KeyBanc Capital Markets is holding firm on its bearish stance toward ServiceNow Inc. (NYSE: NOW), even after the enterprise software company unveiled an ambitious target of surpassing $30 billion in annual subscription revenue by 2030. Analyst Jackson Ader reiterated an Underweight rating and an $85 price target following ServiceNow's investor day, according to a report from StreetInsider.
The divergence between ServiceNow's long-term vision and KeyBanc's near-term caution is drawing attention as the stock attempts to recover from a sharp decline. Shares of ServiceNow traded at $93.13 early Monday, up 2.1%, giving the company a market capitalization of approximately $97.1 billion.
KeyBanc's concerns center on slowing bookings growth. The firm calculated that organic current bookings growth for ServiceNow came in at 9.6% in the first quarter, marking the first single-digit increase since late 2024. Looking ahead, KeyBanc projects growth could dip to 5.4% in the second quarter before rebounding to around 20% in the second half of the year. Bookings, which represent signed customer commitments, are a key leading indicator for future software revenue.
ServiceNow's AI Ambitions
ServiceNow is not backing down from its bold goals. During its Financial Analyst Day in Las Vegas on May 4, executives outlined a plan to generate more than $30 billion in subscription revenue by 2030. They also projected that ServiceNow AI could account for over 30% of annual contract value (ACV), a metric that measures anticipated yearly contract sales.
Chief Financial Officer Gina Mastantuono emphasized that the target is grounded in reality. “It’s not a blue-sky scenario,” she told Fortune, noting that ServiceNow is already tracking ahead of its 2021 five-year target on an organic basis.
Near-Term Financial Performance
In the first quarter, ServiceNow reported a 22% increase in subscription revenue to $3.67 billion. Contract revenue expected to be recognized over the next 12 months rose to $12.64 billion, up 22.5%. Total remaining performance obligations stood at $27.7 billion.
The company's AI product, Now Assist, reached $750 million in ACV in the first quarter of 2026, up from $600 million in 2025, and ServiceNow expects that figure to surpass $1.5 billion by year-end. The company also noted that AI reasoning costs represent less than 10% of its cost to serve, helping maintain gross margins above 80% despite increasing usage.
Product Innovation and Partnerships
At its Knowledge 2026 conference, ServiceNow unveiled Otto, a new enterprise AI experience, and Action Fabric, which allows external AI agents such as Anthropic’s Claude or Microsoft Copilot to trigger governed actions on the ServiceNow platform. CEO Bill McDermott described the strategy succinctly: “AI thinks and workflows act.”
ServiceNow also deepened its partnerships with Microsoft and Nvidia. The Microsoft collaboration integrates AI Control Tower governance with Microsoft Agent 365, while the Nvidia partnership involves Project Arc, an early-preview autonomous desktop agent secured by Nvidia OpenShell and managed by ServiceNow AI Control Tower.
Risks and Industry Context
Despite the positive momentum, ServiceNow faces headwinds. The company has cited postponed government contracts in the Middle East, and its $7.75 billion acquisition of Armis is expected to pressure 2026 margins, with a projected 200-basis-point hit to free cash flow margin. One basis point equals one-hundredth of a percentage point.
The broader software sector is under scrutiny as competitors like Salesforce, Oracle, and Freshworks face questions about whether AI agents will boost or undermine their core businesses. Reuters has reported that AI tools from Anthropic and others are putting pressure on shares of companies like Salesforce and ServiceNow. Meanwhile, Oracle is revamping its Fusion cloud suite with a focus on “agentic apps.”
“How things will evolve over the coming three, four, five years and even longer” is the real concern, said Joe Maginot, portfolio manager at Madison Investments, in comments to Reuters, reflecting the broader uncertainty in the software industry.
