Service Today ( NOW 3.52% ) has grown at a dramatic rate since its first public offering a decade ago. The digital workflow service provider’s annual revenue increased from $ 244 million in 2012 to $ 5.9 billion in 2021, representing a compound annual growth rate (CAGR) of 42.5%
ServiceNow went public on July 28, 2012, at $ 18 per share, costing the company approximately $ 2.2 billion. Today, the stock trade is approximately $ 560, giving ServiceNow a market capitalization of approximately $ 113 billion. A $ 1,000 investment in its IPO is worth nearly $ 31,000 today.
That’s why the stock is a massive multi-bagger, but can ServiceNow stock continue to rally in the long run and strengthen its market cap beyond the $ 1 trillion mark in 2040?
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An forecast of $ 15 billion in annual revenue by 2026
ServiceNow believes its annual revenue will increase at a cumulative annual rate of at least 20.5% over the next five years, reaching more than $ 15 billion by 2026.
It expects the digitization of businesses, the secular shift to remote and hybrid employment, and its expansion into fresh industries and geographic regions will all contribute to that growth. It can also squeeze more revenue from its previous customer base-which already includes approximately 80% of the Fortune 500-by adding new services to its subscription-based offers.
Its ecosystem is sticky. The company ended 2021 with an impressive renewal rate of 99%-unchanged from 2020-while its outstanding performance obligations-a key measure of a software company’s forward demand-rose 32%.
ServiceNow is part of the global market of workflow management services, where Grand View Research predicts a CAGR of 30.6% between 2021 and 2028. The size of that tailwind across the industry suggests ServiceNow could easily surpass its guidance for 2026.
The company also became profitable on a generally accepted accounting principles (GAAP) basis in 2019, and it has remained in the black ever since. Its bottom line has been chaotic, mainly because of its continued investments, but its revenue growth should be steady as it grows its business.
But can it continue to grow until 2040?
ServiceNow did not show any forecasts beyond 2026, but its growth is likely to weaken from there if it generates $ 15 billion in annual revenue – a top line comparable to Adobe‘s (ADBE 0.45% ) now. Analysts expect Adobe’s mid -youth revenue to increase by a percentage in 2022 and 2023.
If ServiceNow generates $ 15 billion in revenue in 2026 and then achieves a more modest CAGR of 12% for the next decade, it will generate about $ 47 billion in revenue in 2036.
From there, if it manages a CAGR of only 10%, its annual revenue will reach $ 70 billion by 2040.
Pairing that growth rate with a reasonable price-to-sales ratio of 10 (being conservative, this is about half the current ratio), it could be worth about $ 700 billion by 2040. That is missing the 12-zero mark, but will still make it a cloud software giant.
Looking beyond market caps
That’s just speculation so far, but ServiceNow’s growth over the past decade shows that it has carved out a high-growth niche in the crowded cloud services market. The confidence of its five-year outlook also suggests that it is not worried about large cloud companies disrupting the digital workflow space.
A lot could happen between now and 2040. Recessions, pandemics, wars, and technological advances could generate headwinds or tailwinds for ServiceNow’s core business. It could acquire many smaller companies, deploy more digital workflow management services, or be overwhelmed by larger cloud companies.
But based on what we know now, ServiceNow looks like a solid long -term investment. It’s growing, it’s profitable, and most of America’s largest companies are already using its services. This stock could easily generate more multi-bagger gains over the next two decades-even if it doesn’t join the elite club of trillion-dollar tech titans.
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