Most office workers know the routine. A password expires, you file a ticket, and someone in IT gets to it eventually. Nearly nine in 10 Fortune 500 companies use ServiceNow Inc. (NOW) software to automate workflows like that one, according to Semafor.
ServiceNow now sells software that closes many tickets itself. Product chief Amit Zavery made the case on the second-quarter earnings call on Wednesday, July 22, 2026. The tool resolves close to 80% to 85% of service requests with no human involved, he said.
Answering Goldman Sachs analyst Gabriela Borges, Zavery called it “labor arbitrage.”
“We also get to monetize the labor cost,” he said. The money your employer spends on the person who resets your password is what ServiceNow wants.
The pitch is selling. ServiceNow’s AI products topped $1 billion in annual contract value, or yearly committed spending, in the second quarter, according to its earnings release.
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In May, CFO Gina Mastantuono pictured a support team of 20 costing more than $1 million a year, mostly in wages, Fortune reported. In her math, that customer’s spending with ServiceNow grows more than fivefold, even after it buys fewer seats.
That is the tension. ServiceNow built its business charging per worker, and its newest product is designed to need fewer of them.
ServiceNow is pricing its software like a worker
To bill for work instead of workers, ServiceNow is moving customers to seats plus metered units it calls “assists.” Half of its net new business already isn’t tied to seats, CEO Bill McDermott said in July.
Upgrades to the new AI tiers carry price increases of 20% to 30%, Mastantuono added. In April, she said many customers find the money for AI as their labor budgets come down.
I’d be uneasy in that buyer’s chair. A help desk worker costs the same every month, while a meter can surprise you. Even so, cooling office hiring makes the meter easier to sell.
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Slower office hiring helps the pitch and hurts workers
Employers added just 29,000 jobs in September, according to the Bureau of Labor Statistics. Professional and business services, a largely white-collar sector, lost 9,000 jobs, the BLS said.
As a worker, I’d welcome faster fixes, but the software targets Level 1 help desk work, a classic entry-level job.
McDermott told CNBC in March that unemployment for new college graduates could reach the mid-30% range within a couple of years, Fortune reported.
Morgan Stanley says growth has to speed up
Investors, meanwhile, want proof that the meter is running faster. Analyst Adam Wood rates ServiceNow as Overweight with a $180 price target, according to a Morgan Stanley research note shared with TheStreet.
The Oct. 26 third-quarter preview, titled “Executing On The Path to Reacceleration,” leaned positive but warned that “an achievable re-acceleration in growth is likely required to move shares higher from here.”
ServiceNow guided for about 20% growth in contracted revenue within a year. Strip out deals such as Armis, which expanded its fast-growing security business, and Morgan Stanley estimates organic growth closer to 17%.
Partners told the firm customers show some hesitancy on pricing, given a “lack of transparency around token economics.” The firm’s $220 bull case assumes new products take off, while its $75 bear case assumes they stall.
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ServiceNow stock leaves little room for a miss
Shares have traded between $81.24 and $192.97 over the past 52 weeks. The swing came as investors debated AI’s effect on software, a worry McDermott pushed back on with Bloomberg in January.
Shares rose more than 70% in the three months before the note, Morgan Stanley said. They slipped about half a percent the day it came out.
The stock trades at about 34 times forward earnings, StockAnalysis shows. Investors pay about $34 for each $1 of expected annual profit.
StockAnalysis also shows a Strong Buy consensus from 49 analysts, with an average price target of $156.54 that the shares have already topped. Recent target moves:
- Overweight, $180: Morgan Stanley, Adam Wood, Oct. 26
- Buy, $180 from $150: Bank of America, Tal Liani, Oct. 23
- Outperform, $266 from $248: Bernstein, Peter Weed, Oct. 20
My rating is Hold. The business is strong, but the shares already price in an acceleration ServiceNow hasn’t shown. I’d keep the shares I own and let new money wait for organic growth to pick up or for a pullback.
ServiceNow reports third-quarter results after the closing bell on Oct. 28. Bulls want proof that customers are burning through more assists. Bears will watch for slower organic growth.
Either way, the bill for routine office work is moving from payroll to software. ServiceNow wants to be the one sending it.
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