[IN-DEPTH ANALYSIS] ServiceNow: Harnessing AI to Automate Workflows and Redefine Enterprise Value

Key Takeaways

· ServiceNow acts as a platform on top of platforms, seamlessly integrating over 200 leading business tools to unify and automate cross-department workflows, effectively breaking down information silos.

· Leveraging advanced AI technologies such as Now Assist and Apriel Nemotron, it drives intelligent workflow automation, enabling enterprises to achieve up to 40% efficiency gains and significantly increase automation in key business areas.

· With solid financial performance, including strong revenue growth, high gross margins, and robust free cash flow, ServiceNow commands a valuation range of approximately $796 to $1,048 per share, maintaining its industry leadership in enterprise AI and workflow automation.

Source: TradingKey

Breaking Down Silos: The ServiceNow Philosophy

TradingKey - Traditionally, most organizations operate in silos: finance only focuses on finance, IT only cares about IT, and so on. This fragmented approach means departments often don’t collaborate effectively, making it harder for the business to move forward as a unified whole.

ServiceNow’s philosophy is to change this mindset. This cloud-based platform is built on the idea that everyone in the enterprise, not just sales or marketing, should care about the overall business and its customers. By acting as a unified process layer above existing systems (like ERP, CRM, and HCM), ServiceNow connects these isolated departments. Think of it as a centralized system that streamlines how your company handles everything from IT support, customer service, HR tasks, to risk management and compliance.

This integration enables seamless workflows that cross departmental boundaries, ensuring that all teams work together toward common business goals and deliver a better experience for both employees and customers.

Why do Enterprise Need ServiceNow?

So, what’s the benefit business can get from service now? ServiceNow is essential because it transforms the manual, fragmented business processes into seamless, automated workflows that improve accuracy, speed, and visibility across entire organization.

1. Comprehensive Business Process Automation (BPA)

ServiceNow automates complex, multi-step business processes across departments such as IT, HR, customer service, procurement, security, and facilities management. This automation reduces manual effort, eliminates errors, and accelerates task completion. For example, if you need to approve a purchase order, ServiceNow automatically sends it to the right person, tracks the delivery, and manages payments while keeping a detailed record. This means fewer mistakes, faster approvals, and everything stays organized and compliant with rules.

Source: ServiceNow, TradingKey

2. Unified Workflow Automation Platform (One platform for all)

ServiceNow’s Workflow Data Fabric acts like the central nervous system of your business operations. It connects all data, whether it’s neatly organized in databases or scattered across emails and documents in real time, without needing to move or copy anything. This means teams always work with the most current information, reducing mistakes and delays caused by outdated or duplicated data.

What truly sets this platform apart is how it brings together the entire technology landscape. It integrates smoothly with over 200 popular business tools you might already use like Salesforce, Microsoft, or AWS, so all systems can communicate and work together. This eliminates the usual chaos of juggling disconnected apps and creates a smooth, coordinated flow of work across departments.

Behind the scenes, ServiceNow uses smart software robots (RPA) and AI to handle repetitive, routine tasks automatically. This lets team focus on higher-value work, while the system speeds up processes and improves accuracy.

3. Powerful, Easy-to-Use Workflow Designer

One of the best things about ServiceNow is how simple it makes building and managing workflows. Don’t need to be a tech expert or wait weeks for IT help. With its visual drag-and-drop editor, anyone can design or tweak automated processes by simply arranging steps on a canvas, like putting together a flowchart.

This ease of use means business can adapt quickly. If you need to change how a process works, say adding a new approval step or speeding up a customer request, you can do it yourself in minutes.

Beyond just creating workflows, the tool helps manage and monitor, so you always know how your automation is performing and where improvements can be made. It also supports collaboration, allowing multiple team members to work together on building and refining processes while maintaining control and compliance.

4. Automation Across Key Business Functions

ServiceNow automates critical business functions across departments, making every day work faster and more reliable. 

· Incident and Service Request Management: Automatically create, assign, and escalate IT incidents or service requests based on predefined rules, speeding up resolution and reducing downtime. For example, if an employee’s computer breaks or a software issue arises, ServiceNow routes the request to the right technician immediately.

· Change Management: Managing changes, such as software updates or infrastructure modifications, can be risky if not handled properly. ServiceNow automates the entire change process, from submission through approvals to final implementation. This ensures compliance with company policies and industry regulations, reducing the chance of errors or disruptions.

· Asset Management: Keeping track of IT assets like computers, software licenses, and other equipment is crucial to avoid overspending or compliance issues. ServiceNow automatically monitors asset lifecycles, sends alerts for renewals or expirations, and maintains detailed records.

· HR Service Delivery: ServiceNow transforms HR operations by automating employee onboarding, offboarding, and routine HR requests. Employees can use a unified self-service portal to find answers, submit inquiries, or complete tasks without waiting for HR staff. Automated workflows route paperwork and approvals efficiently, improving employee experience and reducing HR’s administrative burden. AI-powered chatbots provide instant support for common questions, making HR services available anytime, anywhere.

· Security Operations: Protecting business from cyber threats requires fast detection and response. ServiceNow automates vulnerability scanning, threat identification, and incident handling. By streamlining these processes, security team can respond faster and more effectively, minimizing risks and safeguarding data.

Competitive Advantages

While other companies like Salesforce is excellent for managing customer relationships and AWS provides powerful cloud infrastructure, neither covers the full spectrum of the business operations. ServiceNow truly stands out because it offers a single, unified platform that connects and automates virtually every part of business. ServiceNow’s strength is in bringing all these pieces together into a cohesive, intelligent system that drives digital transformation.

ServiceNow doesn’t force enterprise to abandon the software already in use. It connects smoothly with popular applications, including Salesforce, AWS, Microsoft, SAP, Oracle, and others. This integration capability means businesses get the best of all worlds: keep familiar tools but manage and automate everything centrally through ServiceNow. So ServiceNow isn’t trying to take contracts away from other software. It actually has no real competitors. Other software companies willingly integrate with ServiceNow because it creates a mutually beneficial partnership without requiring ServiceNow to pay them directly for software licenses. These integrations expand each company’s reach and improve customer experience by automating processes, reducing errors, and increasing efficiency. Often, these partnerships involve collaborative agreements to co-market solutions and share revenue from integrated services or app stores, giving software vendors access to ServiceNow’s large enterprise customer base and new business opportunities.

Plus, its low-code or no-code tools empower anyone, not just developers, to build or customize workflows quickly, enabling business to adapt rapidly without heavy IT involvement. This is the trend I see that software companies are doing their best to help not just tech people, but also people with no programming skills to accomplish tasks that traditionally needed heavy coding before. This is the same thing Snowflake is doing, with the help of AI in my last article.

ServiceNow’s Enterprise AI

Every company will adopt AI sooner or later, and AI functions are likely to be managed through IT department. Unlike newer entrants or niche AI vendors, ServiceNow doesn’t need to break into enterprise IT. It’s widely adopted in the enterprise world, especially for IT workflows, so ServiceNow is already deeply embedded as a critical platform in many large organizations.  

Source: Cyntexa

Introducing and scaling AI-powered enterprise agents seamlessly across the organization is easier for ServiceNow. These AI agents can automate, reason, and optimize workflows, using the data and processes already managed by ServiceNow, making ServiceNow a natural leader in deploying enterprise AI at scale.

Let’s clarify something first, with Enterprise AI agents, the whole process goes like this:

First, AI agents must be able to read, interpret, and extract meaning from a wide variety of business content: documents, PDFs, emails, images, and more. So ServiceNow has developed advanced content understanding capabilities. ServiceNow’s Now Assist leverages large language models and generative AI to enhance content understanding by summarizing documents, support tickets, and emails, generating intelligent responses, and enabling natural language interactions. This AI-powered assistant helps users quickly find relevant information and automates routine tasks, further improving accuracy and efficiency across workflows.

Second, AI agents must have ability to reason through complex workflows, make decisions, and take action autonomously. ServiceNow’s Apriel Nemotron, a compact, enterprise-grade large language model developed in partnership with NVIDIA, is purpose-built for real-time reasoning. It draws inferences, weighs goals, and navigates rules to automate multi-step business processes such as routing, prioritization, and escalation across IT, HR, and customer service. This model delivers faster responses and lower inference costs while maintaining high accuracy, enabling proactive and autonomous workflow management.

Third, we need AI agents to customize to unique organizational needs. ServiceNow’s Workflow Data Fabric serves as the backbone for this adaptability. By unifying data from both legacy and modern systems into a single, real-time layer, it allows AI to continuously learn from up-to-date workflow information and adjust its actions accordingly. This integrated data environment ensures that AI agents understand the specific context and complexities of an organization’s processes, enabling tailored automation that evolves over time to improve accuracy, efficiency, and relevance.

Last but not least, AI agents must work as a team. ServiceNow combines its workflow automation system, AI controller, and Workflow Data Fabric to create a control tower that orchestrates teams of AI agents. These agents coordinate complex, cross-functional processes, such as employee onboarding involving IT, HR, security, and facilities, ensuring smooth, end-to-end automation. The platform’s openness to all hyperscalers, data models, and systems makes it the central nervous system of enterprise automation, breaking down silos and enabling unified digital workflows.

Real AI Value Added for Clients

Clients such as ASML, Orica, Stellantis, and AstraZeneca report substantial efficiency gains: Orica increased IT service desk deflection from 18% to 94%, doubling fully resolved cases without human intervention; AstraZeneca credits ServiceNow AI with returning 90,000 employee hours by accelerating issue resolution. Across the board, clients report up to 30–40% reductions in manual workloads and process cycle times, and IT incident resolution times cut by 50% or more.

ServiceNow’s AI-driven automation has been adopted by thousands of global enterprises across industries, with over 70% of its customers planning to implement its generative AI within the next 12 months. ServiceNow projects subscription revenues of approximately $12.6 billion in 2025, with AI-powered automation and Agentic AI playing a key role in driving long-term growth.

Notably, in Q1 the number of Pro Plus deals (a premium product tier), including multiple Now Assist AI products, has more than quadrupled YoY, indicating that AI capabilities are fueling larger, more strategic contracts.

ServiceNow’s AI innovation extends beyond agents to foundational technologies like RaptorDB, its next-generation AI database, which has secured multiple million-dollar deals. Internally, ServiceNow applies its own Agentic AI to operations, achieving a 16x improvement in lead-to-sale conversion and deflecting over 86% of repetitive work, showcasing the transformative impact of AI both for clients and within the company.

Financials

1. Revenues

Total revenue grew 18.6% YoY to $3.09 billion in Q1 2025, slightly above expectations. Subscription revenues (97% of total revenues) of $3.005 billion in Q1 2025, growing 19% YoY, which remains strong for an enterprise SaaS company at its scale.  

Source: ServiceNow Earnings Reports, TradingKey

However, there is a slight deceleration in revenue growth. The slowing growth rate over the years reflects ServiceNow’s maturation and scale rather than deteriorating business health. The recent slower growth rates reflect macro uncertainties with cautious IT spending, seasonality, and shift to consumption-based pricing models.

From 2024, ServiceNow is moving from charging customers a fixed, upfront fee for its software based on contracts or licenses (Subscription-based pricing model) to a pricing model where customers pay based on how much they actually use the service. This consumption-based pricing aligns revenue more closely with real-time customer usage rather than large, upfront payments. As a result, revenue grows more steadily and smoothed over time, but this can temporarily reduce the speed of reported revenue growth because some revenue that would have been recognized upfront is now spread out over the period customers use the service. 

North America remains the dominant market, contributing 64% of revenue, consistent with prior quarters. Revenue outside North America accounts for about 36% of total revenue. EMEA and Asia Pacific showed slower growth in Q1 2025 compared to previous periods rather than the historically faster expansion seen before, reflecting macroeconomic challenges hit Europe and Asia more heavily than Americas.

2. cRPO

cRPO grew 22% YoY to $10.31 billion Q1 2025, beating guidance and signaling strong near-term revenue visibility and healthy demand for its products. Despite macroeconomic uncertainties and pricing model shifts, ServiceNow continues to sign substantial contracts, including large enterprise deals and AI-powered product bundles. Since cRPO reflects future revenue, its faster growth compared to current revenue suggests a growing contract backlog that will convert into revenue in upcoming quarters, supporting sustained growth.

Source: ServiceNow Earnings Reports, TradingKey

3. Customers

The number of customers with more than $5 million in annual contract value (ACV) rose 20% YoY to 508, indicating strong enterprise adoption and expansion within large enterprises. This metric reflects not only new customer acquisitions but also substantial expansion within existing large clients, showing their ability to upsell. Large ACV customers typically have longer contract durations and higher renewal rates. And the current overall renewal rate is 98%.

Source: ServiceNow FY25Q1 Investor Presentation

4. Profitability & Margins

When we look at SaaS companies, we usually focus on Non-GAAP measures to exclude certain non-cash or non-recurring items such as stock-based compensation, amortization of purchased intangibles, acquisition-related expenses, and legal settlements. It can provide a clearer view of the company’s core operating performance, which is especially useful for investors analyzing ongoing business trends.

Non-GAAP net income rose 20% YoY to $846 million, and adjusted EPS grew to $4.04, beating analyst expectations.

Source: ServiceNow FY25Q1 Investor Presentation

Q1 2025 ServiceNow’s non-GAAP gross margin was 82%. Even the company invests in AI innovation and infrastructure to support growth, gross margin is till high.

Source: ServiceNow FY25Q1 Investor Presentation

The non-GAAP operating margin improved to 31.0%. ServiceNow is effectively managing its operating expense. Free cash flow margin was 48%, meaning nearly half of its revenue converted into free cash flow.

Source: ServiceNow FY25Q1 Investor Presentation

Source: ServiceNow Earnings Reports, TradingKey

Robust profitability and effective cost management support ServiceNow’s financial health.

5. ACV Contribution

ServiceNow’s net new ACV contribution across workflows and products in Q1 2025 reflects several important trends and strategic shifts. Technology Workflows, historically ServiceNow’s core strength (IT service management, IT operations), contributed 48% of net new ACV, down from 52% a year earlier. Meanwhile, CRM, Industry, and Core Business Workflows increased their share to 34% of net new ACV, up from 30%. This shift indicates ServiceNow is successfully expanding beyond IT-centric workflows into broader enterprise functions like customer service, HR, and industry-specific solutions, diversifying its revenue base. This shift is a good thing because CRM market is a much larger and faster growing market than IT service management market. According to Fortune Business Insights, the global CRM market is projected to be about $112.9 billion in 2025, while the IT Service Management (ITSM) market is estimated to be around $15.6 billion by 2026 based on industry consensus.

Source: ServiceNow FY25Q1 Investor Presentation

6. Stock-Based Compensation (SBC)

In Q1 2025, ServiceNow’s stock-based compensation expense was approximately $470 million, marking an 11.4% increase year-over-year. SBC as a percentage of total revenue was around 16%, declining from 2021. The slower SBC growth relative to revenue may suggest a sign of a maturing.

Source: ServiceNow Earnings Reports, TradingKey

Valuation

To value ServiceNow, I apply an EV/Forward Revenue multiple range of 12x to 16x, which is well-justified by ServiceNow’s strong financial profile. The peer group’s median and average EV/Forward Revenue multiples are 8.3x and 9.3x, respectively, but ServiceNow commands a significant premium, currently trading at 15.4x, due to its industry-leading revenue growth (18.6%), exceptional gross margin (78.9%), best-in-class free cash flow margin (47.7%), and a Rule of X score (84.9%) that far exceeds all listed peers.

Using 12x as the low end of the range reflects a premium over the group for ServiceNow’s consistent outperformance, while 16x at the high end is justified by its continued market leadership, robust growth, and operational efficiency, and AI. Applying these multiples to ServiceNow’s 2025 forward revenue of $13,150 million results in an enterprise value range of $157.8 billion to $210.4 billion; adding net cash of $8,533 million and dividing by 209 million shares outstanding yields a target price range of approximately $796 to $1,048 per share. The company is fairly priced currently. 

Source:  S&P Global Market Intelligence, TradingKey