ServiceNow shares rose 1.05% to $141.80 at the time of publication on Tuesday, according to Benzinga Pro. Oppenheimer analyst Brian Schwartz raised the price target to $165 from $140 and reaffirmed an Outperform rating. Oppenheimer's earnings preview examines federal demand and ServiceNow's CRPO.
Schwartz said third-quarter federal obligations to ServiceNow looked weak, providing a negative indication. Slower seat growth following the rationalization of earlier purchases and continued caution about spending probably explain the weakness. Schwartz calculated federal obligations at $424 million as of October 12, down 16% from a year earlier. That level also trails the same period in 2024 and 2023. Schwartz said the year-over-year growth rate trails the three-year average for normal third-quarter patterns by 13 points. Schwartz said the growth rate trails the five-year average by 34 points.
Schwartz described the CRPO picture as mixed. ServiceNow began providing CRPO guidance in 2021. ServiceNow exceeded CRPO guidance by an average of 2%, or $173 million, across the past four quarters. Over three years, the typical third-quarter beat has been 2%, or $193 million. The typical fourth-quarter beat over three years has been 1%, or $92 million.
The third quarter looks easier than the fourth quarter. Wall Street's third-quarter CRPO estimate assumes a $362 million quarter-over-quarter gain. That assumed gain is $51 million below the usual seasonal gain. The estimate also falls $194 million short of what an average seasonal beat would deliver. Management has a long history of exceeding management's guidance. Schwartz expects ServiceNow to exceed consensus, but not by a wide margin. Schwartz expects the beat to be smaller than last quarter's 2% and the 3% recorded a year earlier.
Schwartz sees limited room for fourth-quarter guidance to exceed Wall Street expectations. Schwartz cited weaker federal activity, a harder comparison with last year, demand headwinds and management's cautious approach as constraints. Schwartz also pointed to a shift in AI budgeting. Return on investment now drives scrutiny after a period of broad testing, raising the threshold for each additional dollar of spending. Growth could slow compared with earlier adoption cycles. Schwartz expects less fourth-quarter IT spending than normal because companies allocated budgets earlier, into the first half of 2026, for AI trials.
Schwartz expects ServiceNow to guide fourth-quarter CRPO in line with, or slightly above, the $15.3 billion consensus. That consensus reflects 19% growth from last year.
ServiceNow Stock Rises as Analyst Raises Price Target to $165
BenzingaShare
Summary
ServiceNow (NYSE:NOW) shares climbed 1.05% to $141.80 on Tuesday, as Oppenheimer analyst Brian Schwartz raised the price target to $165 from $140. Schwartz cited weak federal obligations in Q3, slower seat growth, and cautious spending as key challenges. He also highlighted ServiceNow’s CRPO guidance, noting the company has historically beaten estimates by 2%. With altcoins to watch gaining attention, the crypto price remains a key focus for traders.
Source:Show original
Disclaimer: The information on this page may have been obtained from third parties and does not necessarily reflect the views or opinions of KuCoin. This content is provided for general informational purposes only, without any representation or warranty of any kind, nor shall it be construed as financial or investment advice. KuCoin shall not be liable for any errors or omissions, or for any outcomes resulting from the use of this information.
Investments in digital assets can be risky. Please carefully evaluate the risks of a product and your risk tolerance based on your own financial circumstances. For more information, please refer to our Terms of Use and Risk Disclosure.