ServiceNow Q1 Earnings Preview: Agentic AI Hype Meets a Market in Search of Stability

ServiceNow is set to report Q1 2025 results after the bell today, and the stakes are high. As one of the market’s top plays on Agentic AI—intelligent automation platforms capable of operating independently in complex workflows—ServiceNow has become a bellwether for enterprise tech adoption of next-gen AI. Investors will be watching for signs that the company’s aggressive push into Agentic AI is translating into real revenue growth, particularly amid lingering macro headwinds and an uneven software spending environment. Shares of NOW have whipsawed from highs near $1,200 in January to lows around $678 earlier this month, though the stock has since clawed back to trade at $817, just above its 20-day moving average. That bounce sets the stage for what could be a pivotal earnings report, not just for ServiceNow, but for peers like Salesforce, Inc. (NYSE: CRM) SAP SE (NYSE: SAP), Freshworks Inc. (NASDAQ: FRSH) SolarWinds Corporation (NYSE: SWI), Atlassian Corporation (NASDAQ: TEAM), and Data Dog (NASDAQ: DDOG).

Key Expectations and Metrics

Wall Street is looking for earnings per share (EPS) of $3.83 and revenue of $3.09 billion, up 12.6% and 18.8% year-over-year, respectively. The critical metric—subscription revenue—is expected to clock in near $3 billion, representing the vast majority of total revenue and a key proxy for the health of ServiceNow’s recurring revenue model. Analysts at Jefferies are modeling a 19.8% constant currency growth rate for subscription revenue, at the midpoint of management's guidance. Also under the microscope will be current remaining performance obligations (cRPO), where Jefferies and Stifel both expect growth in line or slightly above the company’s 20.5% guidance. However, cRPO dollars are expected to decline sequentially—potentially the steepest Q1 decline in five years—adding a layer of caution.

ServiceNow has set expectations for a 30% operating margin in Q1, and some analysts believe there is room for upside given hiring moderation and FX tailwinds. Commentary from Stifel, DBAB, and Citi suggests that while there are still strong pockets of enterprise deal activity, particularly in areas like Customer Service Management (CSM) and workflow upgrades, macro volatility and federal government procurement delays tied to the Department of Government Efficiency (DOGE) could weigh on guidance.

Agentic AI, Acquisition Strategy, and Cloud Outlook

ServiceNow’s Agentic AI strategy is a central narrative for this earnings report. The company has made four AI-focused acquisitions in Q1 alone, including its announced intent to acquire Moveworks. Investor expectations around AI monetization have cooled in recent months, but NOW is still widely viewed as one of the few enterprise software names making tangible progress on deploying large language model capabilities into real workflows. Needham's recent partner call suggests ServiceNow is likely to outperform by 3–5% this quarter on the back of robust cross-sell and AI-led interest.

This could bode well for broader software sentiment, particularly for other workflow-oriented names like Datadog (DDOG) and Snowflake (SNOW), both of which report later this earnings cycle. The pivot from “traditional GenAI” to Agentic AI is still unfolding, and ServiceNow’s ability to sustain interest while executing in a more conservative IT spending environment will be telling.

Valuation and Sentiment Setup

Valuation remains a polarizing topic. Shares are down about 32% from their January peak but still trade at roughly 33x FY26 free cash flow, according to Jefferies. Bulls argue that’s defensible given ServiceNow’s robust growth profile and 20%-plus FCF margin expansion potential. Citi, JPMorgan, and Stifel have all cut price targets ahead of earnings—now clustered between $950 and $1,082—but continue to rate the stock a Buy. Investor sentiment has been notably more cautious this quarter, as noted in recent feedback from European meetings, where discussions have shifted from AI-driven optimism to macro risk containment.

With a $1,042 average Street price target, the implied upside is still over 25% from current levels. However, that upside hinges on NOW delivering results—and guidance—that signal resilience amid growing uncertainty. Tariffs, DOGE-related federal delays, and extended sales cycles remain overhangs, but a beat-and-raise quarter could reset the narrative.

Final Thoughts

ServiceNow enters Q1 earnings with a lot to prove and plenty of support beneath the surface. The stock’s recent recovery from oversold levels reflects cautious optimism, but guidance will be the true test. Investors are looking for clear evidence that Agentic AI is moving the revenue needle, subscription growth remains intact, and margin expansion is sustainable. A reaffirmation or raise of FY25 guidance—especially in light of cautious commentary from peers—would likely be well received.

Ultimately, ServiceNow’s results could help shape sentiment around the broader software group. It’s the first major enterprise AI name to report this season. That puts it squarely in the spotlight—exactly where an Agentic AI leader should be.