ServiceNow Valuation After Recent Market Moves: Undervalued or Overpriced?

ServiceNow (NOW) shares have experienced a 6% gain over the past year, with a recent 11% dip. The company's recent moves in the market have led investors to wonder what's next. Analysts estimate a fair value of $1,142.59, which is 18% higher than the current share price, driven by future growth prospects and anticipated margin improvements. However, ongoing reliance on US federal contracts and integration challenges with recent acquisitions pose risks to ServiceNow's growth story. The market's pricing lens also suggests the stock is expensive by industry standards.

ServiceNow (NOW) shares have experienced a 6% gain over the past year, with a recent 11% dip, leaving investors curious about the company's next steps. Analysts estimate a fair value of $1,142.59, which is 18% higher than the current share price, driven by future growth prospects and anticipated margin improvements. However, ongoing reliance on US federal contracts and integration challenges with recent acquisitions pose risks to ServiceNow's growth story. The market's pricing lens also suggests the stock is expensive by industry standards.

Recent Moves and Market Performance

ServiceNow has been leveraging its AI-driven platform to automate workflows across various sectors, including IT, HR, customer service, and CRM. In Q2 2025, subscription revenues hit $3.11 billion, up 22.5% year-over-year, prompting a "beat-and-raise" quarter that showcased the mission-critical nature of the ServiceNow AI Platform ServiceNow’s AI Revolution: Record Growth, Stock Insights & Bold Moves in 2025^[1]. Despite a 12% year-to-date dip in shares, ServiceNow's stock trades around the mid-$900s, with a market cap near $200 billion .

AI Platform and Strategic Deals

In September 2025, ServiceNow launched its "Zurich" platform release, delivering enhanced enterprise security features, natural language developer tools, and improved support for autonomous "agentic" AI workflows . The company also announced a landmark "OneGov" agreement with the U.S. General Services Administration (GSA) to modernize federal IT, which could boost government workflow efficiency by up to 30% . Additionally, ServiceNow committed $750 million to invest in Genesys (AI-powered customer experience) and partnered with NVIDIA on next-gen AI agents .

Analyst Insights and Upgrades

Analysts remain bullish on ServiceNow, with over 30 covering the stock with an average 12-month price target around $1,100 (~15–20% above current levels) . Morgan Stanley upgraded NOW to "Overweight" on September 24, 2025, with a $1,250 target, citing "consistent execution" and a well-positioned roadmap for generative AI capabilities . The firm projects ~20% annual subscription growth and 20% free cash flow growth through 2027 , calling the recent pullback a "unique opportunity" for long-term investors .

Risks and Challenges

While ServiceNow's AI momentum and strategic deals are promising, the company faces several risks. Ongoing reliance on US federal contracts and integration challenges with recent acquisitions, such as Blue Mantis's acquisition of Coreio Inc., pose potential obstacles to growth . Additionally, the stock's valuation is considered expensive by industry standards, which may limit its attractiveness to some investors .

Conclusion

ServiceNow's recent performance and strategic moves have garnered attention from investors and analysts alike. While the company's AI-driven platform and strong customer base offer compelling growth prospects, risks associated with federal contracts and integration challenges should not be overlooked. With a fair value estimate of $1,142.59, ServiceNow's stock presents an opportunity for long-term investors, but it is essential to consider the potential risks and challenges the company may face in the coming years.

References

ServiceNow’s AI Revolution: Record Growth, Stock Insights & Bold Moves in 2025^[1] https://ts2.tech/en/servicenows-ai-revolution-record-growth-stock-insights-bold-moves-in-2025/
https://ts2.tech/en/servicenows-ai-revolution-record-growth-stock-insights-bold-moves-in-2025/
https://ts2.tech/en/servicenows-ai-revolution-record-growth-stock-insights-bold-moves-in-2025/
https://ts2.tech/en/servicenows-ai-revolution-record-growth-stock-insights-bold-moves-in-2025/
https://ts2.tech/en/servicenows-ai-revolution-record-growth-stock-insights-bold-moves-in-2025/
https://ts2.tech/en/servicenows-ai-revolution-record-growth-stock-insights-bold-moves-in-2025/
https://ts2.tech/en/servicenows-ai-revolution-record-growth-stock-insights-bold-moves-in-2025/
https://ts2.tech/en/servicenows-ai-revolution-record-growth-stock-insights-bold-moves-in-2025/
https://ts2.tech/en/servicenows-ai-revolution-record-growth-stock-insights-bold-moves-in-2025/
https://ts2.tech/en/servicenows-ai-revolution-record-growth-stock-insights-bold-moves-in-2025/
https://ts2.tech/en/servicenows-ai-revolution-record-growth-stock-insights-bold-moves-in-2025/