Key Takeaways
- Stifel reduced NOW’s price target from $180 down to $135, maintaining a Buy rating
- Shares have declined 43% during the past six-month period, hovering close to 52-week lows
- U.S. federal spending weakness and typical Q1 seasonal softness create headwinds
- Federal segment revenue shows significant year-over-year decline against strong comparison period
- First quarter 2026 earnings announcement scheduled for April 22; analysts project $3.75B in revenue
Stifel has adjusted its price objective for ServiceNow (NOW) downward to $135 from a previous $180, pointing to challenges in the U.S. federal spending landscape and sluggish early-year momentum. The firm continues to maintain its Buy recommendation on the shares.
The revision follows Stifel’s channel checks with system integrators, which revealed a slight deterioration in quarterly sentiment. Multiple sources attributed the softness to typical seasonal pipeline development after an aggressive fourth-quarter push.
Federal segment performance has contracted substantially on a year-over-year basis, particularly when measured against the previous year’s robust period that delivered 30% expansion. Stifel’s analysis highlighted that this decline incorporates a $15 million de-obligation related to the Deferred Resignation program, though analysts believe management likely factored this into initial guidance.
“It appears the Fed business is down meaningfully Y/Y vs. what was a very strong year-ago comp,” Reback wrote. The analyst added that the drop appears worse than management had originally anticipated.
Stifel now anticipates approximately 50 basis points of Q1 current remaining performance obligation (cRPO) upside — a reduction from the roughly 100 basis points projected last quarter. This positions expected cRPO growth at around 20.5% year-over-year in constant currency, slightly exceeding the company’s 20% target.
Federal Segment Challenges Take Center Stage
The lowered price objective also accounts for shifts in the business framework as clients increasingly adopt ServiceNow’s AI capabilities. This transition brings consumption-driven revenue models and possible gross margin pressure, although the company maintains a healthy gross profit margin of 77.5% over the trailing twelve months.
Stifel anticipates federal segment performance will strengthen in Q2 2026, observing that this quarter experienced the most significant DOGE-related effects during 2025, creating a more favorable year-over-year comparison.
System integrators expressed greater confidence regarding the Q2 pipeline, providing encouragement for the latter portion of the fiscal year.
First Quarter Results Approaching
ServiceNow plans to release Q1 2026 financial results on April 22 following market close. Wall Street consensus anticipates adjusted EPS of $0.97, GAAP EPS of $0.53, and revenue reaching $3.75B. Management’s guidance projected revenue between $3.650B and $3.655B.
The company has delivered revenue growth exceeding 20% for three consecutive quarters, yet shares have faced persistent downward pressure, declining more than 40% across the past six months.
Additional analysts have recently adjusted their price targets. FBN Securities lowered its objective to $160 from $220, retaining an Outperform rating. BNP Paribas Exane maintained its Outperform stance with a $140 target.
Citizens maintains a more optimistic outlook, holding a Market Outperform rating with a $260 price objective and forecasting Now Assist ACV will reach $1 billion by 2026.
NOW currently trades close to its 52-week low of $98, with shares at $104.04 at the time of publication.
