ServiceNow (NOW) is undervalued

Hi all, I’ve just finished a valuation on ServiceNow and wanted to share it here for discussion. TL;DR: On my base-case assumptions, I get an intrinsic value of about $160/share vs a current price of $104.27, which implies roughly 53.5% upside. Date of analysis: 17–20 February 2026 Price used: $104.27 (Feb 20 close) Verdict: Undervalued (base case) Margin of Safety: 35% ... I won't bore you with what the company does, as you either already know, or can look it up easily. Why I think it is interesting for a DCF The (currently Hated) moat that matters here (for valuation purposes) is process entrenchment, switching costs and platform expansion economics. Once workflows are embedded, replacing them is painful. If the company can keep expanding use-cases inside existing customers, incremental returns can stay attractive for a long time. DCF framework (base case) I used a 10-year unlevered FCFF DCF plus a perpetuity terminal value. The model is built on indexed revenue first (FY2025 revenue = 100), then converted back to USD using FY2025 revenue of $13.28B. Key base-case assumptions Revenue growth (FY2026-FY2035):20.5%, 18%, 16%, 15%, 14%, 12%, 10%, 8%, 6%, 4.5% GAAP EBIT margin:Starts at 15.0% (FY2026, in line with guidance) and expands gradually to 22.5% by FY2035 Tax rate:21% normalised operating tax rate Cash-flow treatment (I consider this important):I treat SBC as a real expense in EBIT/NOPAT, but add it back in FCFF as a non-cash item and handle dilution at the per-share level (assuming buybacks broadly offset net dilution over time). I also explicitly include deferred commissions and capitalised contract acquisition costs in operating asset /liability changes so FCFF is not overstated. Discount rate & terminal assumptions Calculated base WACC: 8.1%  Effective WACC used in the DCF (conservative overlay): 8.5% Terminal growth rate (g): 2.5% I use 8.5% (not 8.1%) deliberately to reflect execution risk, AI business-model uncertainty, and duration sensitivity. Terminal value FCFF(2035E): $13.55BFCFF(2036E): $13.89BTV(2035E) = FCFF(2036E) / (WACC - g) = 13.89 / (0.085 - 0.025) = $231.5B Results PV of FCFF (Years 1-10): $57,217M PV of terminal value: $102,315M Enterprise value: $159,532M Equity bridge (FY2025 balance sheet inputs): (+) Cash, cash equivalents and marketable securities: $10,055M (-) Long-term debt: $1,491M Implied equity value: $168,096M Assumed diluted shares: 1.05B (split-adjusted) Intrinsic value: $168,096M / 1.05B = = $160.1/share (rounded: $160) Scenarios Bear case: $98.5/share Assumptions: 10.0% WACC, 2.0% terminal g, faster revenue fade, weaker net expansion, GAAP EBIT margin capped around 18%, working-capital tailwinds fade earlier Implied downside vs $104.27: -5.53% Base case: $160.1/share Assumptions: as described above, 8.5% WACC, 2.5% terminal g, revenue fade as above, GAAP EBIT margin to 22.5%, working-capital inflow fades towards neutral Implied upside vs $104.27: +53.54% Bull case: $199/share Assumptions: 8.0% WACC, 3.0% terminal g, stronger growth persistence, GAAP EBIT margin up to 24%, working capital remains a modest tailwind for longer Implied upside vs $104.27: +90.85% Margin of safety MoS = 1 - (Current Price / Intrinsic Value) MoS = 1 - (104.27 / 160.1) = 34.87%, i.e. rounded to 35% So, on these assumptions, NOW screens as undervalued with roughly a 35% margin of safety. What could break the thesis The biggest risks in my view are AI-driven seat compression and/or pricing pressure, weaker net expansion as the platform matures, lower-than-expected GAAP operating leverage, and the usual DCF duration sensitivity (small changes in WACC/g move value a lot). Disclaimer: I don't know NOW for NOW. :) I'm finishing up my fundamental analysis & will most likely initiate a position next week. What do you think about the assumptions used in my model? And about the company generally? (Not financial advice. Just sharing my work for discussion. Anyone wondering about the whole methodology can read the whole analysis here, it's for free: https://hatedmoats.substack.com/p/servicenow-dcf-valuation )