Bank of America has raised its price target for ServiceNow to $150, citing strong AI-driven growth and improving sentiment, even as the stock lags the S&P 500 and investors weigh whether the market is still undervaluing its potential
ServiceNow investors are watching closely as Bank of America raises its price target for the company's shares, signaling a shift in how Wall Street views the risks and opportunities tied to artificial intelligence. The new target, set at $150 per share-up from $130-reflects a belief that the market's earlier concerns about AI disrupting ServiceNow's business model were overstated. Instead, analysts now see AI as a powerful growth driver for the company, not a threat to its core platform.
Bank of America's latest call, led by analyst Tal Liani, is based on three main factors: a broad expansion in software valuations, improving growth among infrastructure software companies, and diminishing fears that AI will undermine enterprise software providers. Importantly, Liani's fundamental estimates for ServiceNow's business have not changed. The higher price target is about market sentiment catching up to the company's actual performance, rather than a sudden improvement in its underlying business.
AI's Role in ServiceNow's Growth
Earlier in 2026, some investors worried that AI agents could automate workflows so effectively that companies would no longer need platforms like ServiceNow. But recent financial results suggest the opposite. In the second quarter of 2026, ServiceNow reported that its annual contract value tied to AI surpassed $1 billion, and agentic deployments of its AI tools increased ninefold in just nine months. The company's remaining performance obligations-a measure of future revenue under contract-rose 21% year-over-year to $29 billion, indicating longer-term customer commitments and growing demand from partners.
ServiceNow's partnerships with major technology players such as Nvidia, Microsoft, Anthropic, and AWS have further solidified its position as a key governance layer for enterprise AI deployments. These collaborations are not defensive moves; they show that leading AI spenders are integrating their systems with ServiceNow's platform to manage and scale their AI initiatives.
Financial Performance and Market Reaction
ServiceNow's second-quarter 2026 results beat Wall Street expectations across all major metrics. Subscription revenues reached $3.877 billion, up 24.5% from the previous year, while total revenues climbed 24% to $3.987 billion. Earnings per share came in at $0.90, exceeding analyst estimates. The company raised its full-year subscription revenue guidance to a range of $15.76 billion to $15.78 billion, implying about 21% growth in constant currency terms. Non-GAAP operating margin is projected at 31.5% for the year, with a non-GAAP subscription gross margin of 81%.
Despite these strong numbers, ServiceNow shares have underperformed the broader market. As of late August 2026, the stock was down more than 15% year-to-date and over 27% for the past 12 months, while the S&P 500 posted gains of nearly 12% and 20% over the same periods. The company's forward price-to-earnings ratio stands at 29.15, a level that some analysts argue is conservative given its growth profile and expanding AI business.
Expanding Partnerships and Competitive Moat
ServiceNow's widening network of partnerships is helping it deepen its role in the enterprise AI ecosystem. Anthropic recently became the first design partner for ServiceNow's Action Fabric, connecting its Claude AI directly to ServiceNow workflows. Transactions through AWS Marketplace have surpassed $1 billion, and collaborations with Nvidia are extending AI governance from desktops to data centers. Microsoft has integrated ServiceNow AI specialists into its Agent 365 ecosystem, and nearly all U.S. states now use ServiceNow's AI platform for citizen services, achieving significant cost reductions in service desk operations.
On August 20, Tech Mahindra announced an expanded multi-year partnership with ServiceNow to accelerate the transition of enterprise AI projects from pilot phases to full-scale production. These moves suggest that large technology services firms increasingly view ServiceNow as essential infrastructure for deploying AI at scale.
Market Sentiment and Investor Opportunity
The disconnect between ServiceNow's business performance and its stock price is at the heart of Bank of America's revised outlook. The market spent much of the past year pricing in the risk that AI would erode ServiceNow's value, but recent results indicate the opposite. As sentiment shifts, some analysts believe there is still room for the stock to re-rate higher, especially if the company continues to deliver on its AI-driven growth strategy.
For investors, the key question is whether the market's skepticism has created a buying opportunity or if further volatility lies ahead. As with any technology stock, risks remain-especially if broader market conditions change or if AI adoption trends shift. But for now, ServiceNow's financial results and expanding partnerships suggest it is adapting effectively to the evolving enterprise software landscape.
For those interested in how other technology companies are navigating similar market pressures, Cisco's recent experience with Bank of America's bullish outlook despite margin concerns offers a useful comparison.
ServiceNow's trajectory highlights the importance of distinguishing between short-term market sentiment and long-term business fundamentals. While analyst price targets are not guarantees, they can signal when the market may be mispricing risk or underestimating a company's growth potential.
Enterprise software companies like ServiceNow often serve as the backbone for digital transformation and AI adoption across industries. Their platforms help organizations manage complex workflows, automate routine tasks, and ensure compliance at scale. As AI becomes more deeply embedded in business operations, the ability to govern, integrate, and scale these technologies will likely become even more critical. Investors evaluating companies in this space should pay close attention to both the pace of innovation and the durability of customer relationships, as these factors can drive long-term value even when short-term sentiment wavers.
