ServiceNow (NOW) Sold Off Despite a Solid Result

Soumya Eswaran

Thu, July 9, 2026 at 5:42 AM PDT 4 min read

Lakehouse Capital, a Sydney-based investment manager, published its "Lakehouse Global Growth Fund" investor letter for April 2026. A copy of the letter can be downloaded here. In April, several portfolio companies reported earnings. Overall, updates were positive, indicating that the companies continue to execute on growth opportunities and show strong fundamentals. The fund returned -0.8% net of fees and expenses, whereas its benchmark, the MSCI All Country World Index Net Total Returns (AUD), returned 5.0%. The Fund has returned 119.9% since its inception compared to 159.3% for its benchmark. In addition, please check the Fund's top five holdings to know its best picks in 2026.

In its April 2026 investor letter, Lakehouse Global Growth Fund highlighted ServiceNow, Inc. (NYSE:NOW). ServiceNow, Inc. (NYSE:NOW) is a cloud-based software company that provides a platform for automating and managing digital workflows. On July 8, 2026, ServiceNow, Inc. (NYSE:NOW) closed at $107.78 per share, reflecting a market capitalization of $111.15 billion. ServiceNow, Inc. (NYSE:NOW) posted a one-month return of 4.56%, while its shares lost 44.33% over the past 52 weeks.

Lakehouse Global Growth Fund stated the following regarding ServiceNow, Inc. (NYSE:NOW) in its April 2026 investor update:

"US-based software company, ServiceNow, Inc. (NYSE:NOW), delivered a solid result with revenues growing 22% year-on-year to $3.8 billion and operating income growing 26% year-on-year to $1.2 billion. The company's key performance indicators remained healthy, with retention rates at 97% and their backlog (remaining performance obligations) growing 24% to $27.3 billion, representing roughly 2x annual revenue. Performance was evenly spread across segments, products, and geographies, and the company continued to execute on the large deal front, closing 16 deals with greater than $5 million in net new annual contract value, up 80% year-on-year. Customers spending more than $5 million in ACV expanded 22% year-on-year, an acceleration from the prior two quarters.

The standout positive was a significant step-up in AI monetisation. Management raised its full year Now Assist ACV target from US$1.0 billion to US$1.5 billion, reflecting continued outperformance from its AI solutions. Several underlying data points reinforce the encouraging trajectory: Now Assist customers spending more than $1 million in ACV grew 130% year-on-year, and roughly half of all net-new business is now coming from non-seat-based pricing models. Management also noted that initial Pro Plus purchases included sufficient Assist capacity to support 12 to 18 months of experimentation, but that burn rates should rise meaningfully as customers deploy more sophisticated, agentic use cases — setting up a material consumption ramp in the second half of 2026.

Looking ahead, we continue to believe ServiceNow is one of the highest-quality software businesses globally, and that the current valuation of 15x 2026 free cash flow materially undervalues the long-term earnings power of the business."