Workflow software company ServiceNow has signed an agreement to acquire Element AI, a Canada-based artificial intelligence company, for an undisclosed amount. It expects the acquisition to close early next year.
ServiceNow (NOW) believes that the Element AI acquisition will support its vision to build the world’s most intelligent workflow platform. It stated that Element AI’s scientists and practitioners will bring expertise in applying modern AI to text and language, chat, images, search, question response, and summarization, with it also accelerating AI innovation natively in the company’s Now Platform.
Element AI marks ServiceNow’s fourth AI acquisition this year, following the purchase of Loom Systems, Passage AI, and Sweagle. The company has been experiencing strong demand for its AI‑powered products such as IT Service Management Pro, Customer Service Management Pro, and HR Service Delivery Pro.
With the Element AI acquisition, ServiceNow plans to create an AI Innovation Hub in Canada with a focus on customer‑oriented AI innovation in the Now Platform. The company has also been making investments in building technology development centers in Chicago, Hyderabad (India), Kirkland, Washington, San Diego and Silicon Valley. (See NOW stock analysis on TipRanks)
NOW shares have surged a staggering 89.5% so far this year. The average price target of $583.15 implies an upside potential of 9.1% over the next year. ServiceNow scores a Strong Buy analyst consensus that breaks down into 21 Buys and 2 Holds.
On Nov. 12, Morgan Stanley analyst Keith Weiss upgraded ServiceNow to Buy from Hold and boosted the price target to $652 from $559. Weiss feels that the post-pandemic demand for workflow automation could position the company to sustain revenue growth of over 25%. He also sees “durable” free cash flow growth of over 30% through 2023. Weiss notes that the company’s billings growth fared better than peers during the pandemic and should accelerate next year as the demand environment improves.
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