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Additional Reading from MarketBeat.com
ServiceNow's 18% Drop: AI Fears Continue, But May Be OverblownBy Leo Miller. Date 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. This debate is reflected in NOW’s wide price swings. After ending 2025 near $150, shares fell to $100 by early February, recovered to nearly $125 in March, dropped below $85 in early April and then climbed back above $100 over the next two weeks.
ServiceNow sold off again after its latest earnings report, falling roughly 18% in a single day to around $85. The stock’s up-and-down trading in 2026 largely centers on one question: how will artificial intelligence (AI) tools affect the growth outlook for large software incumbents? Given the available information on ServiceNow, here’s where the company stands. Understanding ServiceNow’s Volatility: The AI DebateRising AI capabilities have driven much of ServiceNow’s volatility. Many investors worry that lower barriers to coding will hurt incumbents by enabling customers to build internally what they previously bought from vendors like ServiceNow. There is similar concern that AI agents could automate tasks customers currently outsource. Some investors are selling on that fear; others buy the dips, believing the concerns are overstated. Those dueling positions likely explain a large share of NOW’s volatility. The conflict in the Middle East, which has increased overall market volatility, is another factor weighing on the stock. With AI evolving quickly, it’s hard to know which view will prevail. However, examining ServiceNow’s fundamentals can help assess whether the market is pricing in excessive pessimism. Puts and Takes: ServiceNow Beats, But Organic Growth Outlook Faces ScrutinyIn its latest quarter, ServiceNow delivered another set of solid results. Revenue totaled $3.77 billion, up more than 22% year over year, and slightly above estimates of $3.75 billion. Adjusted earnings per share were $0.97, roughly 20% year-over-year growth and in line with expectations. The company also reported an operating margin of 32%, 50 basis points above guidance, driven in part by AI-related efficiency gains as the firm uses AI to reduce costs. ServiceNow nudged full-year guidance higher, but its organic growth outlook is essentially unchanged. The midpoint of its subscription guidance was raised by $205 million to $15.775 billion, but most of that increase reflects the recently closed Armis acquisition, which will add about 125 basis points of growth this year. The company is also building some caution into its outlook because of the Middle East conflict. Management said delays in Middle Eastern deals created roughly a 75-basis-point headwind to Q1 growth, so modest conservatism in guidance is understandable. ServiceNow lowered its margin guidance to account for Armis integration costs, projecting full-year operating margin of 31.5% and a free cash flow margin of 35%. Those figures are 50 and 100 basis points lower, respectively, than prior guidance, which did not include Armis—an expected short-term effect of acquisitions. Analysts Eye Big-Time Upside After ServiceNow’s FallNotably, ServiceNow continues to see momentum in its AI offerings. The number of customers spending $1 million or more in annual contract value (ACV) on its Now Assist platform rose 130% year over year. Management’s target for Now Assist ACV in 2026 was $1 billion; the company now says it’s already talking about $1.5 billion. ServiceNow also maintains that corporate spending on AI labs is incremental and not cannibalizing its business. “Customers are spending a lot on AI, but that is incremental. It is not replacing what they're spending on us,” management said. Given the company’s strong growth to date, that appears to hold for now. Management emphasized that recent AI-related acquisitions will bolster its offerings. “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,” the company said. After the decline, ServiceNow’s share price now implies a fairly undemanding long-term growth profile. The market appears to be pricing in a scenario where AI has a significantly negative net impact on the company. With elevated AI fears, the post-earnings sell-off felt more panic-driven than fundamental, and at roughly $85 the stock’s long-term outlook looks skewed to the upside. Despite many analysts trimming targets after the report, sentiment remains constructive. The average of price targets updated after the results is about $145, implying more than 65% upside from current levels and only modestly below the MarketBeat consensus price target near $150. Still, AI concerns are likely to keep near-term volatility elevated. |
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