ServiceNow NOW and Salesforce shares climbed 5% on Wednesday after Guggenheim upgraded the software companies, arguing that their valuations have become attractive despite ongoing risks posed by artificial intelligence.
The upgrade comes after a difficult year for enterprise software stocks, with investors reassessing growth prospects as AI reshapes the industry.
ServiceNow shares are down 33% so far in 2026, while Salesforce has fallen 38%.
Guggenheim upgrades ServiceNow and Salesforce
Guggenheim analyst John DiFucci upgraded ServiceNow to Buy from Neutral and assigned a $125 price target, valuing the company at 7.5 times enterprise value to next-12-month recurring revenue.
According to DiFucci, the upgrade reflects valuation rather than optimism that ServiceNow will emerge as a major AI winner.
“We believe current levels present an attractive opportunity for investors to purchase a comfortably profitable stock likely to continue to grow at double digits,” DiFucci noted, citing expected improvements in the company’s US federal government business.
His discussions with management suggest that ServiceNow’s government-related business could improve as disruptions tied to federal spending changes and procurement delays associated with the Department of Government Efficiency begin to ease.
DiFucci also upgraded Salesforce to Buy from Neutral, saying investors have become overly pessimistic about the software company.
He described the “Armageddon scenario” reflected in Salesforce’s valuation as “misaligned with reality.”
Salesforce is currently trading at about 3.7 times projected enterprise value to revenue over the next 12 months, a valuation DiFucci believes is “grossly undervalued.”
AI remains a risk, not a growth driver
Although DiFucci turned more constructive on both companies, he maintained a cautious stance on artificial intelligence.
He has previously described AI as a major threat to software companies and said that view has not changed materially.
“We want to be clear that we are not upgrading shares because we see [ServiceNow] as an AI beneficiary,” he wrote, adding that he believes AI monetization is “unlikely to materialize” for the company, and that the threat of artificial intelligence “does pose significant risks.”
Regarding Salesforce, DiFucci also tempered expectations for future growth.
“Realistically, the company will ‘struggle to grow much, but does not decline much either,'” he said. “This is not a call that [Salesforce] will be a beneficiary of AI, but we don’t believe it will decline as implied in the current valuation.”
The brokerage also pointed to ongoing risks, including talent migration to AI-native startups and the company’s reliance on acquisitions, including Armis, to support growth.
Investors turn attention to quarterly execution
Separately, Evercore ISI reiterated its Outperform rating on ServiceNow with a $150 price target ahead of the company’s second-quarter earnings report.
The brokerage said investor attention has shifted from long-term AI strategy toward execution over the coming quarters.
ServiceNow recently outlined its AI Control Tower strategy, AI-native product packaging, and a target of generating more than $30 billion in subscription revenue by fiscal 2030.
According to Evercore ISI, the company’s long-term target implies subscription revenue compound annual growth of approximately 17.5% without requiring an acceleration in growth.
According to Evercore ISI, the company’s long-term target implies subscription revenue compound annual growth of approximately 17.5% without requiring an acceleration in growth.
For the second quarter, ServiceNow guided current remaining performance obligations growth of about 19.5% in constant currency, including contributions from the Moveworks and Armis acquisitions.
Evercore ISI said investors will closely watch whether organic growth stabilizes as pressure in the federal government market eases and AI adoption increases.
The firm added that constant-currency growth of 20% to 20.5% would likely meet expectations, while results closer to 21% or higher could help ease concerns about slowing organic growth.
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