Key Takeaways
- Stifel reduced NOW’s price objective from $180 down to $135, maintaining its Buy recommendation
- Shares have declined 43% during the last half-year period and are hovering close to 52-week lows
- Primary concerns center on sluggish U.S. government spending and typical Q1 seasonal softness
- Government sector revenues show significant year-over-year deterioration versus robust prior-year comparisons
- First quarter 2026 financial results scheduled for April 22; analysts forecast $3.75B in revenue
Stifel has reduced its price objective for ServiceNow (NOW) from $180 down to $135, pointing to challenges in the U.S. federal spending landscape and a sluggish beginning to the calendar year. Despite the reduction, the firm maintains its Buy recommendation on the shares.
The downward revision follows analysis conducted by Stifel’s research team, headed by Brad Reback, which included conversations with system integration partners revealing a moderate deterioration in quarterly sentiment. Multiple contacts highlighted typical seasonal patterns involving pipeline reconstruction after an intense year-end sales cycle.
Government-related business has experienced substantial year-over-year contraction when measured against an exceptionally robust comparable period that delivered 30% expansion. Stifel’s assessment indicates this downturn incorporates a $15 million de-obligation connected to the Deferred Resignation initiative, though analysts believe management likely factored this into initial projections.
“It appears the Fed business is down meaningfully Y/Y vs. what was a very strong year-ago comp,” Reback stated. The analyst further noted that the deterioration seems more pronounced than what management had initially projected.
Stifel currently anticipates approximately 50 basis points of upside to Q1 current remaining performance obligation (cRPO) — a reduction from the roughly 100 basis points observed in the previous quarter. This positions anticipated cRPO expansion at roughly 20.5% year-over-year in constant currency terms, marginally exceeding the company’s 20% guidance framework.
Government Sector Challenges Take Center Stage
The lowered price objective also accounts for a transforming business structure as clients increasingly adopt ServiceNow’s artificial intelligence capabilities. This transition introduces consumption-oriented revenue streams and potential gross margin pressure, although the company maintains a robust 77.5% gross profit margin over the trailing twelve months.
Stifel projects improvement in the federal segment during Q2 2026, observing that this quarter experienced the most substantial DOGE-related disruptions in 2025, creating more favorable year-over-year comparisons.
System integration partners expressed greater confidence regarding the Q2 pipeline development, providing some encouragement for the second half of the year.
First Quarter Results Approaching
ServiceNow plans to announce Q1 2026 financial results on April 22 following market closure. Wall Street analysts project adjusted earnings per share of $0.97, GAAP earnings per share of $0.53, and total revenue of $3.75B. The company’s internal guidance projected revenue in the range of $3.650B to $3.655B.
Notwithstanding three consecutive quarters delivering revenue growth exceeding 20%, the equity has experienced persistent downward pressure, declining more than 40% across the past six-month period.
Additional Wall Street firms have similarly adjusted their price objectives recently. FBN Securities lowered its target to $160 from $220, preserving an Outperform designation. BNP Paribas Exane retained its Outperform stance with a $140 objective.
Citizens demonstrates greater optimism, maintaining a Market Outperform rating alongside a $260 price target and forecasting Now Assist ACV reaching $1 billion during 2026.
NOW currently trades in proximity to its 52-week low of $98, with shares priced at $104.04 at the time of publication.
