Unlocking Value: Why ServiceNow Remains a Compelling Investment
Decoding ServiceNow's Third-Quarter Performance in 2025
TCW Concentrated Large Cap Growth Fund's third-quarter 2025 investor letter offers an in-depth look at the equity market's trajectory, fueled by AI investments and robust corporate earnings. The fund's Class I shares saw a return of 4.11%, contrasting with the Russell 1000 Growth Index's 10.51% gain. Amidst this backdrop, ServiceNow, Inc. (NOW) emerged as a key focus. The company's intelligent workflow automation solutions continue to bolster digital businesses, as evidenced by its impressive financial metrics.
Analyzing ServiceNow's Financial Health and Market Fluctuations
Despite a modest one-month decline of 4.95% and a 30.99% decrease over the past 52 weeks, ServiceNow's shares closed at $152.59 on December 24, 2025, with a market capitalization of $158.448 billion. This valuation underscores its significant presence in the technology sector. The company's resilience is further highlighted by its subscription revenues, which reached $3.299 billion in the third quarter, representing a 20.5% year-over-year increase in constant currency.
Key Performance Indicators: cRPO and Subscription Revenue Exceed Expectations
ServiceNow's operational strength is evident in its current Remaining Performance Obligations (cRPO), which surpassed consensus estimates by growing 21.5% compared to an anticipated 19.4%. Subscription revenue also exceeded projections, driven by superior net new Annual Contract Value (ACV) and better-than-expected on-premise sales. These figures demonstrate ServiceNow's consistent ability to secure and expand its client base, reinforcing its market leadership.
Addressing Investor Concerns and Future Growth Strategies
Investor apprehension regarding ServiceNow's exposure to the U.S. Federal government market has been a persistent challenge. However, the company successfully onboarded six new government clients during the quarter, indicating a strategic effort to diversify and strengthen its public sector footprint. Furthermore, ServiceNow has adopted a cautious approach in its future guidance, incorporating conservative estimates for the upcoming quarter, which suggests a prudent management outlook.
The Ascendancy of AI-Embedded Products and Workflow Dominance
ServiceNow's new product offerings, particularly those integrated with artificial intelligence, are gaining considerable traction. The company finalized 21 deals involving five or more Now Assist products, including a substantial $20 million transaction during the quarter. This success validates ServiceNow's commitment to leveraging AI to enhance its platform. The company's competitive edge lies in its robust workflow platform, which seamlessly integrates across various enterprise systems, enabling efficient task management and serving as a centralized hub for deploying and overseeing AI agents. This strategic positioning reinforces a bullish sentiment on ServiceNow shares among investors.
ServiceNow Amidst the Broader AI Investment Landscape
While ServiceNow is a notable player, it does not feature on the list of the 30 most popular stocks among hedge funds. As of the end of the third quarter, 104 hedge fund portfolios held ServiceNow, a slight decrease from 106 in the preceding quarter. Despite its strong performance, some analysts suggest that other AI stocks might offer greater upside potential with reduced downside risk, particularly those poised to benefit from Trump-era tariffs and the trend towards onshoring. This perspective indicates a diverse and dynamic AI investment landscape beyond ServiceNow's immediate orbit.