ServiceNow Built a Billion-Dollar Cybersecurity Business, and It's Growing Faster Than the Competition

ServiceNow Built a Billion-Dollar Cybersecurity Business, and It's Growing Faster Than the Competition

Bryan White, The Motley Fool

Tue, August 4, 2026 at 5:05 PM GMT+3 3 min read

• NOW +1.43%
• NVDA +1.77%

ServiceNow (NYSE: NOW), which is best known for software that helps automate workflows, spoke about its new cybersecurity vertical like a real competitor on its second-quarter call recently.

Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »

Its security and risk franchise crossed $1 billion in annual contract value last year, and CEO Bill McDermott claims it's growing faster than the top cybersecurity companies. After having its cyber solutions included in 80% of the company's biggest deals, McDermott stated, "we're in the party now."

The stock has been hit hard over the past year as investors soured on SaaS (software-as-a-service) stocks. If artificial intelligence (AI) can run enterprise workflows, it's natural for investors to lose faith in the terminal value of an expensive software stock. That's the value assigned by the market after a company's explicit growth period ends, and it's how a stock can be crushed despite still posting solid quarterly numbers.

Even so, there are reasons to be optimistic about ServiceNow. Here's why.

Palo Alto owns the sensors

One of the top industry players -- Palo Alto Networks (NASDAQ: PANW) -- recently proved that cybersecurity budgets are still expanding when it reported record results in June. Next-generation firewall bookings rose nearly 40%, the fastest pace for hardware in a decade, and its next-generation security annual recurring revenue grew 60% to $8.1 billion.

CEO Nikesh Arora declared the SaaSpocalypse for cyber "dead." Palo Alto's answer is a platform with 125 million sensors worldwide, capturing 17 petabytes of daily telemetry. At the same time, he cited false positive rates often reaching 25% and claimed that AI models "always fail at the last mile of complexity."

The map above the sensors

False alarm or not, someone still has to resolve the issue, and that's where ServiceNow's advantage lies. Palo Alto can contain the immediate threat. ServiceNow's "control tower" uses its diagram of how each enterprise runs to help the IT department patch the problem.

Companies and institutions expand over time, adding new business units that run on systems built years apart. This creates enough complexity for AI to become an agent of chaos without a reliable map. Trillions of transactions run on top of ServiceNow's proprietary configuration management database, connecting workflows.

Through recent acquisitions, the company has added device visibility and identity governance capabilities. While the two companies barely overlap today, and Palo Alto is a dominant incumbent, developing a risk and security business was a good move by ServiceNow's McDermott.

At roughly 24 times forward earnings, down from its five-year historical average of 50, the stock has room to run if ServiceNow improves enterprise AI outcomes. I expect the SaaSpocalypse fears to fade for the company as the complexity of running AI in the workplace becomes harder to dismiss.

Should you buy stock in ServiceNow right now?

Before you buy stock in ServiceNow, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and ServiceNow wasn't one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $395,463!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,268,290!*

That performance is why people listen. With a track record of beating the S&P 500 by 4x, Stock Advisor offers a distinct advantage. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built for the long haul.

See the 10 stocks »

*Stock Advisor returns as of August 4, 2026.

Bryan White has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ServiceNow. The Motley Fool recommends Palo Alto Networks. The Motley Fool has a disclosure policy.

ServiceNow Built a Billion-Dollar Cybersecurity Business, and It's Growing Faster Than the Competition was originally published by The Motley Fool