ServiceNow, Inc NOW is one of the weaker performers in Goldman Sachs analyst Kash Rangan’s coverage group.
Rangan maintained a Buy rating on the company and lowered his price target to $1,050 ($1,200 prior) on Thursday.
ServiceNow has been one of the weaker performers in Rangan’s coverage group year-to-date (-22% versus coverage average -14%) as investors grapple with sub-20% fiscal 2025 guidance, the potential rationalization of PubSec IT spending, and knock-on effects from tariff policy volatility.
Regarding the fiscal first quarter, the analyst noted ServiceNow could deliver +20.2% CC Subscription Revenue growth (modestly above guidance for +19.5% to +20%) and CC cRPO growth in line with guidance (+20.5%).
Also Read: ServiceNow Eyes $3 Billion AI Deal, Targets Boost From Moveworks Chatbot Tech
While fiscal first-quarter guidance likely contemplated ongoing PubSec dynamics and closed before any tariff-related announcements, Rangan noted there may be some risk to fiscal second-quarter and fiscal 2025 guidance.
The analyst noted ServiceNow’s potential to modestly reduce growth expectations in response to predominantly tariffs and PubSec-related demand volatility (though the 90-day tariff pause adds further complexity).
However, with ServiceNow -29% off all-time highs (and at 33x EV/FCF calendar 2026), Rangan noted the stock provides an attractive entry point, notwithstanding the turbulent macro period.
ServiceNow is the standard for selling on customer value, amplified by its expanding AI portfolio (AI ACV >$200 million) and recent Moveworks acquisition. It has consistently supported a growing share of IT budgets.
Furthermore, ServiceNow offers a strong and expanding free cash flow margin profile (>30%) and maintains a solid balance sheet, meeting the key characteristics of a defensive software asset while still providing a bend toward high growth at scale.
Rangan noted ServiceNow as a resilient software asset that is facing macro uncertainty. However, while the analyst expects fiscal first-quarter results to largely be shielded from the volatility of recent tariff news, he noted the potential for fiscal second-quarter and fiscal 2025 guidance to be impacted by the evolving macro backdrop.
Tariff uncertainty will likely cause enterprises to reassess IT budgets, spending priorities, and hiring plans, Rangan notes.
Even following the announcement of the recent 90-day pause, the potential for ServiceNow to reduce forward expectations for revenue and cRPO growth modestly, he adds. Expect some enterprises to be more reluctant to sign large, transformational software deals in the interim, given a lack of clarity around what shape tariff policy will take.
The analyst noted that ServiceNow provides an attractive entry point, notwithstanding the turbulent macro environment. ServiceNow is the standard for selling on customer value, with clear ROI and efficiency gains, all of which are amplified by its growing AI portfolio.
Rangan projected first-quarter revenue of $3.09 billion and adjusted EPS of $3.93.
Price Action: NOW stock is down 5.19% at $783.49 by Thursday’s close.
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