QS Research · Michael Burry's Scion Capital analyst template · 2006
ServiceNow, Inc. (NOW)
As of 2026-11-06 · 12/15 boxes filled from SEC filings and market data
Conclusion: WATCH
Conviction low · base case 0% · downside -18% · upside +26%
I use TTM to Sep 30, 2026 operating earnings, not a cycle average: EBIT $1.49B, EBITDA $2.76B, FCF $4.75B. ServiceNow still trades at 73.5x P/E, 40.4x EV/EBITDA and 7.22x EV/Sales, so the 41.8% drawdown has compressed the multiple without making it deep value. Base case at the current 7.22x sales multiple on $15.43B revenue is $111.38B EV, less $5.13B net debt = $106.25B equity, or ~$102 per share, 0% versus today; downside at 6.0x sales is $92.6B EV, $87.4B equity, ~$84 (-18%); upside at 9.0x sales is $138.9B EV, $133.7B equity, ~$129 (+26%). The business is still growing ~20% with $29.7B RPO and a raised $1.7B AI ACV target, but the rule is not met either way, so this is a watch, not a long or short.
Key numbers
- Share price: $102.36
- Market cap: $106.25B
- Latest financial period: TTM to Sep 30, 2026
- Revenue (TTM): $15.43B
- EV / EBITDA (TTM): 40.4x
- P/E (TTM): 73.5x
- Price / book: 8.11x
The 15 boxes
- ✓ 1. Long-form business notes
ServiceNow sells subscriptions to a single cloud platform — now positioned as an AI governance and workflow platform — through a direct enterprise sales force, and grew revenue from $4.52B in FY2020 to $13.28B in FY2025, with operating income rising from $199.0M to $1.82B over the same six years. FY2025 operating cash flow was $5.44B against $868M of capex, and $1.84B went to buybacks. The FY2020 10-K described IT, Employee, Customer and Creator workflow product lines on the Now Platform; the FY2025 10-K recasts the portfolio into four areas (Technology; CRM and Industry; Core Business; Creator and Other) wrapped around the AI Platform, Now Assist, AI agents and the Moveworks acquisition, with an added consumption-based pricing component on some AI and data products.
- ✓ 2. Competitive advantage
The sources point to a weak moat: FY2025 revenue of $13.28B and operating income of $1.82B show scale and execution, but the 10-K calls the market highly competitive with low barriers to entry and names larger rivals including Microsoft, Oracle, SAP, Salesforce and Workday plus AI entrants. The financial history shows operating leverage and cash generation, with FY2025 operating cash flow of $5.44B, but no source documents durable switching costs, network effects or pricing power. FY2023 net income of $1.73B exceeded pre-tax income of $1.01B, so net income is not a clean operating read; operating income was $762.0M.
- ✓ 3. 10-Q takeaways
Q3 2026 (quarter ended 2026-09-30) growth held at 21% — total revenue $4,106M, subscription $3,988M — but profitability split sharply: total gross margin fell to 71% from 77% and GAAP operating income dropped 33% to $385M on acquisition amortization ($198M vs $33M), stock-based compensation ($633M) and $87M of severance, while non-GAAP operating income rose 17% to $1,338M. Backlog and cash generation stayed strong: RPO $29.7B (+22%), 46% current, 680 customers above $5M ACV (553 a year ago), renewal rate 98%, and nine-month free cash flow $3,121M versus $2,604M. The balance sheet changed character: goodwill $10,012M (from $3,578M) and intangibles $3,594M (from $1,121M) from acquisitions, funded partly with new debt ($2,086M short-term, $5,438M long-term) that pushed quarterly interest expense to $81M from $6M. Management guides FY2026 subscription revenue up in dollars but flat as a percent of revenue, and explicitly guides subscription gross margin down.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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