Which Cloud Software Stock Has The Edge?

Salesforce CRMs ServiceNow NOW is one of the leading enterprise cloud software companies, helping large organizations modernize operations, automate workflows and manage critical business processes.

While both benefit from long-term digital transformation trends, their business momentum and execution profiles differ significantly. For investors trying to choose between these two software leaders, a closer look at their fundamentals, growth prospects and risks will help determine which stocks currently offer a stronger investment case.

According to Gartner, Salesforce has long held the top position in the customer relationship management market. The company’s vision now goes beyond customer management and is building a broader ecosystem focused on artificial intelligence (AI), data and collaboration. Acquisitions such as Waii, Bluebirds, Informatica and Slack demonstrate Salesforce’s drive to evolve into a more complete business platform.

AI is now central to Salesforce’s growth story. Since rolling out Einstein GPT in 2023, Salesforce has integrated generative AI into its offerings to help companies automate processes, improve decision making, and strengthen customer relationships.

The latest innovation, Agentforce, is gaining momentum. Combined with Data Cloud, these AI-powered offerings generated $1.4 billion in recurring revenue in the third quarter of fiscal 2026, representing a 114% year-over-year increase. Agentforce alone generated $540 million in recurring revenue, up 330% year over year. More than 50% of Agentforce deals came from existing customers, demonstrating Salesforce’s success in cross-selling AI features to its user base.

Nevertheless, Salesforce’s biggest challenge right now is slowing revenue growth. For years it has delivered strong double-digit sales increases. However, that pace has now cooled to single digits. In the first nine months of fiscal 2026, revenues rose just 8.7% year-over-year. This slowdown reflects cautious corporate spending amid economic uncertainty and geopolitical pressures.

This changing growth profile shows how companies are adjusting their IT budgets. Instead of large digital transformation projects, many opt for smaller investments with lower risk. For Salesforce, this means adapting its strategy to remain competitive and relevant.

ServiceNow has benefited from increasing adoption of its workflows as companies scale their digital operations. The platform supports automation across IT, HR, finance, procurement, legal and support, helping customers increase efficiency and reduce time-to-value.

Momentum on major deals remains strong. In the third quarter of 2025, ServiceNow closed 103 transactions with more than $1 million in net new annual contract value (ACV), including six deals of more than $10 million. The number of customers contributing more than $5 million to ACV reached 553 at the end of the third quarter.

ServiceNow’s AI strategy stands out for its comprehensive approach to business adoption. At Knowledge 2025, the company introduced an AI Control Tower that provides a unified dashboard that allows business leaders to monitor AI agents in enterprise systems, track adoption metrics, and ensure governance compliance. The company’s AI Agent Fabric enables both first- and third-party agents to communicate and collaborate, creating a powerful orchestration layer that competitors will struggle to match.

Strategic partnerships strengthen ServiceNow’s competitive advantages. The company expanded its strategic partnership with NTT DATA, appointing them as a strategic AI delivery partner to accelerate AI-led transformation for enterprises worldwide. These partnerships, combined with collaborations with NVIDIA on open-source AI models and integrations with major cloud providers, expand ServiceNow’s addressable market and reduce implementation challenges for customers.

The company’s federal business grew more than 30% year over year in the third quarter of 2025, demonstrating strength in a traditionally challenging market segment that many software companies struggle to effectively penetrate.

Both companies will benefit from the ongoing digital transformation trend, but ServiceNow’s growth profile appears stronger in the near term. The Zacks Consensus Estimate for NOW’s 2025 revenue and earnings per share (EPS) indicates year-over-year upside of 20.5% and 24.5%, respectively. For 2026, the top and bottom lines are expected to grow by 18.1% and 16.8%, respectively.

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In contrast, Salesforce’s estimates for fiscal 2026 indicate revenue growth of 9.5% and earnings per share growth of 14.6%. For fiscal year 2027, the top and bottom lines are expected to rise by 10.8% and 10.5%, respectively.

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Shares of Salesforce and ServiceNow have fallen 2.4% and 25.2%, respectively, over the past six months.

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On the valuation front, Salesforce is trading at a trailing-twelve-month price-to-sales (P/S) multiple of 5.48, well below ServiceNow’s 10.23.

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Salesforce is a stable and profitable company with a strong platform, but growth has slowed. Meanwhile, ServiceNow continues to deliver stronger growth, better execution and clearer demand trends. Despite the higher valuation, ServiceNow currently has an investment lead over Salesforce.

Currently, ServiceNow and Salesforce each carry a Zacks Rank #3 (Hold). You can see it You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article was originally published on Zacks Investment Research (zacks.com).

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