Now Is the Time to Buy ServiceNow—The Rebound Is Real

Key Points

• ServiceNow outperformed and raised guidance, catalyzing a significant rebound and market reversal.
• Analysts are raising price targets, leading to new highs in 2025. 
• Tariffs are an opportunity, not a headwind, for this business. 

Now is the time to buy ServiceNow NYSE: NOW because, after correcting 40% from its early 2025 high, the rebound is on. The Q1 results sent the share price up more than 15% to confirm a significant technical reversal. The market shows a textbook head & shoulders reversal pattern strengthened by the robust post-release move and subsequent march higher. 

The market for NOW stock shows support not only at the recent lows, aligning with the H&S pattern, but also at the critical 150-day exponential moving average (EMA), which suggests that institutional investors are in the mix. Institutional data reported by MarketBeat shows that this group has been buying the stock on balance for more than six consecutive quarters and is ramping higher in H1 2025.

With this in play, the odds are high that the NOW stock price will continue to advance in 2025 and retest record levels, if not set new highs. 

Strong Results Catalyze Rebound in ServiceNow Stock 

ServiceNow had a robust quarter with revenue aligning with the analyst forecast for 18.8% growth. The growth was led by a 19% increase in the core subscription business, offset by a smaller service gain. Large clients underpinned the growth, including significant increases in remaining performance obligations, a leading indicator of future revenue. 

The current RPO grew by 22% in Q1 and by 25% overall, and this strength is expected to continue through the end of the year. 

Margin is an area of strength and highlights an opportunity that management has revealed. The company is a leader in AI applications for enterprises and uses its tools to increase operational efficiency and business insights. Those resulted in better-than-expected margins and leveraged bottom-line performance that outpaced consensus estimates, making the results attractive to businesses, more so to those facing tariff impacts. 

Guidance is another area of strength, catalyzing the market for this stock. The company issued better-than-expected guidance for Q1 and the year, forecasting Q1 strength to persist through year’s end.

This is important because of its growth, strength relative to analysts’ forecasts, and profitability. It is rapidly improving its balance sheet, driving value for investors, and improving its ability to return capital. Capital returns in the form of stock buybacks are not robust in 2025 but are likely to increase substantially over time. 

ServiceNow’s balance sheet is strong. At the end of Q1, the highlights include increased assets and equity, with equity up 5% year-over-year. Leverage is low, with net debt running at 0.15x equity.  

Analysts Cheer: ServiceNow Among Most Durable Software Stocks

The analysts’ response to ServiceNow’s results is a resounding cheer. The takeaway from the chatter is that it is among the most durable software stocks and capable of sustaining its robust growth trajectory. Not only are tariffs increasing demand for ServiceNow automation and insight, but the DOGE labor force reductions also help.

Government agencies are turning to ServiceNow to automate tasks that were once done manually and are expected to remain a business strength in the long term. 

The analysts’ trends provide a strong tailwind for this market, including increased coverage, firming sentiment, and a rising price target with at least a 10% upside. The post-release activity includes numerous increases that add 10% or more, and a move to the high-end range is likely.

That's a move worth more than 40% in late April 2024 and could be a light target, given the trends. Assuming ServiceNow continues to show strength, analysts will likely continue to raise targets and take this stock into the $ 1,500 range or higher. ServiceNow is already ripe for a stock split; a move to $1500 would put this stock well above levels where a split would be warranted.