ServiceNow (NYSE: NOW), the cloud computing and software company that creates tools to automate other companies’ technology operations, has a powerful platform that stands to benefit from continued AI integration. It unveils new product lines to expand its customer base and makes strategic moves into specific industries and locations that are ripe for targeting. Finally, it exceeds its own forecasts with notable growth in revenue and net income in recent months.
All of these factors combine to make NOW stock a remarkable potential investment. Analysts at many Wall Street firms have taken notice of ServiceNow in recent weeks, particularly since the company reported better-than-expected results in its first-quarter financial report in late April.
I see NOW as a possible leader in integrating generative AI into workflow and operations management and agree with the Street’s optimistic assessments. Below I detail some of the factors that make NOW worth considering.
ServiceNow is ready for the benefits of AI
ServiceNow offerings are poised to see huge improvements in functionality and popularity with continued AI integration. The company has unveiled a number of new AI-related features and products in recent weeks. These include an expansion of its Now Assist portfolio to include generative AI and a partnership with Microsoft (NASDAQ:MSFT) to bring two AI-powered assistants together in a single enterprise experience.
One factor that makes ServiceNow stand out among the countless companies looking to adopt AI technology into their pre-existing operations is that ServiceNow offers products with take-home generative AI capability. This allows ServiceNow customers to use the company’s tools to better power their own AI development. Of course, this also adds to how ServiceNow can use AI to strengthen its own offerings.
With businesses around the world expected to spend more than $150 billion by 2027 to integrate generative AI into their offerings, ServiceNow stands to gain from both its own use of AI and its efforts. other companies to also use AI.
New products reach new end users
Earlier this month, ServiceNow announced new solutions in its Now platform aimed at improving employee productivity and satisfaction and reducing costs. This is one of several updates and new products that analysts like. William Blair’s Arjun Bhatia is considered key to generate an increase in the number of customers.
In addition to wooing new customers with fresh products, ServiceNow plans to expand its reach into sectors, such as manufacturing, that have the potential to strengthen its base. The company is also opening offices and pursuing investments and partnerships in regions poised for growth.
Profits well above expectations
All these concerted efforts to expand its reach are reflected in ServiceNow’s recent first quarter earnings report. The company reported subscription revenue for the quarter of $2.5 billion, 25% higher than the year-ago figure. Total revenue of $2.6 billion represented a 24% year-over-year increase.
The company also had operating income of $332 million in the first quarter, a margin of 13%, and generated free cash flow of $1.2 billion. This helps ensure that as the company continues to build its base and expand its product offering, it is well placed to reap the rewards and invest in future growth.
ServiceNow expects this trajectory to continue this quarter and through the end of the year. The company expects second-quarter subscription revenue to grow 21.5% to 22% year-over-year and full-year subscription revenue to grow at the same rate, reaching $10.6 billion for all of 2024.
Is NOW Stock a Buy, According to Analysts?
Despite the fact that NOW shares are up 61% in the last year, Wall Street analysts rated the stock a Strong Buy based on 28 Buy ratings, two Holds and no Sells. THE average price target for NOW stock is $866.27, representing an upside potential of 14.9%.
Conclusion: Excellent AI Positioning and Successful Growth Efforts
ServiceNow stands to gain from the widespread shift toward AI technology across various industries and has already managed to thoughtfully expand its reach. So it’s no surprise that analysts believe this company is an attractive prospect for retail investors.
