NOW Stock Has Rebounded Over 54% — Why ServiceNow’s Rally Could Have Further Room to Run

After underperforming in the first half of the year, ServiceNow (NOW) stock has staged a strong recovery, rising 57.4% from its low of $81.24.

The sell-off was driven largely by a broader shift in investor sentiment toward enterprise software stocks. As artificial intelligence (AI) reshapes the software industry, investors have grown concerned that AI-powered agents could disrupt traditional software vendors. These concerns triggered widespread selling across the sector, including ServiceNow.

Margin pressure also weighed on the shares, adding to concerns about the company’s near-term profitability.

However, ServiceNow’s underlying business momentum remains strong. Rising subscription revenue and an upbeat outlook suggest that the company is leveraging AI to accelerate its growth. Further, ServiceNow’s expanding customer base and larger deals support its growth case.

With investor sentiment improving and multiple growth catalysts in place, ServiceNow stock has room to run further.

ServiceNow: Multiple Factors Strengthen Its Bull Case

ServiceNow’s Q2 performance strengthens the investment case for the company. Its subscription business continued to grow at a healthy pace. Meanwhile, strong enterprise demand, platform consolidation, expanding customer spending, and accelerating AI adoption provide multiple avenues for solid growth ahead.

ServiceNow’s subscription revenue reached $3.975 billion in Q2, up 23% year-over-year (YOY) on a constant-currency basis. Moreover, its current remaining performance obligations (RPO) reached $13.2 billion, providing strong visibility into future revenue.

The quality of this growth is encouraging, as it is increasingly driven by customers consolidating multiple workflows into ServiceNow’s platform. Eighteen of its top 20 deals included at least eight products, suggesting that customers are expanding their relationship with ServiceNow across multiple functions.

IT Service Management (ITSM) was included in 15 of the top 20 deals, while IT Operations Management (ITOM) appeared in 18 of them. Notably, 14 ITOM deals exceeded $1 million. Security and risk products were included in 16 of the top 20 deals, while CRM and industry workflows were also present in 16 deals, with 15 exceeding $1 million.

This matters because broader adoption is increasing customer wallet share while making ServiceNow more deeply embedded in enterprise workflows. Therefore, ServiceNow is benefiting from expansion within its existing customer base and new customer acquisition.

Customer retention creates a strong foundation. ServiceNow’s 98% renewal rate remains a significant competitive advantage. High retention gives the company a durable recurring-revenue base, while customer expansion provides an additional growth lever.

The number of ServiceNow customers generating more than $5 million in annual contract value (ACV) reached 658. Meanwhile, 32 additional customers have crossed the $20 million ACV threshold since last year.

The key takeaway is that ServiceNow is not simply retaining customers; its largest customers are increasingly spending more with the platform. That expansion supports higher lifetime customer value and strengthens the business's economics.

AI is arguably the most important incremental catalyst for ServiceNow. AI ACV surpassed $1 billion, while net new AI ACV accelerated by more than 40% sequentially. Adoption is also broadening rapidly. Deals involving five or more AI products increased 5.5x YOY, while the number of customers deploying agentic AI in production has increased 9x in just nine months.

Management is already tracking ahead of its long-term target for AI to represent 30% of ACV by 2030. If adoption continues to accelerate, AI would become a meaningful contributor to both revenue growth and customer expansion over the next several years.

The Bottom Line

ServiceNow’s sharp rebound reflects solid momentum in its business. Robust subscription growth, high retention, expanding enterprise spending, and accelerating AI demand provide a solid foundation for further gains.

Although valuation and margin pressures remain short-term risks, ServiceNow’s solid positioning in enterprise workflow consolidation and agentic AI strengthens its long-term growth outlook. Analysts are also bullish on ServiceNow stock and maintain a “Strong Buy” consensus rating.

With strong momentum in its business and multiple growth catalysts, ServiceNow stock has room to run.