The analyst believes ServiceNow's margins won't be compressed by AI inference costs due to their pricing model, viewing the adoption risk as low, implying a bullish stance on $NOW.
ServiceNow prices AI consumption separately, avoiding margin compression from inference costs; adoption risk is low as customers are using tokens.
$NOW's margins won't get compressed due to inference costs: It's correct for SaaS companies that price AI as a feature inside their existing seat license model. E.g. Copilot pricing initially was a nightmare cos of this. But ServiceNow's pricing bypasses this by making AI consumption a separate rev generator for them . So the risk would be if customers don't actually consume enough tokens to make that pricing model accretive. Essentially making it an adoption risk. (People are using up tokens though, so I view it as little-no risk for $NOW)
| Horizon | Raw move | vs SPY |
|---|---|---|
| 1 day | -2.2% | -2.8% |
| 1 week | +21.8% | +20.3% |
| 1 month | -8.9% | -8.8% |
| 3 months | — | — |
| 6 months | — | — |