Key takeaways
- Stifel lowered the price target for ServiceNow from $180 to $135 while maintaining a buy recommendation
- Shares are down 43% over six months, hovering near a 52-week low
- Slowing US government spending and the usual weakness in the first quarter are major concerns
- Federal sector revenues declined significantly compared to last year’s strong performance
- Q1 2026 results scheduled for April 22; Analysts expect revenue of $3.75 billion
Stifel lowered its price target for ServiceNow (NOW) from $180 to $135, citing challenging conditions in federal government spending and lackluster momentum entering the year. Despite the downgrade, the investment company maintained its buy recommendation.
The review follows due diligence conducted by Stifel with system integration partners, which revealed a slight deterioration in quarterly sentiment. Multiple contacts attributed the weakness to typical seasonal patterns as sales teams rebuilt pipelines after an intense year-end shutdown period.
The government sector witnessed a notable year-on-year contraction, especially when compared to the previous year’s exceptionally strong results which achieved a 30% expansion. Stifel’s analysis indicates that this downturn includes the cancellation of a $15 million commitment associated with the deferred resignation initiative, although analysts believe this factor was already reflected in the company’s initial forecasts.
“Fed business appears to have declined significantly year over year versus what was very strong a year ago,” Reback wrote. The analyst added that the decline appears worse than management originally expected.
Stifel now expects approximately 50 basis points of outperformance of the current remaining performance obligation (cRPO) for the first quarter – a decline from the approximately 100 basis points seen last quarter. This expects cRPO to expand approximately 20.5% year over year in constant currency terms, marginally exceeding the company’s forecast of 20%.
Challenges of the government sector
It also represents a low price target Service now Evolving business dynamics as customers increasingly embrace AI capabilities. This shift brings consumption-based revenue streams and potential pressure on gross margins, although the company maintained a healthy gross margin of 77.5% over the trailing twelve months.
Stifel expects Fed performance to strengthen in the second quarter of 2026, noting that this period absorbed the most significant DOGE-related disruptions in 2025, creating an easier benchmark year-over-year.
System integration partners expressed greater confidence regarding Q2 opportunities, providing some encouragement for the latter half of the fiscal year.
Next quarterly report
Service now It plans to announce first-quarter 2026 financial results on April 22 after the market closes. The Wall Street consensus expects adjusted earnings per share of $0.97, GAAP EPS of $0.53, and total revenue of $3.75 billion. Official management guidance projected revenues in the range of $3.650 billion to $3.655 billion.
Although the company has delivered revenue growth of more than 20% for three straight quarters, shares have faced persistent selling pressure, falling more than 40% over the past half year.
Several other analysts have recently revised their forecasts downward. FBN Securities lowered its target from $220 to $160 while maintaining an Outperform rating. BNP Paribas Exane maintained its outperforming stance with a target of $140.
Citizens takes a more optimistic view, maintaining an Outperform Market rating with a $260 price target and expecting Now Assist ACV to reach $1 billion by the end of 2026.
NOW is currently trading near its 52-week low of $98, with shares priced at $104.04 at the time of writing.
