ServiceNow NOW is scheduled to release its second-quarter 2026 results on July 22.
The Zacks Consensus Estimate for second-quarter revenues is currently pegged at $3.92 billion, indicating 22% growth from the figure reported in the year-ago quarter.
The consensus mark for earnings is pegged at 86 cents per share, unchanged over the past 30 days and indicating growth of 4.88% from the figure reported in the year-ago quarter.
Consensus Earnings Trend
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ServiceNow’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 9.47%.
ServiceNow, Inc. Price and Consensus
ServiceNow, Inc. price-consensus-chart | ServiceNow, Inc. Quote
Let’s see how things are shaping up prior to this announcement.
NOW’s Q2 to Ride on Strong Portfolio
ServiceNow’s second-quarter 2026 results are expected to have benefited from continued enterprise adoption of its AI-native platform, particularly Now Assist, AI Control Tower and Autonomous Workforce offerings. Management indicated that AI demand continues to exceed internal expectations, with Now Assist NNACV outperforming forecasts, customers spending more than $1 million, growing more than 130% year over year, and EmployeeWorks already closing multiple seven-figure deals shortly after launch. The integration of Moveworks is also expected to have contributed meaningfully to subscription growth as AI becomes embedded across the platform.
Growth in Security & Risk, AI-native CRM and EmployeeWorks is likely to have remained a key driver in the reported quarter. The Armis and Veza acquisitions expanded ServiceNow’s AI governance, identity management and cybersecurity capabilities, while AI-powered CRM and CPQ solutions continue to replace legacy platforms. NOW highlighted strong traction in sales CRM, with NNACV growing more than fivefold year over year, supported by increasing enterprise demand for workflow automation and AI-enabled customer service.
However, NOW is expected to have suffered from macroeconomic uncertainty and longer enterprise spending cycles. Operating expenses are likely to have increased due to the integration of Moveworks, Armis and Veza acquisitions, while NOW continues investing aggressively in product innovation and go-to-market expansion.
Stiff competition from Salesforce CRM, Microsoft MSFT, Oracle ORCL and other enterprise software vendors that are rapidly embedding generative AI into their platforms, requiring continued investment to sustain technological leadership, has been a headwind. ServiceNow management has acknowledged that competition has become even more intense as AI reshapes enterprise software. This is expected to have kept margins under pressure in the to-be-reported quarter.
ServiceNow Shares Lag Sector, Overvalued
NOW shares have dropped 32.5% year to date (YTD), underperforming the Zacks Computers - IT Services' drop of 25.3% and the broader Zacks Computer & Technology sector’s return of 16.6%. Shares of Microsoft, Oracle and Salesforce have dropped 17%, 36.3% and 34.8%, respectively, over the same time frame.
NOW Stock’s Price Performance
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ServiceNow’s Value Score of D suggests a stretched valuation at this moment.
In terms of the forward 12-month price/earnings (P/E), NOW is trading at 22.60X, higher than the Zacks Computers - IT Services industry’s 16.6X, Microsoft’s 20.63X, Oracle’s 14.83X and Salesforce’s 11.71X.
NOW Shares Overvalued
Image Source: Zacks Investment Research
Can ServiceNow’s AI Platform Help the Stock Recover?
ServiceNow's long-term growth is expected to be driven by its strategy of becoming the AI Control Tower for enterprise workflows. The company is integrating AI, data, security and workflow orchestration into a unified platform, allowing enterprises to govern AI agents, automate complex business processes and manage heterogeneous IT environments. NOW targets more than $30 billion in subscription revenues by 2030 and sees a total addressable market exceeding $600 billion, supported by AI-native CRM, Security & Risk, Data & Analytics, EmployeeWorks and Workflow Data Fabric.
Expanding adoption beyond IT into HR, CRM, security and industry workflows, ServiceNow enjoys significant cross-selling opportunities. The company’s Context Engine, Workflow Data Fabric and AI-native architecture provide differentiation by combining enterprise context with workflow execution, while acquisitions such as Moveworks, Armis and Veza broaden its AI and security capabilities. NOW also expects Data & Analytics to become a multibillion-dollar business and AI products to continue scaling rapidly.
However, the enterprise software landscape is becoming increasingly competitive as hyperscalers and application vendors embed AI into their platforms. Microsoft, Salesforce, Oracle, Google Cloud and others continue investing heavily in agentic AI, workflow automation and enterprise productivity solutions. Sustaining product differentiation will require continued innovation, acquisitions and elevated spending from ServiceNow.
Conclusion
While ServiceNow continues to benefit from strong AI adoption and an expanding enterprise platform, near-term risks appear to outweigh the positives. Rising operating expenses, intensifying competition, longer enterprise spending cycles and a premium valuation could limit upside even if the company delivers another earnings beat. Coupled with its sharp YTD underperformance, investors are likely to remain cautious until ServiceNow demonstrates that its AI investments can translate into sustained margin expansion and faster earnings growth.
ServiceNow currently has a Zacks Rank #4 (Sell), which implies investors should avoid the stock ahead of the quarterly result announcement.
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This article originally published on Zacks Investment Research (zacks.com).