ServiceNow (NOW) Stock Receives Dual Upgrades Ahead of Q2 Results

Key Takeaways

Table of Contents

BNP Paribas maintains Outperform rating with $140 price target, viewing ServiceNow as a “constructive setup” before Q2
Stefan Slowinski from BNP sees IBM-driven selloff as attractive entry point for NOW shares
Analyst suggests FY26 subscription revenue growth guidance of 20.5%-21% appears overly cautious
RBC Capital upgrades price target from $121 to $130 while keeping Outperform stance
Both investment firms report encouraging channel checks, with NOW climbing back to top position in BNP’s reseller survey

ServiceNow (NOW) approaches its second-quarter earnings report with renewed support from two prominent Wall Street analysts, despite market turbulence following IBM’s disappointing pre-announcement.

ServiceNow, Inc., NOW

Stefan Slowinski, analyst at BNP Paribas, characterized the IBM-related stock decline as “an opportunity,” highlighting NOW’s expanding cybersecurity capabilities and the potential for easier year-over-year comparisons in federal government business during the latter half of 2026.

With an Outperform rating and $140 price objective, Slowinski contends that ServiceNow’s fiscal 2026 guidance projecting 20.5% to 21% subscription revenue expansion in constant currency appears overly prudent.

According to his analysis, this cautious outlook partially reflects NOW’s first-quarter challenges with on-premises deal timing. Management has indicated confidence that all delayed transactions will finalize within the current year.

For the second quarter specifically, ServiceNow has projected subscription revenue advancement between 21% and 21.5% on a constant currency basis, with merger and acquisition activity contributing approximately 225 basis points additionally.

Acquisition Impact May Exceed Expectations

Slowinski noted that the projected contribution from the Armis acquisition might be conservatively estimated, potentially enabling NOW to surpass its headline revenue projections.

His forecast anticipates the company may tighten its annual guidance range toward the upper boundary and project 21% subscription revenue growth in constant currency for the complete fiscal year.

Regarding net-new annual contract value, Slowinski projects year-over-year momentum to build during the second half of 2026, driving organic subscription revenue expansion to approximately 19% by year’s end, compared to roughly 18% recorded in Q1.

Government Sector Positioned for Recovery

A critical element of BNP’s investment thesis centers on NOW’s upcoming favorable comparisons to last year’s period affected by DOGE-related disruptions and government shutdown concerns that hampered performance from Q2 through Q4 of 2025.

This dynamic suggests US federal business, which previously created headwinds, may transform into a growth catalyst as year-over-year comparisons become more favorable throughout the remainder of this year.

Recent industry feedback has also trended positively for NOW. Slowinski observed that the company reclaimed the leading position in BNP’s reseller survey following a temporary decline last quarter.

RBC Capital similarly increased its price objective on NOW before the earnings release, elevating it from $121 to $130 while maintaining an Outperform recommendation.

RBC referenced its own encouraging industry checks and insights from a recent Bay Area technology tour that enhanced the firm’s outlook for select software companies, particularly those focused on cybersecurity consolidation and infrastructure solutions.

The firm did identify one monitoring point: CIO and CTO spending behavior continues to show volatility due to what it termed “Mythos urgency.” RBC also noted that IBM’s disappointing pre-announcement raises broader concerns about deal velocity and spending priorities as Q2 software sector earnings season unfolds.

RBC Capital Markets adjusted its ServiceNow price target to $130 from $121 on July 16, reaffirming its Outperform rating as part of its comprehensive Q2 software industry earnings preview.

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