NOW's Subscription Growth Picks Up: A Sign of More Upside?
Growth in subscription revenues is the key driver of NOW's financial performance.
In the second quarter of 2025, subscription revenues increased 22.5% year over year to $3.11 billion, surpassing the Zacks Consensus Estimates by 2.66%. Current Remaining Performance Obligations appreciated 21.5% year-over-year to $10.92 billion in the second quarter. ServiceNow secured 89 net new ACV deals over $1 million, including 11 above $5 million, implying strong enterprise demand during the reported quarter.
Growth in NOW's subscription business is supported by rising adoption of its innovative product suite. AI-enhanced Pro Plus tiers of core products like ITSM, CSM and HRSD help customers automate workflows and accelerate resolution times. Tools such as Workflow Data Fabric and RaptorDB Pro unify data and support high-performance AI applications. In the reported quarter, the AI Pro Plus deal count increased by over 50% sequentially. ServiceNow also closed its largest Now Assist deal to date, exceeding $20 million, with 21 large transactions involving five or more Now Assist products.
With strong adoption trends in place, ServiceNow expects 2025 subscription revenues of $12.785 billion and the Zacks Consensus Estimate for the same is pegged at $12.661 billion. As enterprises deepen platform adoption and expand across AI-driven SKUs, subscription growth is expected to remain the central engine for NOW's revenue expansion.
NOW Faces Stiff Competition
NOW faces stiff competition in the subscription-driven workflow automation space from the likes of Salesforce CRM and Pegasystems PEGA.
Salesforce is benefiting from strong demand for its Einstein AI platform, which integrates across subscription offerings to enhance customer relationship management and automation capabilities. Salesforce has a steady subscription revenue growth driven by AI adoption. Salesforce recently expanded its subscription platform with advanced AI agents and workflow automation tools to compete directly with specialized automation providers like ServiceNow.
Pegasystems remains a formidable competitor in the enterprise workflow subscription market, leveraging its GenAI Blueprint solution to accelerate application development. Pegasystems continues expanding its subscription-based platform with AI-powered decisioning capabilities, positioning it as a key rival for enterprise automation budgets in the growing subscription economy.
NOW's Share Price Performance, Valuation and Estimates
ServiceNow's shares have declined 6.3% year to date, underperforming the broader Zacks Computer & Technology sector's return of 11.4% but beating the Zacks Computer- IT services industry's decline of 9.9%.
NOW Stock Performance
Image Source: Zacks Investment Research
ServiceNow stock is trading at a premium, with a forward 12-month Price/Sales of 14.19X compared with the sector's 6.72X. NOW has a Value Score of F.
NOW Valuation
The Zacks Consensus Estimate for ServiceNow's third-quarter 2025 earnings is pegged at $4.22 per share, which decreased by a penny over the past 30 days. This indicates a 13.44% increase year over year.
ServiceNow, Inc. Price and Consensus
The consensus mark for NOW's 2025 earnings is pegged at $16.79 per share, which has increased by 25cents over the past 30 days, suggesting 20.62% year-over-year growth.
NOW 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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