ServiceNow (NOW) Stock Slips as Weak U.S. Federal Spending Weighs on Outlook

TLDR

• Stifel cut its price target on NOW from $180 to $135, while keeping a Buy rating
• The stock has fallen 43% over the past six months and trades near its 52-week low
• Weak U.S. federal spending and a seasonally slow Q1 are the main drivers
• Federal revenue is down meaningfully year-over-year vs. a strong prior-year comp
• Q1 2026 earnings are due April 22; consensus expects revenue of $3.75B

Stifel has lowered its price target on ServiceNow (NOW) to $135 from $180, citing a weak U.S. federal spending environment and a slow start to the year. The firm kept its Buy rating on the stock.

ServiceNow, Inc., NOW

The cut comes after Stifel analysts, led by Brad Reback, reviewed checks with system integrators that showed a modest quarterly decline in tone. Several sources pointed to seasonal pipeline rebuilding following an aggressive year-end push.

Federal business is down meaningfully year-over-year, compared to what was a very strong prior-year period that saw 30% growth. Stifel noted this decline also includes a $15 million de-obligation tied to the Deferred Resignation program, though the firm believes that was likely already baked into management’s original guidance.

Stifel now expects only around 50 basis points of Q1 current remaining performance obligation (cRPO) upside — down from roughly 100 basis points last quarter. That puts expected cRPO growth at approximately 20.5% year-over-year in constant currency, just above the company’s 20% guidance.

Federal Headwinds in Focus

The reduced target also reflects an evolving business model as customers increasingly use ServiceNow’s AI tools. That shift introduces consumption-based revenue and potential gross margin compression, though the company’s gross profit margin still sits at a solid 77.5% over the last twelve months.

Stifel expects the federal picture to improve in Q2 2026, noting that quarter bore the heaviest DOGE-related impacts in 2025, making the year-over-year comparison easier.

System integrators were more upbeat about the Q2 pipeline, which gives some reason for optimism heading into the back half of the year.

Q1 Earnings on the Horizon

ServiceNow is set to report Q1 2026 results on April 22 after market close. The street is looking for adjusted EPS of $0.97, GAAP EPS of $0.53, and revenue of $3.75B. The company’s own guidance called for revenue between $3.650B and $3.655B.

Despite posting 20%-plus revenue growth for three straight quarters, the stock has been under sustained pressure, falling more than 40% in the past six months.

Other analysts have also trimmed their targets recently. FBN Securities cut its target to $160 from $220, maintaining an Outperform rating. BNP Paribas Exane kept its Outperform rating with a $140 target.

Citizens remains more bullish, holding a Market Outperform rating with a $260 price target and projecting Now Assist ACV to hit $1 billion by 2026.

NOW currently trades near its 52-week low of $98, with the stock at $104.04 at the time of writing.

The post ServiceNow (NOW) Stock Slips as Weak U.S. Federal Spending Weighs on Outlook appeared first on CoinCentral.