ServiceNow Shares Fall 33% Despite Software Rotation, Trades at 7.23 P/S
Software stocks have seen a rotation back, yet ServiceNow shares declined 33.3% over three months versus an 18% industry drop. The stock trades at a forward price-to-sales of 7.23 and analysts expect 17.7% EPS growth in fiscal 2026.
1. Sector Rotation into Software
Recent market flows have shifted back into software names, driven by anticipation of stable subscription revenue streams. ServiceNow, as a leading IT service management provider, is positioned to benefit from this rotation over the longer term despite short-term share pressure.
2. Share Performance Lag
ServiceNow shares declined 33.3% over the past three months, underperforming the industry decline of 18% and peers TaskUs' 7.6% and Leidos' 4.8% drops.
3. Valuation Comparison
NOW stock trades at a forward price-to-sales multiple of 7.23, which is high relative to peers TaskUs at 0.79 and Leidos at 1.24 but below the industry average of 13.40 for enterprise AI and software players.
4. Earnings Outlook
Analyst forecasts call for 17.7% EPS growth for ServiceNow in fiscal 2026, reflecting expectations of continued subscription revenue expansion and enterprise digital workflow adoption.