Can Agentic AI Adoption Fuel ServiceNow's Next Phase of Growth?
ServiceNowNOW is seeing strong demand for its Agentic AI products as enterprises look to automate more work and improve productivity. The company is expanding AI across IT, customer service, employee service and security. Management said customers now want AI that can complete tasks and deliver clear business value instead of simply assisting employees. This is helping drive adoption of the company's AI offerings.
Customer adoption continues to improve. During the second quarter of 2026, the number of customers using Agentic AI in production increased nine times compared with nine months ago. The percentage of renewal customers buying Agentic AI for the first time doubled both sequentially and year over year. First-time Agentic AI buyers also increased more than 45% year over year. AI annual contract value (ACV) crossed $1 billion during the second quarter, and ServiceNow expects AI ACV to exceed $1.5 billion by the end of 2026. Management also said the company remains ahead of its long-term goal of AI contributing 30% of total ACV by 2030.
ServiceNow is also adding new AI capabilities to its platform. Its Level 1 AI Specialist can resolve 80-85% of service requests without human involvement and reduce resolution time from about two days to around 20 minutes. Customers are also adopting more AI products. During the second quarter, deals that included five or more AI products increased 5.5 times year over year, while AI deals worth more than $1 million tripled. Further, the company's AI-native products continue to support higher pricing, with price increases of 20-30%.
ServiceNow expects customers to expand AI use across more departments after their first deployment. If the company continues to add new AI products and customers keep increasing their AI spending, Agentic AI can become an important driver of revenue growth over the long term. The Zacks Consensus Estimate for ServiceNow's 2026 and 2027 revenues indicates year-over-year growth of 22% and 18.5%, respectively.
ServiceNow Faces Stiff Competition
ServiceNow is facing stiff competition from the likes of SalesforceCRM and AtlassianTEAM.
Salesforce competes with ServiceNow through its offerings such as Agentforce, Data Cloud and Slack, through which it creates a unified ecosystem and connects customer data with integrated AI across systems, apps and devices. In the first quarter of fiscal 2027, Agentforce’s annual recurring revenues (ARR) surpassed $1 billion, up in triple digits year over year. Salesforce expects this momentum to continue in fiscal 2027, on the back of robust customer demand for its agentic offerings.
Atlassian competes with ServiceNow through its suite of cloud-based software solutions, such as Jira, Rovo and Teamwork Graph, which help organizations collaborate and manage their workforce. In the third quarter of fiscal 2026, Atlassian continued to add millions of monthly active users to Rovo, while strong customer engagement across Jira helped the company's cloud business grow 29% on a year-over-year basis.
NOW’s Share Price Performance, Valuation & Estimates
ServiceNow shares have plunged 28.2% year to date compared with the Zacks Computers - IT Services industry’s decline of 21.1%.
NOW’s YTD Price Performance
Image Source: Zacks Investment Research
ServiceNow stock is overvalued, with a forward 12-month price/earnings (P/E) of 23.93X compared with the industry’s 17.37X. NOW has a Value Score of D.
NOW Forward 12 Months (P/E) Valuation Chart
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for ServiceNow’s 2026 earnings is pegged at $4.07 per share, revised downward by 6 cents over the past seven days. The figure indicates a 15.95% increase year over year.
Image Source: Zacks Investment Research
ServiceNow stock currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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