Architectural Cases

Unlocking Value: Why ServiceNow Remains a Compelling Investment

Decoding ServiceNow's Third-Quarter Performance in 2025

TCW Concentrated Large Cap Growth Fund's third-quarter 2025 investor letter offers an in-depth look at the equity market's trajectory, fueled by AI investments and robust corporate earnings. The fund's Class I shares saw a return of 4.11%, contrasting with the Russell 1000 Growth Index's 10.51% gain. Amidst this backdrop, ServiceNow, Inc. (NOW) emerged as a key focus. The company's intelligent workflow automation solutions continue to bolster digital businesses, as evidenced by its impressive financial metrics.

Analyzing ServiceNow's Financial Health and Market Fluctuations

Despite a modest one-month decline of 4.95% and a 30.99% decrease over the past 52 weeks, ServiceNow's shares closed at $152.59 on December 24, 2025, with a market capitalization of $158.448 billion. This valuation underscores its significant presence in the technology sector. The company's resilience is further highlighted by its subscription revenues, which reached $3.299 billion in the third quarter, representing a 20.5% year-over-year increase in constant currency.

Key Performance Indicators: cRPO and Subscription Revenue Exceed Expectations

ServiceNow's operational strength is evident in its current Remaining Performance Obligations (cRPO), which surpassed consensus estimates by growing 21.5% compared to an anticipated 19.4%. Subscription revenue also exceeded projections, driven by superior net new Annual Contract Value (ACV) and better-than-expected on-premise sales. These figures demonstrate ServiceNow's consistent ability to secure and expand its client base, reinforcing its market leadership.

Addressing Investor Concerns and Future Growth Strategies

Investor apprehension regarding ServiceNow's exposure to the U.S. Federal government market has been a persistent challenge. However, the company successfully onboarded six new government clients during the quarter, indicating a strategic effort to diversify and strengthen its public sector footprint. Furthermore, ServiceNow has adopted a cautious approach in its future guidance, incorporating conservative estimates for the upcoming quarter, which suggests a prudent management outlook.

The Ascendancy of AI-Embedded Products and Workflow Dominance

ServiceNow's new product offerings, particularly those integrated with artificial intelligence, are gaining considerable traction. The company finalized 21 deals involving five or more Now Assist products, including a substantial $20 million transaction during the quarter. This success validates ServiceNow's commitment to leveraging AI to enhance its platform. The company's competitive edge lies in its robust workflow platform, which seamlessly integrates across various enterprise systems, enabling efficient task management and serving as a centralized hub for deploying and overseeing AI agents. This strategic positioning reinforces a bullish sentiment on ServiceNow shares among investors.

ServiceNow Amidst the Broader AI Investment Landscape

While ServiceNow is a notable player, it does not feature on the list of the 30 most popular stocks among hedge funds. As of the end of the third quarter, 104 hedge fund portfolios held ServiceNow, a slight decrease from 106 in the preceding quarter. Despite its strong performance, some analysts suggest that other AI stocks might offer greater upside potential with reduced downside risk, particularly those poised to benefit from Trump-era tariffs and the trend towards onshoring. This perspective indicates a diverse and dynamic AI investment landscape beyond ServiceNow's immediate orbit.

In a landscape where investors are increasingly seeking dependable revenue streams within an energy sector defined by consistent cash generation rather than rapid expansion, Tortoise Capital has unveiled an innovative approach to engage with master limited partnerships (MLPs), circumventing the usual complexities associated with tax reporting.

On Monday, Tortoise introduced the Tortoise MLP ETF (TMLP), an investment vehicle designed to tackle long-standing issues prevalent in MLP investments. The timing of this launch is particularly opportune, as midstream energy companies are demonstrating robust and stable operational volumes, disciplined capital expenditure, and enhanced free cash flow. These factors collectively render pipeline and storage assets highly appealing for investment portfolios prioritizing yield.

The ETF’s strategy involves tracking the Tortoise MLP Index, which serves as a market-capitalization-weighted benchmark for energy-focused MLPs engaged in the transportation, storage, processing, and production of energy resources. With over a decade of history, this index provides Tortoise with a proven track record in the field. Although MLPs have historically attracted income-oriented investors, accessing them through ETFs has often presented drawbacks, such as the cumbersome K-1 tax forms that complicate filings or the corporate tax implications and unpredictable net asset value fluctuations associated with C-Corp fund structures. TMLP aims to mitigate both of these challenges. Instead of directly holding MLPs, the ETF gains economic exposure through total return swaps, operating within a regulated investment company (RIC) framework. For investors, this structure translates into a single Form 1099, the absence of deferred tax liabilities at the fund level, and more straightforward tracking of MLP performance. Furthermore, cost-efficiency is a significant advantage, as TMLP features a 0.50% fee, which is notably lower than many traditional MLP funds that often incur higher expenses due to their structural inefficiencies.

As pioneers who introduced the inaugural MLP closed-end fund in 2004, Tortoise views this new ETF as a natural evolution of its enterprise. Tom Florence, the CEO, stated that TMLP propels the MLP market into the contemporary ETF era with a cost structure poised to significantly enhance potential investment returns compared to its competitors. For individuals seeking energy-related income without the burden of tax-filing complexities, TMLP is establishing itself as a unique proposition on Wall Street, offering a simplified and more accessible pathway to pipeline investments.