ServiceNow: Leader in AI through rapid growth and expansion of agent-based AI

ServiceNow $NOW has established itself as a major player in artificial intelligence (AI) software and its solutions Now Assist AI has become the company's fastest-growing product ever. With the growth of the shift to agent-based AI, the company is focusing on new ways to automate and streamline work processes, which puts it in an advantageous position in the market.

Financial results and steady growth

For the third quarter, ServiceNow $NOW reported a 22% increase in revenue to $2.8 billion, beating estimates of $2.75 billion. Subscription revenue also grew significantly, up 23% to $2.7 billion, with earnings per share reaching $3.72, above analysts' estimates of $3.45. The number of customers with an annual contract value (ACV) of more than $1 million increased 14% to 2,020, and the average value of these contracts grew 9% to $4.8 million.

RPO growth and future outlook

An important metric that investors track is the growth in RPO (deferred revenue and backlog). In the third quarter, RPO grew 26% to $19.5 billion, while current RPO (cRPO) grew 23.5% to $9.4 billion. This suggests that revenue growth will continue to be steady. For the fourth quarter, ServiceNow $NOW expects subscription revenue growth of 21.5% to 22%, confirming the company's long-term growth potential.

Challenges and Valuation

Although ServiceNow $NOWstock has appreciated significantly over the past two years and now trades at a high forward price to earnings multiple (approximately 15 for 2025), the company still holds a strong market position due to its growth in AI. However, this high multiple leaves less room for error. Investors targeting long-term growth should consider prudent position management in this stock.

ServiceNow $NOW has the potential to maintain steady growth and become a leader in software for automating and streamlining workflows, making it an attractive productivity tool for companies thanks to innovative AI and high demand.