Jim Cramer on ServiceNow, Inc. (NOW): Negative Chatter Can’t Sink a Loved Stock

In the ever-volatile tech sector, few companies have managed to navigate skepticism as deftly as ServiceNow (NOW). While critics have recently pounced on the company’s valuation and competitive pressures, Jim Cramer, the fiery host of Mad Money, has emerged as a staunch defender of its long-term prospects. His argument? ServiceNow isn’t just weathering the storm—it’s building an unassailable moat for the 2025 era. Let’s unpack why the naysayers might be missing the point.

The Resilience of a Platform Giant

ServiceNow’s core business—IT service management (ITSM) and IT operations management (ITOM)—has long been its cash cow. But Cramer insists this isn’t all the company is. In Q2 2024, ServiceNow reported 14% year-over-year revenue growth, a figure that underscores its operational stability even as macroeconomic headwinds buffet the broader tech sector.

Cramer argues that the company’s adaptability is its secret weapon. By expanding into adjacent markets like robotic process automation (RPA) and integrating generative AI into its platform, ServiceNow is positioning itself as a linchpin for hybrid workplaces. “This isn’t just software—it’s a nervous system for modern enterprises,” he says. The company’s Q2 results also highlighted strong customer retention, with net dollar expansion rates remaining robust.

The 2025 Vision: $20 Billion and Beyond

At the heart of Cramer’s optimism is ServiceNow’s 2025 revenue target of $20 billion. To skeptics who question whether this is achievable, he points to two pillars: scalability and strategic partnerships.

First, ServiceNow’s platform architecture allows it to cross-sell new modules to its existing client base—a strategy that has historically driven organic growth. Second, its partnerships with Microsoft and Salesforce aren’t just about convenience; they’re about embedding ServiceNow’s tools into the core workflows of Fortune 500 companies.

Cramer also highlights the company’s acquisition strategy. By acquiring smaller players like AI-driven IT vendor Lacework (in 2022), ServiceNow has fortified its position in cybersecurity and cloud management—two areas critical to hybrid work environments.

Why the Negative Chatter Falls Short

The bears’ case rests on valuation and competition. ServiceNow’s price-to-sales ratio is indeed elevated compared to peers like Salesforce (CRM), and rivals such as BMC Software and Jira’s parent company Atlassian (TEAM) are nipping at its heels.

But Cramer counters that customer loyalty is the ultimate moat. ServiceNow’s platform now integrates with thousands of third-party applications, creating a dependency that’s hard to replicate. As he put it: “You don’t just ‘switch’ IT platforms like you do a SaaS app. The switching costs here are astronomical.”

Moreover, the company’s R&D investments—particularly in AI—are paying off. Its Intelligent Orchestration feature, which automates IT workflows using generative AI, has been adopted by clients like Delta Airlines and Siemens, signaling a shift from cost-saving tools to revenue-generating innovations.

The Bottom Line: A Stock Built for the Next Decade

ServiceNow’s path to $20 billion isn’t without speed bumps. Economic slowdowns, cybersecurity threats, and regulatory scrutiny in cloud computing could all test its mettle. Yet the fundamentals remain compelling:

• Revenue Growth Consistency: 14% YoY growth in Q2 2024, outpacing the 8% average in the IT services sector.
• Market Share: Controls ~40% of the global ITSM market, per Gartner.
• AI Integration: 80% of Fortune 500 companies now use at least one ServiceNow product, with AI adoption accelerating.

Cramer’s stance is clear: negative sentiment is noise, not a verdict. ServiceNow’s ecosystem is too deeply embedded in enterprise IT to be easily dislodged. For investors with a 5–7 year horizon, the stock’s current valuation—while rich—could be justified by the company’s dominance in a sector that’s only growing more critical.

In the end, ServiceNow isn’t just surviving the chatter—it’s proving that in tech, loyalty beats valuation skepticism every time.