JPMorgan Chase (JPM.US): ServiceNow (NOW.US) AI Monetization Delayed to 27 Years, CRPO Growth Stabilized

According to Woofun AI, JPMorgan Chase (JPM.US) (Komo) maintained an increase rating on the eve of ServiceNow (NOW.US) earnings release and set the target price at $150. Given the current share price of $145.36, this valuation corresponds to a 3.2% upside.

Notably, the stock has accumulated gains of around 58% since the last earnings report, which means that any further revaluation will require strong fundamental evidence, particularly verification of the stability of the organic growth of remaining performance obligations (CrPO).

In a report released on October 20, 2026, J.P. Morgan Chase carefully disassembled the 3Q26 performance drivers. The core logic revolved around contract renewal and expansion, AI product version upgrades, seasonal fluctuations in US federal business, and the driving effects of security products. Short-term performance that exceeded expectations mainly depended on contract renewals and up-sales, while large-scale implementation of AI consumption monetization was delayed until 2027.

According to data compiled by Woofun AI, Komo expects 3Q26 subscription revenue to reach US$3,978 billion, an increase of 20.6% year over year, which is slightly lower than the market consensus of US$3,984 million. In terms of CrPO, the total is expected to reach $13.56 billion, up 19.5% year over year, with organic growth of around 17.4%.

This growth rate has slowed compared to 19% of 2Q organic CrPO, indicating that growth is stabilizing. Partner feedback further confirms this trend: an Elite partner said the Q3 business was delivered as planned, Q4 typically accounts for 35% to 40% of annual orders, and the 2027 budget was not cut. Renewals are currently the most definitive source of growth. Customers generally increase their expenses by 10% to 25% after migrating to the AI-native product version, with the Advanced version being the preferred tier.

Despite 2Q benefiting from early contract renewals, Komo expects 3Q to exceed expectations by around 200 basis points. Furthermore, the US federal business showed the strongest seasonality in Q3. Management indicated that although federal demand brought some local deployment revenue forward to 2Q, the Q3 pipeline was still strong. Security products such as Armis and Veza are also replacing competitors in a number of projects, providing an additional boost to core business.

2027 is a critical turning point on the AI monetization path. The annual contract value (ACV) of AI broke through the $1 billion mark in 2Q26, achieving a significant increase compared to $600 million at the end of 2025, of which Moveworks contributed more than $100 million, and the net addition of AI ACV increased by more than 40% month-on-month. The net addition of less than $500 million in the second half of the year would be needed to reach the annual target of $1.5 billion.

However, the main component of the current AI ACV is still the price increase brought about by upgrading the AI product version, and incremental consumption accounts for a very small proportion. Most customers have yet to exhaust their credit pools, and management expects real consumer monetization to occur in 2027 with large-scale rollouts. The risk of seat compression was not apparent, Elite Partners did not observe customer seat cuts, and only a few cases involved trimming unused licenses. High-capacity IT help desks and customer service centers are expected to experience the first wave of seat compression in 2027, when around 50% of net new business will have switched to non-seat systems. The visibility of monetization in 2027 depends on the rate of credit pool consumption and the share of non-seated revenue. The former determines whether AI ACV can shift from upgraded pricing to usage charges, while the latter determines the extent of the impact of seat compression.

At the same time, cross-selling of AI Control Tower, Armis, and Veza is also driving up customer unit prices, and packaged sales for security and governance scenarios have prompted some customers to upgrade multiple modules at once when renewing their contracts.

The key to the valuation revaluation is the 4Q cRPO guideline. If management raises the implied organic growth guide to 19% to 20%, the market will interpret it as confidence in long-term momentum; if the guidance falls at 17% to 18%, the market may view 3Q stability as a short-term phenomenon, thus delaying the revaluation window. Currently, it faces three major risks: 3Q will need to cope with the high base pressure brought about by 2Q's early renewal, AI consumption monetization delayed until 2027, and seat compression before entering the high-capacity scenario in 2027. Performance before earnings reports depended on contract renewal and expansion, while valuation revaluation depended on consumption monetization. The time difference between the two will ultimately determine the upward space for stock prices.