Government Spending Slowdown Weighs on ServiceNow's Outlook

Stifel slashes ServiceNow's price target to $135 on federal spending weakness, but maintains a Buy rating ahead of Q1 earnings. Shares trade at a deep discount.

A notable pullback in U.S. federal agency spending is casting a shadow over ServiceNow, a leading cloud software provider. This sector, typically a source of lucrative contracts, is now prompting analysts to temper their expectations just weeks before the company's quarterly earnings release.

Analyst Adjusts Target Amid Federal Spending Shift

In response to the deteriorating spending environment, Stifel analyst Brad Reback has made a significant revision to his outlook. He slashed his price target for ServiceNow shares to $135, down sharply from a previous target of $180. This adjustment stems directly from observed weakness in the government sector. Following a robust prior year that saw a 30% surge in federal expenditures, the current climate is markedly weaker. Consequently, Reback now anticipates only minimal growth in current remaining performance obligations (cRPO) for the first quarter of 2026. Despite this substantial target cut, Stifel maintains its "Buy" recommendation on the stock.

Upcoming Quarterly Report to Provide Clarity

The full impact of the government's spending restraint will become clearer on April 22, when ServiceNow reports its Q1 financial results. Current market consensus estimates, as tracked by analysts, are as follows:

• Revenue: $3.75 billion
• Adjusted Earnings Per Share (EPS): $0.95 to $0.97
• Annual Subscription Revenue Target: $15.53 to $15.57 billion

Share Price Decline Creates Valuation Opportunity

Market uncertainty has already left its mark on ServiceNow's share price. Trading near $102, the stock now sits more than 40% below its peak from the last six months. This decline, however, has resulted in an unusually attractive valuation. The forward price-to-earnings (P/E) ratio now stands at approximately 24.5, less than half of the company's three-year historical average.

The broader analyst community remains largely undeterred by this near-term softness. An overwhelming majority—42 out of 46 surveyed experts—continue to rate the shares as a "Buy." This sustained optimism is underpinned by ServiceNow's strategic expansion of its AI partnership with Nvidia and a Wall Street average price target that remains at $188.