ServiceNow looks mispriced for the quarter it just delivered. The market is treating NOW like another crowded AI software trade losing momentum, but the actual numbers point the other way: Q2 subscription revenue rose 24.5% year over year to $3.877 billion, beat the high end of guidance by 150 basis points, and management raised full-year subscription revenue guidance again. That is not what a demand peak looks like. It looks like a stock being punished for expectations and multiple compression even as the business keeps executing.
The cleanest reason to stay constructive is that monetization is still accelerating where it matters most. Management said AI net new ACV growth continues to outpace expectations, and that showed up in the guidance raise to $15.760 billion to $15.780 billion in FY2026 subscription revenue, implying 22.5% growth. If AI demand were actually rolling over, ServiceNow would not be lifting the full-year outlook after already coming into the quarter with a high bar.
The broader operating profile still supports paying up for quality, even if the valuation is not cheap on the surface. Revenue is growing 20.9% year over year, EPS is up 22.5%, and net income growth is 22.7%, while gross margin remains a hefty 74.8%. That combination is exactly why the TickerSpark Score stays respectable at 65 overall, with standout Profitability and Growth sub-scores of 85 and 90. This is not a story stock living on hope alone; the underlying engine is still compounding.
The selloff also looks overdone when stacked against what the market is rewarding elsewhere in software. Shopify trades at 77.34 times earnings and 12.31 times sales with 30.1% revenue growth and a 10.8% net margin. ServiceNow sits at 62.11 times earnings and 7.00 times sales with 20.9% growth and an 11.3% net margin. That is not a bargain-bin valuation, but it is a more grounded setup than plenty of software names still getting the AI halo. With NOW down 32.2% year to date and lagging Technology by 56.1 percentage points, the derating already happened long before the latest guidance raise.
The market is not inventing the risks out of thin air. NOW still trades at 31.27 times EV/EBITDA, the TickerSpark Score gives it just a 47 on Valuation, and the chart is undeniably damaged with the stock below its 50-day and 200-day moving averages. Momentum is the weak spot in the TickerSpark Score at 30, and that matters when software investors are quick to punish any hint that AI budgets are shifting around rather than expanding cleanly.
That skepticism is real, but the business results still win the argument. Consensus remains heavily positive at 59 buys against 9 holds and 1 sell, recent sentiment is strongly positive, and ServiceNow has beaten earnings in 6 of the last 8 quarters. If the market wanted proof that AI demand was still monetizing, management just handed it over in the form of a second full-year subscription revenue raise. The stock action may stay messy, but the fundamentals are not confirming the bearish narrative.
That leaves NOW looking like a high-quality software name caught in the wrong market mood. We would rather own ServiceNow here than chase a richer multiple in SHOP because NOW is pairing 20%-plus growth with raised guidance and explicit AI demand strength, while the stock is already trading as if the good news is behind it.
What we'd watch now is simple: whether management keeps converting AI enthusiasm into subscription revenue beats and whether the stock can reclaim its 50-day area after this post-earnings shakeout. If future quarters stop producing guidance raises, the premium multiple becomes harder to defend fast. Until that happens, this looks less like a broken AI story and more like an expectations tantrum in a business that is still executing.
