How ServiceNow Is Turning AI Strategy Into Real Revenue

Key Points

• The company is effectively translating its artificial intelligence strategy into a significant and growing stream of high-margin subscription revenue.
• Strategic partnerships and key acquisitions are expanding the company's market reach and strengthening its competitive advantage in the enterprise software sector.
• Overwhelming support from institutional investors demonstrates a high level of market conviction in the company’s long-term growth and leadership position.

In a market saturated with promises about artificial intelligence (AI), distinguishing between strategy and actual revenue can be a challenge for investors. While many technology sector companies are still outlining their AI roadmaps, ServiceNow NYSE: NOW is delivering tangible results today.

The company's recent decision to raise its full-year 2025 forecast was a clear signal of confidence, built on the accelerating customer adoption of its AI-powered platform. 

This move suggests ServiceNow has successfully transitioned from an AI promise to a profitable reality, positioning it for a new phase of growth.

How ServiceNow Is Building Its Next Growth Spurt

ServiceNow's bullish outlook is powered by two interconnected catalysts: a proven ability to monetize its AI innovations and a series of strategic moves designed to expand its competitive advantage. This combination provides a clear and durable path toward achieving its ambitious growth targets.

The health of its pipeline is already evident in key forward-looking metrics, such as its $10.92 billion in Current Remaining Performance Obligations (cRPO), which represents contracted future revenue and grew a robust 24.5% year-over-year in the second quarter.

Turning AI Code Into Cash Flow

The company's growth is being directly fueled by its success in upselling new and existing customers to premium "Pro Plus" licensing tiers. These higher-priced packages embed powerful generative AI features, branded as "Now Assist," directly into the core IT, HR, and customer service workflows that enterprises rely on. This strategy is proving highly effective.

The clearest evidence of its success is a crucial forward-looking metric: ServiceNow is firmly on track to hit its target of $1 billion in Annual Contract Value (ACV) from its AI products by 2026. This is not a distant goal but a tangible target based on current deal momentum.

The company’s earnings report for the second quarter of 2025 saw it close 89 new deals worth over $1 million in net new ACV, with management noting that AI capabilities are a significant factor in securing these large enterprise agreements.

Strategic Moves to Widen the Moat

ServiceNow is strategically expanding its entire ecosystem to make its platform indispensable. Several key moves are designed to accelerate future growth and lock in market leadership:

• The Genesys Investment: The commitment to invest up to $750 million in customer experience leader Genesys is a major strategic push into a massive market. This partnership deeply integrates ServiceNow's workflow automation with a top-tier customer service platform, creating a unified and powerful offering that is difficult for competitors to match.
• Technology Integrations: The company is also enhancing its core technology. A partnership with NVIDIA NASDAQ: NVDA makes its AI agents faster and more efficient, while the recent acquisition of data.world provides a sophisticated data catalog. This ensures ServiceNow’s AI operates on high-quality, well-governed data, leading to more accurate and reliable results for customers.

These initiatives are fundamental upgrades to the business. They expand the company's total addressable market and solidify its premium positioning, supporting a clear path to long-term value creation for the stock.

Why Top Investors Remain Bullish on ServiceNow

While ServiceNow's operational momentum is clear, investors must also consider other market signals, such as the company’s valuation and recent insider activity. A closer look reveals a story of high conviction from professional investors.

The most powerful indicator of market confidence is that institutional investors hold 87.18% of the company's stock. More telling is the flow of capital: over the last 12 months, institutions have purchased $41.08 billion of ServiceNow stock while selling only $18.86 billion, a net inflow of over $22 billion.

This demonstrates that the smart money, including top holders like Vanguard and State Street, is actively increasing its bet on the company's future.

This conviction provides important context for the stock’s valuation. Its high price-to-earnings ratio (P/E) and price-to-sales ratio (P/S) reflect the premium the market assigns to a company with consistent 20%+ growth, strong profitability, and a leadership role in the transformative enterprise AI sector. 

While recent stock sales by executives have been noted, regulatory filings show these are primarily conducted under pre-scheduled Rule 10b5-1 trading plans.

This suggests routine financial planning rather than a change in outlook, a fact that has not deterred large institutional funds from maintaining their significant positions.

A Durable Growth Story for Investors

A proven AI monetization playbook and a reinforcing ecosystem of strategic partnerships and technology enhancements back ServiceNow’s confident guidance for the remainder of 2025.

The company’s demonstrated ability to generate tangible, high-margin revenue from artificial intelligence already sets it apart from many competitors in the enterprise software space.

With strong operational momentum, deep institutional backing, and a consensus analyst price target pointing to a potential upside of over 25%, ServiceNow presents a compelling case for investors looking for a durable market leader in the next phase of enterprise software growth.