NOW · Forward model · Bear case
The Bear case, 20 quarters out
Each segment is projected from its own operating driver, rolled up into consolidated cash flow, and discounted back to a fair value per share. The assumptions below are editable — change them and every number on this page moves with them.
Reported segments only: ServiceNow publishes exactly two revenue lines, subscription and professional services and other, and this model carries exactly those two. Every historical quarter is disclosed - nothing is apportioned, nothing is estimated. Vertical margins are the gross margins the company guides or discloses (81% non-GAAP subscription for FY2026, -14.5% non-GAAP for services); operating expenses are not disclosed by line, so all of them sit in corporate overhead, set at 47.0% of revenue, which is the level that reproduces the guided FY2026 non-GAAP operating margin of 31.5% in the first projected quarter. Free cash flow here is EBITDA less capex less tax at the disclosed 21% non-GAAP rate; it is NOT the company's non-GAAP free cash flow margin of 35%, which adds back stock-based compensation and the working-capital benefit of deferred revenue. Both verticals are deliberately aseasonal - twelve interior quarters of ratio-to-moving-average factors sit within 1.4% of 1.0 on the subscription line with a wider spread than signal. The Q3/Q4 2026 sequential zigzag in guidance is a one-off federal pull-forward and is smoothed rather than encoded, so the model prints 2026 Q3 subscription revenue of $4,053m against guidance of $3,975-3,980m and 2026 Q4 of $4,232m against the $4,245m the FY guide implies, with H2 in aggregate 0.8% above the guided sum. No consensus is carried: the available EPS consensus sits on a third accounting basis from either the GAAP $0.29 or the non-GAAP $0.90 ServiceNow reported.
Subscription growth decays to a 2.2% terminal, FY2030 subscription revenue reaches $26.8bn - 11% short of the $30bn target - margins run two points below guidance and the multiple compresses to 5.5x as the miss becomes visible. The evidence for a softer path is inside the Q2 release: part of the beat was federal on-premise revenue pulled out of Q3, roughly 125bp of FY2026 growth is acquired, Q1 lost about 75bp to Middle East deal delays, and the FY2026 subscription gross margin guide was cut from 81.5% to 81.0%. Fair value $117.91, below the current price.
Latest: $7.47B (2031Q2E)
| Period | Value |
|---|---|
| 2022Q4 | $1.94B |
| 2023Q1 | $2.10B |
| 2023Q2 | $2.15B |
| 2023Q3 | $2.29B |
| 2023Q4 | $2.44B |
| 2024Q1 | $2.60B |
| 2024Q2 | $2.63B |
| 2024Q3 | $2.80B |
| 2024Q4 | $2.96B |
| 2025Q1 | $3.09B |
| 2025Q2 | $3.21B |
| 2025Q3 | $3.41B |
| 2025Q4 | $3.57B |
| 2026Q1 | $3.77B |
| 2026Q2 | $3.99B |
| 2026Q3E | $4.17B |
| 2026Q4E | $4.34B |
| 2027Q1E | $4.52B |
| 2027Q2E | $4.69B |
| 2027Q3E | $4.87B |
| 2027Q4E | $5.04B |
| 2028Q1E | $5.21B |
| 2028Q2E | $5.38B |
| 2028Q3E | $5.55B |
| 2028Q4E | $5.72B |
| 2029Q1E | $5.89B |
| 2029Q2E | $6.06B |
| 2029Q3E | $6.23B |
| 2029Q4E | $6.41B |
| 2030Q1E | $6.58B |
| 2030Q2E | $6.76B |
| 2030Q3E | $6.93B |
| 2030Q4E | $7.11B |
| 2031Q1E | $7.29B |
| 2031Q2E | $7.47B |
What drives each segment
Subscription
Growth pathOne platform sold as multi-year subscriptions and recognised ratably, so a quarter's revenue is set by the contracted book rather than by that quarter's selling. ServiceNow publishes the book - cRPO was $13.20bn at 30 June 2026, up 21% - and it has converted into the following four quarters of subscription revenue at 1.25x to 1.33x across six observable windows. The renewal rate is 98%, so growth is almost entirely expansion inside a base that does not leave, plus about 125bp of acquired Armis revenue in FY2026.
Latest: $7.32B (2031Q2E)
| Period | Value |
|---|---|
| 2022Q4 | $1.86B |
| 2023Q1 | $2.02B |
| 2023Q2 | $2.08B |
| 2023Q3 | $2.22B |
| 2023Q4 | $2.37B |
| 2024Q1 | $2.52B |
| 2024Q2 | $2.54B |
| 2024Q3 | $2.71B |
| 2024Q4 | $2.87B |
| 2025Q1 | $3.00B |
| 2025Q2 | $3.11B |
| 2025Q3 | $3.30B |
| 2025Q4 | $3.47B |
| 2026Q1 | $3.67B |
| 2026Q2 | $3.88B |
| 2026Q3E | $4.05B |
| 2026Q4E | $4.23B |
| 2027Q1E | $4.40B |
| 2027Q2E | $4.57B |
| 2027Q3E | $4.75B |
| 2027Q4E | $4.92B |
| 2028Q1E | $5.08B |
| 2028Q2E | $5.25B |
| 2028Q3E | $5.42B |
| 2028Q4E | $5.59B |
| 2029Q1E | $5.76B |
| 2029Q2E | $5.93B |
| 2029Q3E | $6.10B |
| 2029Q4E | $6.27B |
| 2030Q1E | $6.44B |
| 2030Q2E | $6.61B |
| 2030Q3E | $6.79B |
| 2030Q4E | $6.96B |
| 2031Q1E | $7.14B |
| 2031Q2E | $7.32B |
Assumptions & reasoning
- Fifteen consecutive quarters of disclosed history, 2022 Q4 to 2026 Q2, each read from the three-month column of that quarter's own 8-K Exhibit 99.1. All fifteen sum exactly to reported total revenues.
- The driver is growth, not units times price, because ServiceNow discloses neither a total customer count nor an ARPU. cRPO is a backlog level rather than a capacity unit, and it is lumpy in a way ratably recognised revenue is not: cRPO fell from $12.85bn to $12.64bn between 2025 Q4 and 2026 Q1 while subscription revenue rose in all fourteen sequential steps of the window.
- The vertical is aseasonal on purpose. Ratio-to-centred-4Q-moving-average over twelve interior quarters gives factors of 1.013 / 0.986 / 0.998 / 1.003, and the within-quarter spread of 0.018 / 0.012 / 0.006 / 0.010 is wider than the signal in three of the four quarters. Bookings seasonality lives in cRPO; ratable recognition smooths it out before it reaches revenue.
- The margin here is subscription gross margin, guided at 81% non-GAAP for FY2026 and cut from 81.5% on hyperscaler use and customer AI adoption. Operating expenses are not split by revenue line, so all of them sit in corporate overhead instead.
- About 125bp of FY2026 subscription growth is acquired rather than organic and the disclosure does not let the model strip it out; the organic rate is not observable until the FY2026 10-K business-combination note.
Professional services and other
Growth pathImplementation, training and other services sold at or below cost to get subscriptions deployed. It was 2.8% of revenue in 2026 Q2 and ran a GAAP gross loss of 26%. It matters to this model only as a small, deliberately unprofitable add-on that must not be allowed to flatter or distort consolidated margin.
Latest: $148M (2031Q2E)
| Period | Value |
|---|---|
| 2022Q4 | $80M |
| 2023Q1 | $72M |
| 2023Q2 | $75M |
| 2023Q3 | $72M |
| 2023Q4 | $72M |
| 2024Q1 | $80M |
| 2024Q2 | $85M |
| 2024Q3 | $82M |
| 2024Q4 | $91M |
| 2025Q1 | $83M |
| 2025Q2 | $102M |
| 2025Q3 | $108M |
| 2025Q4 | $102M |
| 2026Q1 | $99M |
| 2026Q2 | $110M |
| 2026Q3E | $112M |
| 2026Q4E | $114M |
| 2027Q1E | $116M |
| 2027Q2E | $118M |
| 2027Q3E | $120M |
| 2027Q4E | $122M |
| 2028Q1E | $124M |
| 2028Q2E | $126M |
| 2028Q3E | $128M |
| 2028Q4E | $130M |
| 2029Q1E | $132M |
| 2029Q2E | $134M |
| 2029Q3E | $135M |
| 2029Q4E | $137M |
| 2030Q1E | $139M |
| 2030Q2E | $141M |
| 2030Q3E | $143M |
| 2030Q4E | $144M |
| 2031Q1E | $146M |
| 2031Q2E | $148M |
Assumptions & reasoning
- Fifteen quarters of disclosed history. The line has ranged from $72m to $110m and has never exceeded 4.2% of total revenue in the window.
- The basis margin is the non-GAAP gross margin: revenue of $110m less cost of revenues of $139m plus the $13m of stock-based compensation inside that cost line gives -14.5%. On a GAAP basis it is -26.4%.
- Aseasonal, and the evidence is that the apparent Q1-soft, Q2-firm shape is inside its own noise: the derived Q1 factor of 0.961 comes from two observations of 1.019 and 0.895, a 12.4-point spread against a 4-point signal.
- One large engagement moves this line by more than any calendar effect does, so no single print should be read as a trend.
Where each case comes from
Bear case — primary sources
The primary sources this case is built from — filings, calls and posts. Where they are claims by an interested party rather than disclosures, every number in the Bear column is what happens if they are taken at face value.
What the release itself says about the beat
- Jul 22, 2026 This higher mix is primarily attributable to strong U.S. Federal demand, which accelerated some on-premise subscription revenues from Q3 2026 into Q2 2026.
- Jul 22, 2026 Our FY 2026 gross margin guidance reflects more customers utilizing our hyperscaler partnerships and an acceleration of customer AI adoption.
- Apr 22, 2026 Subscription revenues | $15,735 - $15,775 | 22.5 % - the FY2026 guide before it was raised, and the quarter that lost about 75 basis points to delayed on-premise deals.
Bull case — primary sources
The primary sources this case is built from — filings, calls and posts. Where they are claims by an interested party rather than disclosures, every number in the Bull column is what happens if they are taken at face value.
The 2030 targets, stated in the 8-K itself
- Jul 22, 2026 ServiceNow hosted its annual Financial Analyst Day on May 4, where the company outlined long-term targets including $30 billion+ in subscription revenues, 30% of ACV to come from AI, and a Rule of 60+ by 2030
- Jul 22, 2026 Remaining performance obligations of $29.0 billion as of Q2 2026, representing 21% year-over-year growth, 22% in constant currency
- Jul 22, 2026 The company had 123 transactions over $1 million in net new annual contract value ("ACV") in Q2 2026, growing nearly 40% year-over-year
- Jul 22, 2026 ended the quarter with 658 customers with more than $5 million in ACV, representing approximately 23% year-over-year growth
McDermott case — primary sources
The primary sources this case is built from — filings, calls and posts. Where they are claims by an interested party rather than disclosures, every number in the McDermott column is what happens if they are taken at face value.
Where the $32bn and the Rule of 60 come from
From cash flow to fair value
| Present value of free cash flow, 20 quarters | $19.78B |
| Terminal-year revenue | $28.80B |
| Terminal-year EBITDA | $8.95B |
| Exit multiple, on revenue | 5.5x |
| Terminal value | $158.40B |
| Discounted at 9.0% a year, terminal value becomes | $102.95B |
| Enterprise value | $122.73B |
| Net cash | -$810M |
| Equity value | $121.92B |
| Shares | 1.03B |
| Fair value per share | $117.91 |
| Against the current price of $138.43 | -15% |
ServiceNow trades at 8.2x EV/revenue at the 24 August close - $132.4bn of equity on 1,034m diluted shares plus $0.81bn of net debt, over roughly $16.2bn of guided FY2026 revenue. The exit takes 7.5x, a modest de-rate for growth falling from 22% toward the mid teens. For scale, the repo carries Salesforce at 4.5x against about 10% growth.
Read the other way round: at $138.43 the market is paying 6.6x terminal-year revenue, holding every other assumption on this page fixed. That is the number to argue about.
The projected path
| Quarter | Subscription | Professional services and other | Revenue | YoY | EBITDA | Capex | FCF | R40 | PV of FCF |
|---|---|---|---|---|---|---|---|---|---|
| 2026 Q3E | $4.05B | $112M | $4.17B | +22% | $1.23B | $137M | $863M | +43 | $845M |
| 2026 Q4E | $4.23B | $114M | $4.34B | +22% | $1.29B | $141M | $906M | +43 | $867M |
| 2027 Q1E | $4.40B | $116M | $4.52B | +20% | $1.35B | $145M | $948M | +41 | $889M |
| 2027 Q2E | $4.57B | $118M | $4.69B | +18% | $1.40B | $150M | $990M | +39 | $908M |
| 2027 Q3E | $4.75B | $120M | $4.87B | +17% | $1.46B | $154M | $1.03B | +38 | $926M |
| 2027 Q4E | $4.92B | $122M | $5.04B | +16% | $1.52B | $159M | $1.07B | +37 | $943M |
| 2028 Q1E | $5.08B | $124M | $5.21B | +15% | $1.57B | $163M | $1.11B | +37 | $959M |
| 2028 Q2E | $5.25B | $126M | $5.38B | +15% | $1.63B | $167M | $1.16B | +36 | $973M |
| 2028 Q3E | $5.42B | $128M | $5.55B | +14% | $1.69B | $172M | $1.20B | +36 | $986M |
| 2028 Q4E | $5.59B | $130M | $5.72B | +14% | $1.74B | $176M | $1.24B | +35 | $999M |
| 2029 Q1E | $5.76B | $132M | $5.89B | +13% | $1.80B | $181M | $1.28B | +35 | $1.01B |
| 2029 Q2E | $5.93B | $134M | $6.06B | +13% | $1.86B | $185M | $1.32B | +34 | $1.02B |
| 2029 Q3E | $6.10B | $135M | $6.23B | +12% | $1.92B | $190M | $1.36B | +34 | $1.03B |
| 2029 Q4E | $6.27B | $137M | $6.41B | +12% | $1.97B | $195M | $1.40B | +34 | $1.04B |
| 2030 Q1E | $6.44B | $139M | $6.58B | +12% | $2.03B | $199M | $1.45B | +34 | $1.05B |
| 2030 Q2E | $6.61B | $141M | $6.76B | +11% | $2.09B | $204M | $1.49B | +33 | $1.05B |
| 2030 Q3E | $6.79B | $143M | $6.93B | +11% | $2.15B | $209M | $1.53B | +33 | $1.06B |
| 2030 Q4E | $6.96B | $144M | $7.11B | +11% | $2.21B | $214M | $1.57B | +33 | $1.07B |
| 2031 Q1E | $7.14B | $146M | $7.29B | +11% | $2.27B | $219M | $1.62B | +33 | $1.07B |
| 2031 Q2E | $7.32B | $148M | $7.47B | +11% | $2.33B | $224M | $1.66B | +33 | $1.08B |
Every row is projected. A year-over-year change is shown only where the quarter it compares against exists — an em dash means there is no comparable quarter, not a flat year.
Model revisions
Assumptions are marked to reality as each quarter prints. Every change is appended here, with the fair value the model produced at the time, so the model's own history stays visible.
| Date | Changed | Fair value then | Note |
|---|---|---|---|
| 2026-08-27 | all | $167.08 | First published model, built on the 2026 Q2 8-K Exhibit 99.1 with fifteen quarters of the disclosed subscription and professional-services split. |