Answer first
ServiceNow remains Core Long. Enterprise UFCF DCF replaces the historical per share multiple method. Historical original weighted value was $155.75. Revised active weighted value is $132.017050634.
Company specific valuation method
Enterprise unlevered free cash flow DCF driven by subscription revenue, normalized economic operating margins, cash taxes, reinvestment, normalized deferred revenue working capital, net debt, and explicit diluted shares.
Why it fits
Contracted subscription growth must convert through margins, taxes, reinvestment, working capital, net debt, and dilution.
Why alternatives can mislead
Revenue methods ignore costs. P E depends on exclusions. Reported free cash flow can include temporary deferred revenue benefits. Rule of 40 and reverse DCF are cross checks only.
Bear, base, and bull
| Scenario | Probability | Year 10 revenue | Year 10 UFCF | WACC | Terminal growth | Equity | Shares | Target | Return |
|---|---|---|---|---|---|---|---|---|---|
| Bear | 30% | $32.90B | $6.22B | 10.0% | 2.5% | $58.14B | 1.20B | $48.448796869 | -62.7% |
| Base | 50% | $43.12B | $11.20B | 8.5% | 3.0% | $139.34B | 1.10B | $126.673587600 | -2.4% |
| Bull | 20% | $54.40B | $17.16B | 7.5% | 3.5% | $284.26B | 1.05B | $270.728088864 | 108.7% |
Weighted value $132.017050634. Expected return 1.75%.
Subscription and cash bridge
Q2 subscription revenue $3.877B. Services $0.110B. cRPO $13.20B. RPO $29.0B. Renewal 98%. TTM OCF $5.308B. Capex $0.728B. SBC $2.185B.
UFCF equals NOPAT plus D and A, minus capex and capitalized software, plus normalized working capital. Diluted shares capture SBC and repurchase offset.
Weighted scorecard
| Pillar | Weight | Historical | Revised | Contribution |
|---|---|---|---|---|
| Business Quality | 30% | 9.7 | 9.7 | 2.910 |
| Management Quality | 15% | 8.1 | 8.1 | 1.215 |
| Industry Tailwind | 15% | 8.8 | 8.8 | 1.320 |
| Valuation and Margin of Safety | 30% | 7.0 | 5.0 | 1.500 |
| Risk and Asymmetry | 10% | 7.0 | 4.0 | 0.400 |
| Conviction | 100% | 8.245, displayed 8.2 | 7.345 | 7.345 |
Primary financial evidence
| Period | GAAP Revenue | GAAP Gross Profit | GAAP Operating Income | GAAP Net Income | GAAP Operating Cash Flow | Capital Expenditure | Share Based Compensation |
|---|---|---|---|---|---|---|---|
| FY2023 | 8.971 | 7.050 | 0.762 | 1.731 | 3.398 | 0.694 | 1.604 |
| FY2024 | 10.984 | 8.697 | 1.364 | 1.425 | 4.267 | 0.852 | 1.746 |
| FY2025 | 13.278 | 10.295 | 1.824 | 1.748 | 5.444 | 0.868 | 1.955 |
| TTM Jun 2026 | 14.732 | 11.015 | 1.680 | 1.670 | 5.308 | 0.728 | 2.185 |
TTM uses FY2025 plus H1 2026 minus H1 2025. Accounting labels remain distinct.
Observable signals
Failure signals include cRPO below 17%, renewal below 95%, subscription gross margin below 76%, economic margin below 22%, or diluted shares above 1.20B.
Confirmation requires sustained cRPO conversion, renewal near 98%, subscription margin near 81%, cash margin expansion, disciplined reinvestment, and buybacks that almost offset issuance.
Downloads
Original initial assessment
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Original deep report
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Original workbook
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Original workspace
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Revised initial assessment
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Revised deep teaching report
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Method note PDF
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Delta memo PDF
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Formula workbook
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Method note Markdown
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Assumptions control
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Financial manifest
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Revised workspace
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