NOW Stock: Can an AI Overhaul Save ServiceNow?

Since the start of the year, software-as-a-service (SaaS) stocks have suffered from an extended sell-off, dubbed the ‘SaaSpocalypse’. 

At the heart of this pullback are two artificial intelligence-driven (AI) concerns, as Dominic-Madori Davis highlighted in TechCrunch in March.

First, AI tools such as Anthropic’s Claude Code have lowered the barrier to entry for software development, enabling companies to build their own workflow management systems rather than buy them from SaaS providers. Second, the shift to using AI agents, rather than people, to get work done endangers the software-per-seat pricing model of many software companies. 

This has sparked an existential crisis for many big software players. “This may be the first time in history that the terminal value of software is being fundamentally questioned, materially reshaping how SaaS companies are underwritten going forward,” noted Abdul Abdirahman, an investor at venture firm F-Prime.

SaaS bigwigs have not taken it lying down, however. 

Despite having lost nearly 50% of its market value since late 2025, Santa Clara-based enterprise cloud computing platform ServiceNow [NOW] has been hard at work, securing key acquisitions and orchestrating an AI-native makeover in the year to date. As with other players in the space, analysts have highlighted that the sell-off could prove a turning point, where software players decide how to adapt to a new way of doing business. 

Ahead of its Q1 2026 earnings call, CMC Aureon investigates if ServiceNow is set to be one of biggest winners of the SaaSpocalypse, or another of its high-profile victims.

AI-forward march

What has been ServiceNow’s primary response to the growing AI threat? 

More AI. 

On 28 January, ServiceNow partnered with Anthropic to enable customers to develop AI agents in its platform. In addition to enabling Claude’s capabilities in its offerings, ServiceNow has also deployed the model in-house, to “[cut] seller preparation time and [boost] engineering productivity,” it said in the press release. 

To help enable the deployment of agents – and not fall behind in the ongoing agentic arms race – ServiceNow announced on 9 April it had moved past the “sidecar AI-era” to offer complete AI-native solutions. New offerings include EmployeeWorks, a natural-language chatbot for customer queries; Context Engine, which monitors the context and reasoning behind agentic actions; and WorkFlow Data Fabric, for improved data connectivity. The company’s pivot explicitly aims to address the enterprise software space’s “fragmentation problem” by building a “unified platform, combining intelligence that understands context with workflows that can act on it.”

ServiceNow has been active on the M&A front as well, aiming to build out cyber security capabilities to support its new AI-powered offerings. On 20 April, the company announced it had completed the acquisition of cyber security platform Armis. This, along with the March acquisition of identity security platform Veza, have increased the company’s capacity both to secure and to deploy AI solutions at an enterprise scale. 

Q4 2025 results, announced at the end of January, were positive, beating expectations. 

Quarterly subscription revenue of $3.47bn, up 19.5% year-on-year, remaining performance obligations of $18.2bn and free cash flow of $4.6bn showcased both the company’s financial health and continued demand for its services in the AI era. While some analysts noted that subscription growth did “not quite represent acceleration”, management’s outlook of 20% subscription revenue growth in 2026 lent a bullish tint to the prospects of a firm that has labelled itself the “gateway” to enterprise AI adoption. 

ServiceNow reports Q1 2026 results after the market closes on Wednesday, April 22. 

SaaS shares slide

Even before the sell-off truly set in, NOW was already on its way down. The stock set an all-time high of $239.62 on January 28 2025, and then spent the year gradually sinking towards the $150-mark by year-end. The plunge began in earnest in Q1 2026, with NOW stock plummeting to troughs of less than half its all-time high in April. As of April 20, NOW is down 34.9% in the year to date and down 35.43% in the past 12 months.

NOW, however, is not alone. The iShares Expanded Tech-Software Sector ETF [IGV] is down 18.35% in the year to date, while SaaS peers Salesforce [CRM] and Atlassian [TEAM] are down 29.51% and 55.91%, respectively. 

Opportunity or reckoning? NOW vs CRM vs TEAM

ServiceNow’s peers have been just as adamant about SaaS’ continued relevance in the AI era; they are likewise deploying AI-powered services to prove their point. 

In an interview with the Wall Street Journal on 20 April, Salesforce CEO and founder Marc Benioff commented that “people think we have our back against the wall when in fact the opportunity has never been greater.” The company behind Slack has deployed Agentforce, an agentic customer service solution deployed by 23,000 of its 150,000 users, and is reportedly working on an AI platform that studies user behaviour and takes actions for them. Salesforce has also pivoted to a price-per-action pricing model. Q4 2026 earnings, reported in February, saw double-digit revenue growth for both the quarter and the full year. Management also updated their 2030 revenue target to $63bn, compared to $41.5bn in FY2026. 

Australia’s Atlassian, meanwhile, secured a revenue and earnings beat in Q2 2026, with management emphasizing annual run rate revenue surpassing $6bn and Q1 cloud revenue above $1bn. Its forecast remained stable, at 20% compounded annual revenue growth through FY2027. On 12 March, the firm announced it was cutting its global headcount by 10% to focus on AI and enterprise sales beyond its AI-powered assistant Rovo, which debuted across its products in May 2024. 

Source: Yahoo Finance

NOW stock: The investment case

The bull case for ServiceNow

Amid the recent sell-off, a number of analysts have highlighted that share prices below historical averages present an opportunity for investors. On 16 March, BNP Paribas upgraded the stock to ‘outperform’, raising its price from $120 to $140. The bank noted that value investors seem to be holding on to the stock, betting on its long-term prospects. 

Investment firm Mizuho also included NOW among its top software stocks for the upcoming earnings season. While it maintained an ‘outperform’ rating, it lowered its target price from $190 to $150, representing a 50.42% increase from the April 20 close. 

ServiceNow’s AI-forward focus could prove to be its greatest strength, as it serves to unify workflow tools, the number of which is likely to continue proliferating as the capability of AI models and agents grows. However, in the near term, investors seem to be waiting for Wednesday’s earnings report for signs of continued strength. 

The bear case for ServiceNow

The so-called SaaSpocalypse could also indicate that the golden days of SaaS firms are over. Those that survive will likely face compressed margins and limited power to set prices as an increasing range of customers weigh the option to build their own workflow systems in-house with AI – not to mention increased competition from newer, AI-native entrants into the space. 

Ahead of earnings, Citi noted that ServiceNow will probably record a “slight” beat on projections of $0.97 EPS and $3.75bn in revenue, propelled by early signs of consumption of AI-powered products. The firm slashed its price target from $237 to $177, maintaining a ‘buy’ rating. UBS, meanwhile, downgraded NOW from ‘buy’ to ‘neutral’, and cut the price target from $170 to $100, emphasizing caution about the wider sector. With the stakes so high, anything short of a giant leap may not be enough to help NOW rally. 

Conclusion

The rapid advancement of AI tools has prompted a sell-off of subscription-focused software stocks. While many analysts say the market reaction is overblown, even industry heavyweights could see increased competition from AI-native newcomers, and lose customers as companies opt to build workflow management systems in-house. Investors are eagerly awaiting the earnings release for signs NOW can weather the storm.