ServiceNow Inc. (NYSE:NOW) is considered one of the best debt-free stocks to buy now. Analyst Brad Reback flagged a potential near-term headwind for the company due to a reduction in U.S. federal spending, specifically tied to workforce changes resulting in a $15 million cut in spending with the company.

The reduction in spending was driven by a de-obligation of funds under the government’s Deferred Resignation Program (DRP) launched in early 2025. With around 200,000 non-Department of Defense employees opting into the program, the Stifel analyst expects additional contract adjustments that may create a headwind for seat-based enterprise software models through 2026.

Reback reaffirmed his Buy rating for ServiceNow Inc. (NYSE:NOW) on January 9, with a trimmed price target of $200. Goldman Sachs also initiated coverage with a Buy rating and a $205 price target, suggesting over 40% upside potential. ServiceNow provides cloud-based platforms for digital workflows across various business processes.

While NOW offers potential as an investment, there are AI stocks with greater upside potential and less downside risk. For those interested in an undervalued AI stock that could benefit from Trump-era tariffs and the onshoring trend, explore the free report on the best short-term AI stock.

Read more at Yahoo Finance: Stifel Sees Long-Term Value in ServiceNow (NOW) Despite Near-Term Headwinds