Should You Buy, Sell, or Hold ServiceNow Stock at 14.92X P/S?
ServiceNow NOW shares are overvalued, as suggested by the Value Score of F. In terms of the forward 12-month Price/Sales, NOW is trading at 14.92X, higher than the Computer & Technology sector's 6.21X.
Price/Sales (F12M)
In terms of share price performance, NOW's shares have lost 4.6% year to date compared with the Zacks Computer & Technology sector decline of 0.3%. The company's shares fell due to a worsening macroeconomic environment following U.S. President Donald Trump's decision to levy tariffs on trading partners, including China and Mexico.
However, NOW shares have outperformed the Zacks Computers – IT Services industry's decline of 6.4%.
ServiceNow has been benefiting from the rising adoption of its workflows by enterprises undergoing digital transformation. The company's expanding portfolio, accretive acquisitions and a rich partner base have been a key catalyst.
YTD Performance
Can NOW stock overcome macroeconomic challenges driven by its strong digital transformation growth and robust product portfolio? What should investors do with NOW shares at the current valuation? Let's find out.
NOW's Expanding Portfolio Aids Prospect
NOW's expanding portfolio has been noteworthy. In May 2025, ServiceNow introduced its Core Business Suite, an AI-powered solution designed to streamline and transform core business operations, including HR, finance, procurement, facilities, and legal, by unifying workflows and automating processes across departments to improve efficiency, reduce time to value, and enhance employee experiences.
ServiceNow also announced the launch of AI agents in its Security and Risk solutions, transforming enterprise security by enabling self-defending systems, improving response times, and enhancing risk management in collaboration with Microsoft and Cisco.
Further expanding its portfolio in May 2025, NOW announced advancements in autonomous IT, introducing agentic AI capabilities on the ServiceNow AI Platform to drive zero outages, zero downtime, and zero service desk incidents.
Acquisitions have also played an important role in expanding NOW's portfolio. In April 2025, ServiceNow announced the acquisition of Logik.ai, a company specializing in AI-powered and Configure, Price, Quote solutions. This move is set to bolster ServiceNow's CRM offerings, particularly in sales and order management, by integrating advanced AI capabilities.
NOW Benefits From an Expanding Partner Base
NOW's strong and frequently updated portfolio is helping it win customers on a regular basis. NOW had 72 transactions of more than $1 million in net new annual contract value (ACV) in the first quarter of 2025. The company expanded its customer relationships, reaching 508 customers with more than $5 million in ACV at the end of the reported quarter, which represents 20% year-over-year customer growth.
Its rich partner base includes Amazon's AMZN cloud computing platform, Amazon Web Services (AWS), Microsoft, NVIDIA NVDA, Zoom Communications and Vodafone Group VOD, which has been noteworthy.
In May 2025, NOW partnered with Amazon Web Services to launch a bi-directional data integration solution, enabling enterprises to unify data and trigger AI-powered workflows by connecting ServiceNow with Amazon Redshift.
The company expanded its partnership with NVIDIA to introduce the Apriel Nemotron 15B reasoning model and a new data flywheel architecture, enhancing the efficiency, accuracy, and real-time decision-making capabilities of enterprise AI agents. This is achieved by leveraging NVIDIA's NeMo microservices and GPU infrastructure.
In the first quarter of 2025, ServiceNow partnered with Vodafone Business to launch AI-powered service management solutions. This collaboration with Vodafone aims to enhance customer service by enabling faster query resolution, proactive anomaly detection and streamlined tool deployment.
NOW's Earnings Estimate Revision Steady
The Zacks Consensus Estimate for second-quarter 2025 earnings is pegged at $3.53 per share, unchanged over the past 30 days, indicating a 12.78% increase over 2024's reported figure.
NOW's earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 6.61%.
The consensus mark for second-quarter 2025 revenues is pegged at $3.12 billion, suggesting growth of 18.79% over 2024's reported figure.
How Should You Approach ServiceNow Stock?
ServiceNow's robust AI portfolio and strong partner base are expected to drive its clientele.
However, unfavorable forex amid a challenging macroeconomic environment, stiff competition and lingering concerns related to tariffs are a concern. NOW stock's stretched valuation makes the stock unattractive for value investors.
ServiceNow currently has a Zacks Rank #3 (Hold), which implies that investors should wait for a more favorable time to accumulate the stock. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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Amazon.com, Inc. (AMZN): Free Stock Analysis Report
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