TipRanks Smart Growth Portfolio #70: Agents of Order
Dear Investors,
In this edition of the Smart Growth Portfolio and Newsletter, we spotlight a company turning workflows into AI runways. But first, some news and updates.
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Portfolio News
❖ Micron (MU) signed a long-term agreement with General Motors to provide the automaker with memory and storage chips used in vehicles. The partnership also includes joint development of next-generation automotive memory and storage technologies. The agreement further strengthens Micron’s position in the fast-growing market for vehicle semiconductors.
The GM deal is part of Micron’s broader long-term supply strategy, one of 16 strategic customer agreements that it outlined during its fiscal third quarter. To support this strategy, MU has been heavily investing to expand and localize supply, including $2 billion invested in additional DRAM capacity at its Virginia facility, which started production earlier this year.
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❖ Vistance Networks (VISN) announced the closing of its landmark divestiture of RUCKUS Networks to Belden, concluding a deal first announced in April. The sale marks a major step in VISN’s portfolio repositioning, allowing it to focus its resources on expanding its Aurora Networks business – an effort that is now supported by a debt-free balance sheet and substantial cash resources. Vistance is slated to receive roughly $1.75 billion after taxes and fees, with most of the net proceeds earmarked for distribution to shareholders as a cash dividend within 60 days of the transaction’s closing.
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❖ Ambarella (AMBA) surged nearly 30% after Rosenblatt Securities named the stock a top pick for the second half of 2026, calling it a physical AI pure play. The firm believes that physical AI is the next stage of growth in this AI cycle, and AMBA’s high-performance, low-power AI vision processors – used in drones, robotics, surveillance, and autonomous systems – position it uniquely as AI adoption shifts beyond data centers.
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This Week’s Top Growth Pick: ServiceNow (NOW)
ServiceNow operates at the control layer of enterprise software, helping large organizations automate workflows, connect fragmented systems, and turn operational data into action. Its cloud platform began in IT service management, but has expanded into a broader digital workflow engine across technology, customer service, employee experience, finance, security, procurement, and industry-specific operations. As companies move deeper into AI-enabled automation, the real value increasingly comes from coordinating tasks, approvals, data, and decisions across departments. ServiceNow is positioned in that coordination layer – where enterprise complexity meets intelligent execution – giving businesses a structured way to digitize work, reduce friction, and make AI useful inside the daily machinery of large organizations.
Source: ServiceNow 2026 Analyst Day presentation
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Then and NOW
Founded in 2003, ServiceNow was one of the first cloud-native enterprise software companies. It began in IT service management and steadily expanded into a broader enterprise workflow platform, serving functions across customer service, HR, finance, security, procurement, and industry-specific operations. Its 2012 IPO provided the capital and visibility to accelerate that shift from an IT workflow specialist to an enterprise-wide automation platform.
NOW’s biggest inflection point came with generative AI, an area where the company moved early. In 2023, ServiceNow introduced Now Assist, embedding genAI across IT service management, customer service, HR, and software development before most large organizations had fully defined how they would use AI inside daily operations.
The company continued expanding that push through later platform releases, including Xanadu and Yokohama, adding agentic AI, automation, governance, and industry-specific capabilities. The 2025 acquisition of Moveworks pushed NOW further into employee-facing AI assistants, enterprise search, and conversational work execution. In March 2026, the Veza acquisition added identity-security capabilities that help enterprises control who and what can access critical data, applications, systems, and AI artifacts. One month later, ServiceNow completed its buyout of Armis, extending the platform into cyber exposure management, connected-asset visibility, and security operations.
By 2026, ServiceNow had deepened its enterprise AI ecosystem through strategic partnerships with OpenAI and Anthropic, strengthening its multi-model approach and widening the intelligence layer available inside the Now Platform. Its collaboration with NVIDIA added another important piece, focused on enterprise-grade AI applications built for NOW’s workflows and customer base. Together with deep partnerships across Microsoft, Google Cloud, AWS, Cisco, and other major technology providers, these relationships reinforced the company’s position as a workflow platform where advanced AI can be applied to real enterprise processes.
Today, more than 85% of the Fortune 500 rely on ServiceNow, with customers including Coca-Cola, Visa, Siemens, AstraZeneca, Adobe, and Wells Fargo. That reach reflects how far the company has moved from IT ticketing toward becoming part of the operating layer inside many of the world’s largest organizations.
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Agent of Record
ServiceNow operates in one of enterprise software’s least glamorous but most valuable layers: the machinery that moves work through large organizations. Every enterprise runs on requests, approvals, incidents, cases, exceptions, security alerts, procurement steps, customer issues, and employee needs. NOW turns that operational sprawl into structured workflows – routing tasks, enforcing rules, connecting systems, tracking outcomes, and keeping work accountable.
That role becomes more powerful in the age of agentic AI. LLMs can generate answers, but enterprises still need permissions, identity controls, system access, audit trails, compliance, workflow logic, and human oversight before AI agents can act inside core operations. NOW is building that governed execution layer – where AI-driven work can be monitored, secured, routed, completed, and recorded. Jensen Huang captured the ambition clearly, calling ServiceNow “the operating system of enterprise AI agents.”
The moat begins with scale and architecture. NOW supports more than 100 billion workflows and 6.5 trillion annual transactions for thousands of organizations, giving it a deep base of process history, operational context, approval patterns, and customer trust. Its single-platform structure – one data model, one security model, one user experience – gives AI agents more consistent rails than a patchwork of point solutions. The company’s open-by-design approach also helps: customers can use different models, clouds, data systems, and interfaces while keeping ServiceNow as the layer that governs and executes work.
ServiceNow’s AI product strategy follows the same logic: govern the work, then automate more of it. AI Control Tower is central to the governance thesis, giving customers visibility and control over NOW’s own AI systems and third-party tools from Claude, OpenAI, Gemini, and others. Additional layers help govern swarms of AI agents and allow greater automation with tighter oversight. ServiceNow’s human-AI gateways – Otto and EmployeeWorks – bring that capability closer to employees, turning enterprise search, AI assistance, and internal requests into completed workflows across corporate functions.
Data is becoming a second major growth pillar because agentic AI is only as useful as the enterprise context behind it. Large companies have data scattered across systems like Snowflake, Databricks, and others, alongside countless internal tools. ServiceNow’s advantage is not simply connecting that data, but turning it into usable context for action: what the request means, which systems are involved, who has authority, which assets are affected, what happened in similar cases, and which approvals or exceptions apply. That creates a richer decision layer for AI agents and a larger monetization surface for NOW as customers prepare fragmented data estates for automation.
Security and risk are becoming a natural extension of ServiceNow’s AI opportunity. As companies deploy more agents, bots, and autonomous workflows, they increasingly need to govern nonhuman actors that can access data, trigger workflows, and make operational changes. That makes security less of a separate product category and more of a prerequisite for AI at scale. Veza and Armis integrate naturally into NOW’s platform strategy, deepening the security thesis around agentic AI.
Partnerships reinforce the same direction. Accenture is helping move enterprises from legacy risk systems onto ServiceNow-based managed security workflows, while AWS, NVIDIA, and Microsoft are tying NOW’s control layer into broader agentic-AI infrastructure. The pattern is clear: as enterprise AI spreads, the need to govern who acts, what they touch, and how actions are recorded becomes part of the workflow itself.
As NOW expands from IT workflows into a much broader market for enterprise execution, AI governance, data readiness, CRM, security, and vertical workflows, its opportunities grow accordingly. Management sees these areas as major growth vectors through 2030, while newer packaging and hybrid pricing give the company more ways to monetize AI usage beyond human seat counts. More than 50% of net new business now comes from non-seat-based models, including tokens, connectors, infrastructure, and other usage-linked assets. U.S. federal demand and international expansion add further runway.
The opportunity still comes with real competition and execution risk. ServiceNow needs to prove that hybrid pricing and AI usage can scale consistently after initial adoption, while keeping margin discipline as AI infrastructure costs rise. Hyperscalers, Salesforce, and AI-native startups all want to own parts of the agentic enterprise, and some large companies may build more automation internally. Still, NOW is one of the best-positioned companies to benefit from the growth of the AI governance market. In complex enterprises, the hard part is not producing intelligence, but making sure that intelligence can act securely, reliably, and accountably – and ServiceNow is already embedded in that layer.
Source: ServiceNow 2026 Analyst Day presentation
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Rule of NOW
ServiceNow’s financials continue to reflect the rare large-cap software combination of durable high growth, strong margins, and expanding AI monetization. The company has beaten revenue expectations for at least eight consecutive quarters, while adjusted EPS has not missed consensus since Q4 2021 – including the latest quarter, which came in line. That consistency confirms that NOW is not buying growth “at any cost” – it is scaling and upgrading a very profitable subscription platform.
Q1 2026 reinforced that setup. Subscription revenue rose 22% year-over-year to $3.671 billion, while total revenue increased 22% to $3.770 billion, exceeding the high end of company guidance and Wall Street revenue expectations. On a constant-currency (CC) basis, both metrics grew 19%, with reported growth benefiting from currency tailwinds. The Q1 beat came despite a roughly 75-bps headwind to subscription revenue growth from delayed large on-premise deals in the Middle East, making the underlying demand picture stronger than the headline growth alone suggests.
The forward indicators were just as important, supporting the durability of future subscription growth. Current remaining performance obligations (cRPO) reached $12.64 billion, up 21% in constant currency, while total RPO reached $27.7 billion, up 23.5%. Large-account expansion also remained strong. During the quarter, NOW added 630 customers above $5 million in annual contract value (ACV), up roughly 22% year-over-year, and 16 transactions above $5 million in ACV, up nearly 80%. The renewal rate stood at 97%, similar to the previous quarters. That, coupled with cRPO and backlog growth, further confirms that AI disruption concerns were massively overstated.
Meanwhile, AI is increasingly visible in the numbers. Customers spending more than $1 million in ACV on Now Assist grew over 130% year-over-year, and management raised its 2026 AI/Now Assist target from $1 billion to roughly $1.5 billion, while saying it counts only incremental AI contribution. Hybrid pricing adds another lever, with more than 50% of net new business now coming from non-seat-based models such as tokens, connectors, infrastructure, and other usage-linked assets.
Profitability remains a key part of the thesis. Q1 non-GAAP operating income reached $1.199 billion, with a 32% margin, while GAAP operating income was $503 million. Free cash flow was $1.665 billion, equal to a 44% margin, giving ServiceNow room to invest in AI, absorb acquisition costs, and repurchase shares. The company ended Q1 with about $7.9 billion in cash, equivalents, and marketable securities, against $1.49 billion of long-term debt. It later refinanced Armis-related borrowing with a $4 billion bond sale.
Guidance points to continued growth at scale. Management raised full-year 2026 subscription revenue guidance to $15.735-15.775 billion, implying 22-22.5% reported growth and 20.5-21% CC growth. Q2 subscription revenue is guided at $3.815-3.820 billion, or 21-21.5% CC growth, with cRPO growth expected at 19.5%. Armis should add about 125 basis points to growth, but will also create temporary margin headwinds, including 75 basis points to operating margin and 200 basis points to free cash flow margin. Even so, FY2026 guidance still calls for 81.5% non-GAAP subscription gross margin, 31.5% operating margin, and 35% free cash flow margin, with normalization expected in 2027. Guidance is seen as conservative, as it was given only weeks into the Iran war amid elevated macro and market uncertainty.
Longer term, management is targeting more than $30 billion in subscription revenue and a “Rule of 60%+” profile by 2030 – i.e., subscription growth and free cash flow margin together should be above 60%. That is an ambitious target for a company already operating at this scale, but it fits the core financial thesis: NOW is a high-growth software business with expanding cash generation. Moreover, the company is very specific in how it plans to reach these targets: through AI, workflow execution, security and risk, CRM, and data & analytics layered onto the core IT business. So far, the evidence points in the right direction: revenue visibility is growing, margins remain best-in-class, and AI is beginning to show up as a real financial engine.
Source: ServiceNow 2026 Analyst Day presentation
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Multiple Meanings
ServiceNow is best measured against a focused group of enterprise software platforms built around recurring revenue, large-customer expansion, workflow automation, and AI-driven operational intelligence. Salesforce is the clearest large-cap benchmark, sharing NOW’s platform breadth, enterprise buying center, subscription model, and push into AI agents. Workday offers the closest comparison in mission-critical internal systems, with a cloud-native platform used to manage core enterprise processes across HR and finance. Atlassian adds the most direct workflow and ITSM-adjacent comparison through Jira Service Management, even though it is smaller and more developer-centric. Datadog provides a premium-growth benchmark from the adjacent IT operations, observability, and cloud automation stack. Together, these peers frame ServiceNow as a large-scale enterprise workflow platform expanding from IT into broader AI-enabled execution.
Most stocks in the peer group dropped sharply over the past year, while Datadog moved in the opposite direction. This sharp performance gap was less about weak execution and more about how investors sorted software stocks during the AI disruption scare. Workflow and application platforms were de-rated on fears that AI agents could pressure seat-based licensing and long-term software demand, while observability and infrastructure names such as Datadog were rewarded because AI workloads directly increase cloud complexity, telemetry, and monitoring needs. For NOW, that creates a more interesting setup: the stock was priced as if AI were a threat to the model, even as the company’s results increasingly show AI becoming an incremental monetization layer on top of an already durable workflow platform. That disconnect is also reflected in Wall Street’s view, with analysts seeing more than 30% potential upside for the Strong Buy-rated NOW.
This optimistic forecast is also supported by NOW’s more moderate valuation, with many of its multiples cut by half or more versus their five-year averages. The stock still trades above Salesforce, Workday, and Atlassian on forward sales and earnings, but that premium has also compressed significantly from historical levels, and it looks much more reasonable when factoring in growth and profitability differences. ServiceNow delivers stronger top-line growth than Salesforce and Workday, while its profitability is much stronger than Workday, Atlassian, and Datadog on EBIT margin, net income margin, and free cash flow margin. At the same time, NOW combines roughly 20% forward revenue growth with a non-GAAP operating margin north of 30% – a structure none of the peers fully match, despite Salesforce’s stronger profitability and Datadog’s faster expected top-line expansion at a much steeper valuation premium. Against that setup, NOW’s roughly 6.4 times forward sales and 21 times FY2 non-GAAP earnings look far from excessive for a highly profitable enterprise software leader still compounding at scale, reinforcing the view that ServiceNow offers a compelling growth-at-a-reasonable-price setup relative to most peers.
NOW also returns capital through share repurchases. Notably, its buyback policy has shifted in recent quarters from a primarily conservative dilution-management tool into a more aggressive capital return strategy. Quarterly repurchases averaged roughly $270 million from program initiation in 2023 through mid-2025, then accelerated meaningfully. In January 2026, ServiceNow’s board authorized an additional $5 billion share repurchase program. In Q1 2026, the company executed a major buyback spree, repurchasing approximately $2.23 billion worth of shares. This step-up was supported by robust free cash flow generation and limited immediate need for that capital beyond the already-financed Armis acquisition. Following the AI-driven selloff, management viewed the stock as undervalued, using buybacks as a clear signal of confidence.
With roughly $4.2 billion in remaining authorization capacity as of the end of Q1, continued large buybacks – beyond pure anti-dilution needs – remain on the table, although they will be opportunistic and tied to capital-allocation priorities. Together, the reset valuation, resilient fundamentals, and more assertive buyback posture make the recent share-price weakness look increasingly like a rerating opportunity.
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To Sum It All Up
ServiceNow is increasingly positioning itself as one of the key control layers for enterprise AI – the place where intelligent systems can move from generating answers to completing real work securely, reliably, and accountably. Its platform already sits deep inside large organizations, managing workflows across IT, employee services, customer operations, security, data, and risk. As AI agents become more capable, that embedded position becomes more valuable, because enterprises will need governance, permissions, auditability, and workflow logic around every automated action. The company’s expanding AI, data, security, and automation layers suggest a larger opportunity than traditional IT service management alone. With strong retention, rising AI monetization, disciplined profitability, and a more reasonable valuation after the selloff, ServiceNow looks set to turn AI disruption fears into a long-term growth catalyst.
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Smart Growth Portfolio
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***Vistance Networks (VISN) apparent stock-price decline is not a real economic loss. Shares plunged roughly 50% on April 27 because they began trading ex-dividend after a $10 special cash distribution, meaning value was mechanically transferred from the stock price to shareholders as cash. Since then, VISN is up roughly 25%, reflecting strong investor confidence in the remaining business. Another similar value-transfer event is expected within the next two months, as Vistance is set to distribute most of the roughly $1.7 billion in net proceeds from its already-closed $1.846 billion RUCKUS sale to Belden.
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