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servicenow stock analysis

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NOW: ServiceNow's $13B Backlog Defies SaaS Crash

ServiceNow (NYSE: NOW) has been caught in the brutal SaaS selloff that has hammered enterprise software stocks since mid-2025. At $108.01 per share, NOW trades 49% below its 52-week high of $211.48 and 37% below its 200-day moving average. The "Saaspocalypse" narrative — fears that AI will cannibalize traditional SaaS subscription revenue — has dragged even the highest-quality names into deep drawdowns. Yet ServiceNow's fundamentals tell a different story. The company just posted FY2025 revenue of $13.3 billion, generated $4.6 billion in free cash flow, and sits on a $13 billion remaining performance obligation backlog that provides exceptional revenue visibility. While the market prices NOW as though AI is an existential threat, ServiceNow is arguably the enterprise SaaS company best positioned to benefit from AI adoption — its Now Platform integrates AI agents directly into enterprise workflows that are notoriously difficult to displace. With the stock trading at 24.7x free cash flow and 8.5x sales — multiples not seen since the pandemic lows — the question for investors is whether this represents a structural re-rating of SaaS or an opportunity to own one of software's most durable franchises at a meaningful discount.

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Market Watch: The Great SaaS Repricing

Something remarkable is happening in enterprise software. Three of the sector's most dominant franchises — Salesforce (CRM), Adobe (ADBE), and ServiceNow (NOW) — have collectively shed roughly $290 billion in market capitalisation from their 52-week highs, with drawdowns ranging from 36% to 49%. Yet their underlying businesses have never been stronger: Salesforce just posted $11.2 billion in quarterly revenue with 77.6% gross margins, Adobe is printing 30% net income margins on $6.2 billion in quarterly sales, and ServiceNow crossed $3.5 billion in quarterly revenue for the first time. The disconnect between operational execution and stock performance represents one of the most significant sector-wide re-ratings in recent memory. With the Federal Reserve having cut rates three times since September 2025 — bringing the fed funds rate to 3.64% — the traditional playbook of 'rate cuts lift growth stocks' has been turned on its head. Instead, the market is repricing enterprise SaaS around a single question: does artificial intelligence strengthen or undermine the moats that have made these businesses cash flow machines? For investors watching from the sidelines, the numbers are striking. Salesforce now trades at a 7.8% free cash flow yield, Adobe at 8.8%, and ServiceNow at 4.1%. These are valuations not seen in years for businesses of this quality — but whether they represent generational buying opportunities or fair compensation for structural disruption risk depends entirely on how the AI story plays out.

SaaS stocksenterprise software selloffSalesforce stock analysis