Salesforce Vs. Servicenow: Which Ai Stock Is A Better Buy?
By Daniel Sparks – Mar 10, 2026 at 10:12PM EST
Key Points
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ServiceNow’s fourth-quarter subscription revenue grew 21% year over year, and its first-quarter guidance implies even faster growth.
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Salesforce’s underlying organic revenue growth has cooled to the high single digits, and its guidance implies further deceleration.
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One stock trades at a much cheaper valuation than the other.
Salesforce: slowing organic growth
Salesforce has dominated the customer relationship management (CRM) space for years, and the company continues to generate massive amounts of cash while expanding its profitability. And in its recently reported fourth quarter of fiscal 2026, the company’s non-generally accepted accounting principles (non-GAAP) operating margin expanded to 34.2%, up from 33.1% a year ago.
The company is also seeing real traction with its AI initiatives. Its Agentforce platform reached $800 million in annual recurring revenue in the fourth quarter, an impressive 169% year-over-year increase.
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NYSE: CRM
Salesforce
Today’s Change
(-1.95%) $-3.88
Current Price
$194.91
Key Data Points
Market Cap
$183B
Day’s Range
$190.60 – $199.57
52wk Range
$174.57 – $296.05
Volume
14M
Avg Vol
11M
Gross Margin
75.28%
Dividend Yield
0.84%
And robust demand for its services is evident by its growing backlog. The company’s remaining performance obligations (RPO) have risen to $72 billion, up 14% year over year.
However, while the company’s profitability has expanded significantly, its underlying top-line momentum has cooled. When adjusting for the company’s recent acquisition of Informatica, Salesforce’s organic revenue growth in fiscal Q4 decelerated to roughly 8% year over year — down from 9% organic growth in fiscal Q3. Even worse, the underlying organic revenue growth rate implied by management’s fiscal 2027 outlook is in the 7% to 8% range.
ServiceNow: much faster growth
ServiceNow, on the other hand, is still putting up spectacular numbers.
The enterprise workflow software specialist’s fourth-quarter subscription revenue came in at $3.47 billion, up 21% year over year. Even better, the company’s current RPOs, which it defines as contract revenue expected to be recognized in the next 12 months, climbed to $12.85 billion. This represents a 25% year-over-year increase, signaling robust future demand.
Additionally, Salesforce, ServiceNow is successfully monetizing AI. Management noted that the annual contract value for Now Assist, its embedded generative AI experience, surpassed $600 million in the fourth quarter. In addition, the company said its fourth-quarter Now Assist net-new account contract value doubled year over year.
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NYSE: NOW
ServiceNow
Today’s Change
(-4.52%) $-5.51
Current Price
$116.42
Key Data Points
Market Cap
$128B
Day’s Range
$114.72 – $121.38
52wk Range
$98.00 – $211.48
Volume
1.4M
Avg Vol
18M
Gross Margin
77.53%
In addition to its rapid top-line growth, ServiceNow is converting a massive amount of its revenue into cash, boasting a staggering 57% free cash flow margin in Q4.
And management expects this strong momentum to continue. For the first quarter of 2026, ServiceNow guided subscription revenue of up to $3.66 billion, implying approximately 21.5% year-over-year growth.
Backing up this growth is an aggressive repurchase program. Highlighting management’s confidence in the stock, the board authorized an additional $5 billion in repurchases and announced an imminent $2 billion accelerated repurchase.
Which software stock is the better buy?
When comparing these two beaten-down software stocks, ServiceNow is the easy choice.
Investors, of course, are willing to pay a premium valuation for ServiceNow’s superior growth. As of this writing, the stock trades at a forward price-to-earnings ratio of about 29 and a price-to-sales ratio of roughly 10. At this valuation, ServiceNow stock is priced for a world in which high growth stays high for the foreseeable future.
Salesforce trades at a lower valuation (a forward price-to-earnings ratio of about 15 and a price-to-sales ratio closer to 5 for Salesforce), but that discount reflects its decelerating, high-single-digit organic growth.
Ultimately, ServiceNow’s combination of accelerating near-term growth, expanding cash generation, and an aggressive repurchase program makes it a more attractive long-term investment. I would much rather pay a premium for a business growing at 20% than buy a slower-growing incumbent.
But investors should keep in mind that both ServiceNow and Salesforce are high-risk stocks operating in fast-changing industries with AI being a potential threat. Yes, AI could be a tailwind as well. But it’s not clear yet that its benefits will outweigh the risks.
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About the Author
Daniel Sparks is a contributing Motley Fool stock market analyst covering technology, industrials, financials, and consumer goods. Daniel is the owner and chief investment officer of Sparks Capital Management. He holds a master’s degree in business administration from Colorado State University. The Globe and Mail profiled him and his investing philosophy in an article titled, “This stock picker is outperforming nearly everybody else. Here’s how he is doing it.”
Stocks Mentioned
ServiceNow
NYSE: NOW
$116.42
(-4.52%)-$5.51
Salesforce
NYSE: CRM
$194.77
(-2.02%)-$4.02
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
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