All or nothing: ServiceNow earnings preview

ServiceNow is one of the companies that, even though it comes in a straight line from classic corporate SaaS, is now confidently marching at the forefront of AI industry pioneers. Pioneers who offer not models or computing power, but business solutions for which those models were created.

ServiceNow has already fallen nearly 50% from its mid-2024 peak, even though over the same period the company has shown profit growth of more than a dozen percent year over year, and nothing suggests that this is about to change.

This stubbornly negative sentiment is hard to call entierly rational, yet it still remains, partly, anchored in market processes and valuation models.

At present, the market assumes that software and SaaS companies will be absorbed or otherwise eliminated from the market “by AI.” As a result, their target value is currently close to zero, even though financial results show something completely different. Leaving aside the rationality and feasibility of such a scenario, ServiceNow is a company whose business model is tightly integrated with and built on AI, not a “dinosaur” waiting for someone to replicate its solutions at a fraction of the price.

In the context of the upcoming earnings call, one question needs to be asked, because the answer matters for the entire sector, not just a single company.

That question is:

What does the company have to show to convince the market that the sell-off is a mistake?

Expectations are extreme, and the margin for error is tiny. Beating revenue and earnings will not be enough.

• Beating consensus revenue of $3.92 billion and adjusted EPS of about $8.6 is the starting point, not proof of the bullish thesis for the company.

The key metrics will be cRPO and RPO (short- and long-term receivables).

• These indicators will allow investors to assess not short-term profitability, but the quality of growth, far better than revenue or even backlog can.
• cRPO should show growth of around 20% year over year; if that growth comes in lower, it will dramatically worsen the company’s target (terminal) value, which is already under pressure.

In short, the company must prove to the market that it is the leader of the “orchestration layer” for AI agents in enterprises, not merely a SaaS company. This is make-or-break for the company’s valuation.

However, ServiceNow’s results matter not only for a single company or even the entire SaaS industry. They will be a litmus test for the whole AI revolution. Success or failure will show whether AI stops being a promise and becomes a solution integrated inside companies.

ServiceNow technical analysis (D1)

The daily chart shows price trapped in a tight rectangle between $84 and $125, with the current close around $102 offering no directional edge. This high-volume “dead zone” means that both bulls and bears are exposed to downside risk until a decisive breakout sets the next trend. Source: xStation5