Now, 2026 has begun with a bit of a wobble for many of those software chaps, hasn’t it? The whole market, as they say, is down a teensy bit – barely a cough, really. But Salesforce and ServiceNow? Oh, they’ve had a proper tumble. Down, down, down they go, like naughty children pushed from a swing. Salesforce, a whopping 26%, and ServiceNow, not much better at 23%. A bit alarming, if you ask me.
The whispers are that investors are getting the jitters about these ‘Artificial Intelligences’ – these clever machines that threaten to gobble up all the good jobs. But both Salesforce and ServiceNow are insisting that these AI whatsits are actually a splendid thing, a boost to their coffers. They’re selling little bits of AI magic, you see, and making a pretty penny doing so.
So, with both stocks looking a bit bruised, a sensible investor (that’s you, and me, of course) might be thinking of scooping them up at a discount. But which one, my dear reader, is the better bargain? Let’s have a proper look, shall we?
Salesforce: A Slowing Steam Engine
Salesforce, for years, has been the king of the customer-wrangling game – the ‘CRM‘ business, they call it. They’re still churning out cash, mind you, and becoming ever more profitable. Their operating margin, a fancy term for how much they keep after all the expenses, has grown to a rather impressive 34.2%. That’s a good sign, like a well-fed pig.
And their ‘Agentforce’ platform, whatever that is, is doing rather well, bringing in $800 million in a year. A 169% jump! That’s a hefty increase, like a giant beanstalk growing overnight.
They also have a backlog, a pile of orders waiting to be filled, worth $72 billion. That’s a mountain of promises, and usually a good thing. However, the engine seems to be slowing. While they’re making money, the growth isn’t as vigorous as it once was. Organic revenue, the stuff they make themselves, only grew by 8% – a bit of a cough, compared to the roar of before. And next year? They’re predicting 7-8% – a decidedly sluggish pace.
ServiceNow: A Rocket Ship with a Smile
ServiceNow, on the other hand, is still blasting off like a rocket ship. A very polite rocket ship, mind you, but a rocket ship nonetheless.
Their subscription revenue, the money people pay regularly, reached $3.47 billion – a 21% jump! And their ‘current RPOs,’ a complicated way of saying ‘promises to pay,’ climbed to $12.85 billion – a 25% increase! That’s a truly impressive pile of promises, like a dragon’s hoard.
And, just like Salesforce, they’re selling bits of AI magic. Their ‘Now Assist’ platform is bringing in over $600 million a year, and the amount of new contracts is doubling! A truly scrumptious number.
What’s more, they’re turning a massive amount of revenue into cold, hard cash – a staggering 57% free cash flow margin! That’s like squeezing gold from a lemon. And they expect this momentum to continue. They’re predicting subscription revenue of up to $3.66 billion next quarter, implying a growth of 21.5%.
And, as if that wasn’t enough, they’re buying back their own shares – a clever trick to make the remaining shares more valuable. The board has authorized $5 billion for this purpose, and they’re starting with a $2 billion splurge. A confident bunch, these ServiceNow chaps.
Which Stock is the Better Buy?
When comparing these two bruised stocks, ServiceNow is the clear winner. It’s not even a contest, really.
Investors are willing to pay a premium for ServiceNow’s superior growth. As of today, the stock trades at a forward price-to-earnings ratio of about 29 and a price-to-sales ratio of roughly 10. A hefty price, yes, but it reflects the expectation of continued high growth.
Salesforce, on the other hand, trades at a lower valuation – a forward price-to-earnings ratio of about 15 and a price-to-sales ratio closer to 5. But that discount reflects its slowing growth. A bit like a tired old donkey, compared to ServiceNow’s spirited racehorse.
Ultimately, ServiceNow’s combination of accelerating growth, expanding cash generation, and share repurchases makes it a more attractive long-term investment. I’d much rather pay a premium for a business growing at 20% than buy a slower-growing incumbent.
However, both ServiceNow and Salesforce are risky stocks operating in a fast-changing world. AI could be a threat, or a tailwind. It’s a bit like playing a game of marbles with a mischievous goblin – you never quite know what’s going to happen. But for a dividend hunter, looking for growth and stability, ServiceNow appears to be the more promising prospect.
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2026-03-11 05:13