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This Week's Exclusive Content
ServiceNow's 18% Drop: AI Fears Continue, But May Be OverblownWritten by Leo Miller. Posted: 4/24/2026. 
Key Points
- ServiceNow has seen several large swings in its share price during 2026 as investors weigh how AI will ultimately affect the company.
- ServiceNow's results were solid, with markets likely overreacting to mixed guidance.
- Analysts continue to eye a large recovery despite lowering targets.
- Special Report: Elon Musk’s $1 Quadrillion AI IPO
Over the past several months, software giant ServiceNow (NYSE: NOW) has been one of the most hotly debated tech stocks in the market. That debate shows up in NOW’s volatile share price. After ending 2025 near $150, shares fell to about $100 by early February, recovered to nearly $125 a month later, dropped below $85 by early April and then climbed back above $100 in the following two weeks.
ServiceNow slid again after its latest earnings report, plunging roughly 18% in a single day to about $85. The stock’s up-and-down trading in 2026 centers on one question: how will artificial intelligence (AI) tools affect the growth prospects of incumbent software companies? Given what is known about ServiceNow today, here’s where the company stands. Understanding ServiceNow’s Volatility: The AI DebateMuch of the volatility reflects investor debate over AI. Some worry that easier access to coding and AI agents will allow customers to build solutions internally that they previously bought from vendors like ServiceNow, reducing the company’s addressable market. Others view these fears as overstated and buy the stock on weakness. Those competing views — along with broader market turbulence driven by the conflict in the Middle East — explain a lot of the swings in the stock. With AI evolving rapidly, it’s hard to say which side will be proven right, but ServiceNow’s fundamentals can help indicate whether the market is overly pessimistic. Puts and Takes: ServiceNow Beats, But Organic Growth Outlook Faces ScrutinyIn the latest quarter, ServiceNow again delivered solid results. Revenue was $3.77 billion, up more than 22% year over year (YoY), slightly above the $3.75 billion consensus. Adjusted earnings per share were $0.97, a 20% YoY increase and in line with expectations. Operating margin came in at 32%, about 50 basis points above guidance, a gain the company attributed in part to AI-driven expense efficiencies. ServiceNow nudged up guidance, but the improvement largely reflects the recently closed acquisition of Armis rather than stronger organic growth. The firm raised the midpoint of its full-year subscription guidance by $205 million to $15.775 billion, and management said Armis will contribute roughly 125 basis points (1.25 percentage points) of growth this year. The company also flagged caution from geopolitical uncertainty. Management cited the conflict in the Middle East as a headwind, noting delays in regional deals reduced Q1 growth by about 75 basis points. Margins were trimmed modestly to account for Armis integration costs: full-year operating margin is now expected near 31.5%, and free cash flow margin around 35% — roughly 50 and 100 basis points below prior guidance, respectively. That adjustment is reasonable given acquisitions typically come with near-term integration expenses. Analysts Eye Big-Time Upside After ServiceNow’s FallServiceNow continues to report strong momentum in its AI products. The number of customers spending $1 million or more in annual contract value (ACV) on its Now Assist platform rose 130% YoY. Management had targeted more than $1 billion in ACV for Now Assist in 2026 and said, "We might have understated that a little bit. We're already talking about $1.5 billion now." Management also maintains that corporate spending on AI initiatives is incremental rather than cannibalistic. As the company put it, "customers are spending a lot on AI, but that is incremental. It is not replacing what they're spending on us." Given ServiceNow’s current growth, that appears to be the case so far. The company added that its recent AI-related acquisitions will bolster its offerings and revenue trajectory. As management said, "We just got them, and we're building out the story with them, and they're going to set the world on fire with reaccelerating revenue growth." After the sell-off, ServiceNow shares trade at levels that imply fairly modest long-term growth. The market appears to be pricing in a materially negative net impact from AI, which makes the post-earnings drop feel more panic-driven than fundamentals-driven. At roughly $85, NOW’s longer-term outlook looks skewed to the upside. Despite some analysts cutting targets after the report, consensus remains constructive. The average of price targets updated post-earnings is about $145, implying more than 65% upside, and is only slightly below the MarketBeat consensus near $150. Still, AI-related concerns are likely to keep volatility elevated in the near term. |
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