ServiceNow is set to report second-quarter 2026 earnings on July 22, just weeks after Guggenheim upgraded the now stock to Buy from Neutral, citing an attractive valuation following a sharp decline in shares year to date.
On July 1, Guggenheim analyst John DiFucci upgraded ServiceNow to Buy with a price target of $125, according to Yahoo Finance. Shares rose about 4% on the upgrade announcement.
The upgrade reflects a valuation-driven thesis rather than a bet on artificial intelligence. Guggenheim noted that ServiceNow’s current valuation of approximately 7.5 times enterprise value to next-twelve-month recurring revenue is justified, despite being a premium to many software-as-a-service peers. “We believe current levels present an attractive opportunity for investors to purchase a comfortably profitable stock likely to continue to grow at double digits,” DiFucci said, according to Yahoo Finance.
The move comes after a prolonged period of weakness for the now stock. Since Guggenheim raised its rating from Sell to Neutral in December 2025, ServiceNow shares have fallen roughly 35%, substantially underperforming both the IGV software index, which declined 16%, and the S&P 500, which gained 10% over the same period, according to Yahoo Finance. The stock is down 33% year to date, per Invezz.
Much of the weakness has been driven by investor concerns about artificial intelligence disrupting ServiceNow’s long-term growth prospects. Guggenheim acknowledged that AI-related risks remain significant and does not expect AI monetization to become a meaningful earnings driver in the near future. However, the brokerage argued that artificial intelligence is unlikely to become the company’s “death knell,” and that risks are already largely reflected in the current share price.
Q2 Earnings Expectations and Growth Drivers
Analysts expect ServiceNow’s Q2 results to reflect strong enterprise adoption of its AI-native platform. The Zacks Consensus Estimate for Q2 revenues is $3.92 billion, indicating 22% growth from the year-ago quarter, according to Yahoo Finance. Earnings per share are estimated at 86 cents, representing 4.88% growth year over year.
ServiceNow has beaten the Zacks Consensus Estimate in all four trailing quarters, with an average surprise of 9.47%, according to Zacks. Q2 results are expected to have benefited from continued adoption of Now Assist, AI Control Tower, and Autonomous Workforce offerings, as well as growth in Security & Risk, AI-native CRM, and EmployeeWorks. The integration of the Moveworks acquisition is also expected to have contributed meaningfully to subscription growth.
However, Zacks noted that rising operating expenses, intensifying competition from Salesforce, Microsoft, and Oracle, longer enterprise spending cycles, and a premium valuation could limit upside even if the company delivers another earnings beat. ServiceNow’s forward 12-month price-to-earnings ratio of 22.60X is higher than the Zacks Computers – IT Services industry average of 16.6X.
DiFucci also pointed to expectations for improving demand from the U.S. Federal Government as a potential catalyst for future growth, according to Yahoo Finance.
Sources
- Yahoo Finance — Guggenheim upgrade to Buy, analyst quote, price target, stock movement, December 2025 rating history, and S&P 500 comparison
- Zacks Investment Research — Q2 consensus revenue and EPS estimates, growth rates, historical earnings beats, valuation metrics, and competitive landscape
- Invezz — Year-to-date stock performance
