Wall Street sometimes loves to misread particular kinds of stocks. And it is always the ones that look disrupted from the outside but are actually getting more deeply embedded on the inside.
ServiceNow (NOW) has spent much of 2026 carrying that misread. The stock fell roughly 38% year to date the week that ended May 15, weighed down by investor fears that the rise of AI would commoditize enterprise workflow software and chip away at the moat that ServiceNow has spent two decades building.
Bank of America just pushed back on that narrative — hard. The firm restarted coverage on the American software company on Monday, May 18, with a buy rating, arguing that AI is the strongest tailwind ServiceNow has ever seen, not an existential threat.
As of this writing, NOW is up 32% year to date, according to Yahoo Finance, and the recent recovery suggests the market is beginning to arrive at the same conclusion.
“While AI is disrupting the software landscape, we think NOW stands to benefit from, rather than be replaced by, new AI solutions,” wrote BofA analyst Tal Liani in a note to clients, Seeking Alpha noted.
BofA resets ServiceNow stock price target to $130
BofA revisited ServiceNow (NOW) and offered a $130 price target in a note to clients. The core of BofA’s bull case is structural. ServiceNow is not just another enterprise software vendor. It is the system that governs, routes, approves, and audits activity across organizations, and the operational backbone of how large institutions actually function.
Liani made the displacement argument explicitly in the note. Replacing ServiceNow is not a software migration. It is an organizational surgery that is costly, complex, and deeply disruptive to the workflows that enterprises depend on daily. That switching cost is the moat. And according to BofA, the agentic AI cycle actually deepens it.
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The reasoning is counterintuitive but logical. Autonomous AI agents operating in enterprises need some place to route decisions, enforce permissions, apply policies, and maintain audit trails. That is exactly what ServiceNow’s platform already does. Rather than competing with AI agents, ServiceNow becomes the orchestration layer that governs them.
BofA specifically highlighted ServiceNow’s AI Control Tower, Action Fabric, hybrid pricing models, and the recent acquisitions of Armis and Veza (both closed in Q1) as evidence that management is actively building the security and identity infrastructure needed to govern an agentic enterprise.
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ServiceNow’s Q1 2026 results also gave BofA the proof points it needed
The fundamental case for BofA’s restart sits on a first-quarter earnings report that beat expectations across every metric.
Key Q1 2026 results, according to ServiceNow’s April 22 earnings release:
- Subscription revenues of $3.671 billion, up 22% year over year
- Total revenues of $3.770 billion, up 22% year over year
- Current remaining performance obligations of $12.64 billion, up 22.5% year over year
- Assist customers spending over $1 million in annual contract value grew over 130% year over year
- 16 transactions over $5 million in net new ACV in Q1, up nearly 80% year over year
- 630 customers with more than $5 million in ACV, up approximately 22% year over year
Source: ServiceNow First Quarter 2026 Financial Results
The cRPO trajectory is the number BofA emphasized most. Contracted remaining performance obligations have exceeded 20% growth for five consecutive quarters.
That streak signals sustained demand and platform relevance, even as competitors have tried to capitalize on AI anxiety around the stock.
“Our AI growth is far exceeding even our own expectations,” said Chairman and CEO Bill McDermott on the earnings call. “We believe the most compelling chapter in ServiceNow’s growth story is just beginning,” added President and CFO Gina Mastantuono.
The financial forecasts BofA is betting on through 2028
The BofA initiation shared in the note to clients comes with specific forward projections that concretely frame the investment thesis.
The firm forecasts 18% to 22% revenue growth from 2026 through 2028, driven by platform expansion, AI budget wins, and monetization of agentic AI capabilities. Free cash flow margins are projected at 35% to 37%. Management has guided for approximately 100 basis points of operating margin and free cash flow margin expansion in 2027.
My review of the valuation framing is where the BofA case becomes most actionable for investors. At 14 times the calendar year 2027 estimated EV-to-free cash flow, ServiceNow is trading at a discount to peers, offering faster growth and superior profitability at a lower relative multiple. That combination, in a market that has been quick to punish any software company perceived as AI-vulnerable, represents the mispricing BofA is betting will correct.
ServiceNow’s recent product launches reinforce the growth pipeline. The Context Engine, Autonomous Workforce, ServiceNow EmployeeWorks, and partnerships with Google Cloud and Nvidia all point to a platform aggressively expanding, not contracting, its addressable market.
The stock’s 32.80% year-to-date recovery suggests the market is already beginning to reprice the fear of AI disruption. BofA’s $130 target implies the re-rating still has significant distance to travel.
Related: Morgan Stanley has a message for ServiceNow investors
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