ServiceNow is a buy with lowered conviction; current price of $145 is fairly valued vs. previous dip below $80.

ServiceNow's management team has done incredible work in recent months in reducing investor fears that artificial intelligence will kill its business. For the full year in 2026, the company's guiding to revenue growth of 21% with operating profit margins approaching 32%.

This doesn't look like a business that's being killed by artificial intelligence. But is the stock a buy? Let's answer that question together by reviewing the company's longer term results, comparing it against its valuation, and determining an answer.

ServiceNow is forecasting revenue growth above 20% for 2026, and the company's been growing above 20% for multiple years.

Over the trailing 12-month period, it generated $14.7 billion in revenue. This figure was less than $2 billion in 2017. The company aims to be the AI control tower, and it's expanding into categories like customer relationship management and cybersecurity.

In the most recently completed quarter, the company's operating profit margin increased substantially, and they have a history of doing just that. Over the trailing 12-month period, it reported operating margins of 13.6% and that was up from -15% in 2017.

For the full year 2026, the management team is forecasting operating margins increasing substantially higher, and especially if you look at it on non-GAAP basis, which removes some one-time expenses, the operating margins look stronger still.

Similarly, ServiceNow has been improving its return on invested capital, which totaled 11% in the most recent period. That's up significantly over the previous decade. This is a software business, and so software businesses have higher profit margins and or less capital intensive than other industries that require heavy fixed capital investment.

Things like manufacturing facilities, warehouses, logistics, etc. These are capital intensive industries. Whereas for a company like ServiceNow, the capital intensity is not all that large.

And so the potential for a high return on invested capital exists, especially at larger scale.

ServiceNow stock price has been on a roller coaster ride in 2026. The SaaS apocalypse that sent shares crashing earlier in the year, the stock price fell as low as $80 per share.

Since then, it's recovered and it's up over $144 as of this recording. Overall, for the year, it's still down 5%.

At one point, its valuation on a forward price-to-earnings basis dropped below 20. That was the cheapest you've ever been able to buy ServiceNow stock, and I made multiple videos, many multiple videos, ranking ServiceNow stock and informing investors that I thought it was a great buying opportunity on the dip.

Some of you may have watched that video and accumulated some shares at those lower prices. So, congratulations on those gains.

ServiceNow is now trading at a forward price-to-earnings of 29, which is still lower than what you were able to buy this stock before 2026. The stock historically traded in the range of a forward price-to-earnings between 40 and 60.

Because as I mentioned earlier, it's growing revenue over 20%. Its operating profit margins and cash flow are improving. And before the SaaS apocalypse of 2026, software stocks had a favorable place in investor minds.

I've also been looking at the valuation using my discounted cash flow model, and I updated this today, and the intrinsic value per share I calculate at $155. The current market price is $145, which after applying a margin of safety, I would say the stock looks fairly valued.

So, ServiceNow has been doing a great job in assuaging investor concerns. The stock price is up significantly, and so the valuation is not as attractive as it was a few months ago when I was very bullish on this business.

So, today I will be reiterating my buy rating for ServiceNow stock. However, I will be lowering my conviction level. Previously, I had a high confidence level, high conviction level that it was a great buying opportunity, and I reiterated that multiple times throughout the SaaS apocalypse.

But now that the share price has increased significantly, and the valuations are approaching fairly valued levels, my confidence in this buy ranking is decreasing. So, I'm not as bullish on ServiceNow as I was maybe a month ago or 2 months ago when the share price was much lower.