Key Takeaways
- Stifel reduced NOW’s price target from $180 to $135 while maintaining its Buy recommendation
- Shares have declined 43% during the last six months, hovering close to 52-week lows
- Sluggish U.S. federal government spending and typical Q1 seasonality are primary concerns
- Federal segment revenue has dropped significantly compared to robust year-ago performance
- First quarter 2026 results scheduled for April 22; Wall Street anticipates $3.75B in revenue
Analysts at Stifel have revised their price objective for ServiceNow (NOW) downward to $135 from a previous $180 target, pointing to challenges in the U.S. federal spending landscape and a sluggish beginning to the calendar year. Despite the reduction, the firm continues to rate the stock as a Buy.
The adjustment follows channel checks conducted by Stifel’s research team, headed by analyst Brad Reback, which revealed a slight deterioration in sentiment among system integration partners during the quarter. Multiple contacts attributed the softer tone to normal seasonal patterns as sales pipelines are rebuilt after an intense fourth-quarter close.
The federal government segment has experienced a substantial year-over-year contraction when compared against an exceptionally strong comparison period that delivered 30% expansion. Stifel’s analysis also accounts for a $15 million contract de-obligation related to the Deferred Resignation initiative, although analysts believe this adjustment was likely already incorporated into the company’s initial projections.
“Federal business appears significantly weaker on a year-over-year basis versus what was an exceptionally strong prior-year comparison,” Reback stated in the research note. He emphasized that the decline seems more pronounced than what management had initially forecasted.
The firm now anticipates approximately 50 basis points of first-quarter current remaining performance obligation (cRPO) outperformance relative to guidance — a decrease from the roughly 100 basis points seen in the previous quarter. This projection suggests cRPO growth of about 20.5% year-over-year in constant currency terms, marginally exceeding the company’s 20% guidance range.
Federal Sector Challenges Take Center Stage
The lowered price objective also reflects ongoing business model evolution as enterprise clients increasingly adopt ServiceNow’s artificial intelligence capabilities. This transition toward consumption-based pricing models introduces potential revenue timing variability and possible gross margin pressure, although the company maintains a healthy 77.5% gross profit margin based on trailing twelve-month figures.
Stifel anticipates improvement in the federal government vertical during Q2 2026, noting that the second quarter of 2025 absorbed the most significant impacts from DOGE-related spending cuts, creating an easier year-over-year comparison baseline.
System integration partners expressed greater confidence regarding the second-quarter sales pipeline, offering grounds for cautious optimism as the year progresses into the second half.
First Quarter Results Approaching
ServiceNow plans to announce its first quarter 2026 financial performance on April 22 following the market close. Analyst consensus forecasts call for adjusted earnings per share of $0.97, GAAP earnings per share of $0.53, and total revenue of $3.75 billion. Management’s official guidance range projected revenue between $3.650 billion and $3.655 billion.
Despite delivering revenue growth exceeding 20% for three consecutive quarters, the shares have faced persistent selling pressure, declining more than 40% over the past half-year period.
Several other Wall Street firms have similarly reduced their price targets in recent weeks. FBN Securities lowered its objective to $160 from $220 while keeping an Outperform rating. BNP Paribas Exane maintained its Outperform stance with a $140 target price.
Citizens JMP Securities remains among the more optimistic voices, holding a Market Outperform rating with a $260 price target and projecting the Now Assist platform will generate $1 billion in annual contract value by calendar year 2026.
NOW shares currently trade at $104.04, positioned near the 52-week low of $98 reached earlier this year.
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