ServiceNow (NOW) is back in focus after first quarter results showed US$3.77b in revenue and raised full year subscription guidance, supported by expanding AI workflows, new healthcare partnerships, and a deeper collaboration with Google Cloud.

Despite the strong Q1 update and new AI and healthcare partnerships, sentiment around enterprise software has been volatile. ServiceNow’s 1 month share price return of 10.63% and year to date share price return of 38.18% decline contrast with a modest 3 year total shareholder return of 3.83%.

If ServiceNow’s AI story has your attention, it can be useful to widen the lens and see what other AI infrastructure players are doing through the 38 AI infrastructure stocks

With ServiceNow guiding to 22% to 22.5% subscription revenue growth in 2026, yet posting a 1-year total shareholder return decline of 53.40%, you have to ask: is there still a buying opportunity here, or is the market already pricing in future growth?

Most Popular Narrative: 16.2% Undervalued

According to a widely followed narrative by andre_santos, ServiceNow’s fair value of $108.81 sits above the last close of $91.16, which helps frame the current share price weakness against long run cash flow potential.

📈ServiceNow has strong operating margins and steady revenue and EPS growth. In addition, it is generating returns on invested capital (ROIC) above its estimated cost of capital.

Curious what powers that fair value gap? This narrative focuses on robust margin assumptions, healthy top line expansion, and earnings compounding that exceeds the implied expectations in today’s share price.

Result: Fair Value of $108.81 (UNDERVALUED)

However, there are still pressure points, including high uncertainty scores around the SaaS sector and ongoing share dilution, which could weaken this undervaluation case.

Another View: Rich P/E Ratios Raise Questions

That 16.2% gap to fair value rests on cash flow and growth assumptions, but the current P/E of 53.5x tells a tougher story. It sits above the US Software industry average of 30.3x, above the peer average of 49.7x, and above a fair ratio estimate of 39.3x.

Put simply, the stock is priced at a clear premium that leaves less room for error if growth, margins, or sentiment wobble again. The tension between that premium and the earlier undervaluation case is exactly where you need to decide how much valuation risk you are comfortable carrying, and what would make you change your mind next.

Next Steps

Seeing mixed signals in the story so far? Take a closer look at the numbers yourself, compare the trade offs, and weigh up the 3 key rewards

Looking for more investment ideas?

If ServiceNow has sharpened your focus, do not stop here. Broaden your watchlist with other angles so you are not missing potential opportunities elsewhere.

• Strengthen your hunt for quality by scanning companies that look underappreciated using the 49 high quality undervalued stocks.
• Build a steadier income stream by reviewing stocks in the 13 dividend fortresses.
• Reduce sleepless nights by checking out companies in the 72 resilient stocks with low risk scores.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.