NOW's Subscription Growth Continues: Is Long-Term Momentum Secured?

ServiceNow’s NOW strong subscription growth continues to reinforce confidence in its long-term prospects. In the fourth quarter of 2025, subscription revenues increased 21% year over year to $3.47 billion, maintaining a steady growth trend seen over the previous three quarters. This consistent performance reflects the strength and reliability of its recurring revenue model, which remains a key driver of the company’s financial performance.

ServiceNow’s future revenue visibility remains robust, supported by a solid pipeline of contracted business. As of the end of 2025, remaining performance obligations (RPO) reached $28.2 billion, while current RPO grew 25% year over year, reflecting steady demand. The company’s 98% renewal rate highlights strong customer retention, and the increase in large deals, including 244 transactions above $1 million, shows growing adoption among enterprise customers.

NOW is also benefiting from increased spend from existing customers. Increased adoption of AI-driven offerings like Now Assist, along with higher multi-product attach rates, is boosting average contract values and strengthening long-term subscription potential. At the same time, its integrated platform — combining AI, data and workflows — is creating more cross-selling opportunities and deepening customer relationships.

Looking ahead, management’s guidance for around 20% subscription revenue growth in 2026 suggests sustained momentum. While macro uncertainties and execution risks remain, ServiceNow’s strong backlog, high retention and expanding AI-led use cases position it well to maintain durable, long-term growth.

NOW Navigates a Competitive Subscription-Led Landscape

Two key competitors to ServiceNow’s subscription-driven model are Salesforce CRM and Atlassian Corporation TEAM.

Salesforce is strengthening its position in the subscription-led landscape with its AI-first platform strategy. Its Agentforce, Data Cloud and Slack create a unified ecosystem that drives recurring revenue growth and large enterprise deals. CRM benefits from embedding AI into workflows across sales and service, boosting efficiency and customer value. With strong adoption of AI-driven offerings and expansion into ITSM, Salesforce is increasingly competing with ServiceNow while enhancing its subscription-based growth model.

Atlassian continues to build strength in the subscription-led landscape through its cloud-based “system of work” platform. It benefits from a product-led model, strong enterprise adoption and growing cloud revenues, driving recurring subscriptions. TEAM’s AI-powered tools like Jira, Rovo and Teamwork Graph enhance workflows and collaboration, supporting long-term customer retention. With flexible pricing and rising enterprise deals, the company is expanding into IT workflows, positioning itself as a strong competitor in subscription-driven growth.

NOW’s Share Price Performance, Valuation & Estimates

ServiceNow shares have declined 31.4% year to date, underperforming the broader Zacks Computer and Technology sector’s fall of 6.1%.

NOW’s Price Performance

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ServiceNow stock is overvalued, with a forward 12-month price/earnings (P/E) of 24.28X compared with the industry’s 18.78X. NOW has a Value Score of D.

NOW’s Valuation

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The Zacks Consensus Estimate for ServiceNow’s 2026 earnings is pegged at $4.12 per share, unchanged over the past 30 days. The figure indicates a 17.38% increase year over year.

Image Source: Zacks Investment Research

ServiceNow stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Salesforce, Inc. (CRM): Free Stock Analysis Report

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This article originally published on Zacks Investment Research (zacks.com).

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