ServiceNow Shares: Market Jitters Mask Robust AI-Driven Growth

Despite posting exceptional third-quarter 2025 results and raising its full-year guidance, ServiceNow (NOW) experienced unexpected share price weakness. This divergence between fundamental performance and market reaction presents a curious scenario for investors, as the company's artificial intelligence products demonstrate explosive adoption and strategic alliances accelerate expansion.

ServiceNow is systematically enhancing its competitive moat through carefully selected technology partnerships. Recent collaborative announcements highlight this strategic approach:

• Figma Integration: A new collaboration allows developers to utilize designs directly as commands for the ServiceNow Build Agent, slashing implementation timelines by more than 80%.
• NTT DATA Expansion: An extended partnership is focused on accelerating AI-driven transformation initiatives for multinational corporations.
• Broad Ecosystem Development: Additional alliances with industry leaders like NVIDIA and FedEx Dataworks underscore the company's commitment to a comprehensive platform strategy.

These integrations are pivotal for scaling AI-powered workflow solutions across diverse industry verticals.

Quarterly Performance Exceeds Expectations

The company's financial metrics for the quarter were undeniably strong. ServiceNow surpassed all external forecasts and its own projections by a significant 300 basis points. Revenue climbed 21.8% to reach $3.41 billion, while non-GAAP earnings per share advanced nearly 30% to $4.82. Margin improvements were particularly noteworthy:

• The operating margin expanded to 16.8%, an increase of 180 basis points.
• The non-GAAP operating margin reached 33.5%, rising 230 basis points.
• Free cash flow grew by 26%, accompanied by an improving margin.

AI Product Surge Fuels Upward Revision

Propelled by this robust performance, ServiceNow issued a substantially more optimistic annual forecast. The company now anticipates subscription revenue of $12.84 billion, representing a growth rate of 20.5%. Its target for non-GAAP operating margin was also raised to 31%.

Should investors sell immediately? Or is it worth buying NOW?

This confidence is directly attributable to skyrocketing demand for its AI offerings. The Now Assist tool significantly outperformed expectations for annual contract value, and consumption of its AI assistant solutions has increased fifty-five-fold since May. ServiceNow is positioned to substantially exceed its $500 million target for AI-related contracts in 2025.

Analyst Confidence Persists Amid Stock Dip

In contrast to the positive fundamentals, ServiceNow's equity faced downward pressure. After a brief post-earnings rally of 2.5%, the stock declined, falling approximately 5% by November 10th, with shares trading around $863.

Market experts remain undeterred by this short-term weakness. The consensus rating continues to be a "Buy," with price targets ranging from $1,159 to $1,191—implying nearly 35% upside potential. Cantor Fitzgerald reinforced this bullish stance by raising its target to $1,200. This optimism is grounded in several key factors:

• An explosive uptake of AI-enabled products.
• Powerful revenue growth rates coupled with expanding profitability.
• Strategic partnerships that solidify the company's long-term market position.

Valuation Context and Share Split Approval

In other positive corporate news, the board of directors has approved a proposed 5-for-1 stock split, with a shareholder vote scheduled for December 5th. This move is intended to make the shares more accessible to a broader base of investors.

Nevertheless, the company's valuation remains a topic of discussion. With a price-to-earnings ratio of 109.6, ServiceNow trades at a significant premium to the industry average. While certain valuation models suggest a fair value near $1,156 per share, the market is clearly pricing in continued momentum from the AI segment. The company's ability to consistently execute its growth strategy will be critical to justifying this premium valuation over the long term.