as market sentiment shifts around evolving tech trends.

One factor that might be driving those short-term wobbles is changing perceptions of risk in the tech sector broadly, particularly as investors weigh macroeconomic developments like interest rate uncertainty and market rotation away from big growth names. Despite these headwinds, ServiceNow’s resilient long-term returns have kept it on many watchlists. Investors looking at the numbers will also notice that, when it comes to traditional valuation models, ServiceNow currently checks only 1 out of 6 boxes for being undervalued. This low score suggests the market still demands a premium for its growth and innovation.

So how should you really think about ServiceNow’s valuation right now? Next, we will walk through the major approaches analysts use, plus we will wrap things up with a smarter way to cut through the noise and spot real opportunity others might miss.

ServiceNow scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: ServiceNow Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) analysis works by projecting a company’s expected future cash flows and then discounting those back to today’s value. This gives investors a sense of what the business is intrinsically worth based on its capacity to generate real cash over time.

For ServiceNow, the current Free Cash Flow (FCF) stands at $3.76 Billion. Analysts foresee significant growth, projecting FCF to reach $9.04 Billion by 2029. Estimates for the following years are extrapolated, with FCF potentially hitting over $14.3 Billion by 2035. This underlines a strong growth trajectory.

According to the DCF model, this trajectory produces an estimated intrinsic value of $884.88 per share. Compared with today’s share price, this suggests the stock is about 4.8% overvalued. That is a relatively slim margin, indicating the market’s pricing lines up closely with the company’s fundamentals.

Result: ABOUT RIGHT

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for ServiceNow.

Simply Wall St performs a valuation analysis on every stock in the world every day (check out ServiceNow's valuation analysis). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes.

Approach 2: ServiceNow Price vs Earnings

For profitable companies like ServiceNow, the Price-to-Earnings (PE) ratio is a go-to metric. It helps investors quickly gauge how much they are paying for each dollar of current earnings. This makes it especially useful when a company has a solid record of turning profits.

Growth expectations and perceived risk both play a big part in determining what counts as a “fair” PE. Fast-growing and less risky companies typically warrant higher multiples, as investors anticipate future profits will make today’s price worthwhile. For ServiceNow, the current PE ratio is 115.9x, much higher than the industry average of 36.2x and the peer average of 62.6x. This indicates the market's enthusiasm for ServiceNow's sustained growth rates and leading position in the software sector.

To provide a more tailored perspective, Simply Wall St’s “Fair Ratio” estimates what a justified PE should be by considering earnings growth, profit margins, industry norms, company size, and risk. Unlike crude industry or peer comparisons, the Fair Ratio presents a more nuanced picture by capturing the unique qualities of the business. For ServiceNow, the Fair Ratio is 49.1x. With the company’s actual multiple currently at 115.9x, this represents a substantial premium and suggests the market may be pricing in extra optimism.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your ServiceNow Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is your big-picture perspective on a company, blending its story, such as new product launches, strategic shifts, or competitive advantages, with your own informed forecasts of future revenue, profits, and margins. Narratives connect this story directly to a fair value estimate, making the numbers more than just data and turning them into actionable investment insight.

Simply Wall St makes Narratives easy and accessible. Used by millions of investors, they are available right within each company’s Community page. Narratives empower you to decide when to buy or sell by comparing your estimated Fair Value with the current Price, and unlike static models, they update automatically as company news or earnings are released.

For ServiceNow, for example, some investors see surging AI demand and strong cloud partnerships taking the stock up to $1,242 per share, while others focus on near-term risks and forecast a fair value as low as $734. Narratives let you track these perspectives, test your own, and adapt as new facts emerge.

For ServiceNow, we’ll make it really easy for you with previews of two leading ServiceNow Narratives:

🐂 ServiceNow Bull Case

Fair Value: $1,142.59

Current Price vs Fair Value: 18.8% undervalued

Revenue Growth Forecast: 18.9%

• ServiceNow’s focus on AI integration and strategic acquisitions, such as Moveworks and Logik.ai, is expected to drive strong revenue growth and higher net margins through more efficient, integrated solutions.
• Expanding into CRM, industry-specific workflows, and the public sector positions ServiceNow for additional growth opportunities and greater revenue stability, even in uncertain economic conditions.
• Risks include reliance on U.S. federal contracts, macroeconomic uncertainties, competitive challenges in CRM and AI, as well as potential integration and execution challenges for recent acquisitions.

🐻 ServiceNow Bear Case

Fair Value: $904.36

Current Price vs Fair Value: 2.6% overvalued

Revenue Growth Forecast: 17.5%

• Strategic shift to AI adoption and hybrid consumption/subscription pricing is expected to result in slower near-term revenue and earnings growth as adoption ramps up gradually.
• ServiceNow faces increased competition, currency and geopolitical risks, which could put pressure on pricing, net margins, and overall revenue predictability.
• Operating margins could be affected by higher costs from data center expansion and AI-driven R&D, while delays in customer uptake of new pricing models pose a risk to near-term financial targets.

Do you think there's more to the story for ServiceNow? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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