ServiceNow Faces Competitive Pressure from AI
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 4 days ago
0mins
Source: NASDAQ.COM
- Stock Decline: ServiceNow's stock has fallen approximately 60% from its highs, primarily due to investor concerns about potential disruptions from artificial intelligence in the enterprise software sector, despite the company's strong first-quarter performance indicating resilience in the market.
- Subscription Revenue Growth: In the first quarter, ServiceNow's subscription revenue grew 19% year-over-year to nearly $3.7 billion, exceeding expectations and prompting management to raise its full-year outlook, now forecasting a 20.5% to 21% increase in subscription revenue for the year.
- AI Product Performance: The flagship AI product, Now Assist, is generating $1 billion in annual revenue and is on track to reach $1.5 billion by year-end, reflecting ServiceNow's strengthening competitive position in enterprises, particularly with its integration into the automation engine, Action Fabric.
- Data Advantage: ServiceNow processes 7 trillion transactions annually and runs 100 billion workflows, with a year-over-year growth rate of 25%, creating a substantial data moat that continuously supports its AI, establishing a critical competitive edge in the AI era.
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Analyst Views on NOW
Wall Street analysts forecast NOW stock price to rise
32 Analyst Rating
30 Buy
2 Hold
0 Sell
Strong Buy
Current: 99.920
Low
172.00
Averages
222.81
High
263.00
Current: 99.920
Low
172.00
Averages
222.81
High
263.00
About NOW
ServiceNow, Inc. provides an artificial intelligence (AI) platform for business transformation. The Company’s AI platform connects people, processes, data, and devices to increase productivity and maximize business outcomes. Its intelligent platform, the Now Platform, is a cloud-based solution that helps enterprises and organizations across public and private sectors digitize workflows. The workflow applications built on the Now Platform are organized into four primary areas: Technology, CRM and Industry, Core Business and Creator. Its products include IT Service Management, IT Operations Management, HR Service Delivery, ServiceNow AI Agents, AI Experience, Build Agent, ServiceNow AI Control Tower, AI Agent Fabric, RaptorDB, Workflow Data Fabric, Workplace Service Delivery, ServiceNow Platform Encryption, Telecommunications Service Operations Management, and others. The Company also offers identity security, helping organizations secure access across the enterprise.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Market Reaction: The recent drop in stock price may prompt investors to reassess ServiceNow's market position in cloud computing and IT service management, potentially affecting long-term growth expectations.
- Financial Impact: With the decline in stock price, ServiceNow may face higher capital costs, which could hinder its future investment and expansion plans, especially in a highly competitive market environment.
- Strategic Adjustments: The company needs to implement effective strategic measures to restore market confidence, such as enhancing product innovation and customer service to improve competitiveness in response to current market challenges.
See More
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- Lack of Investment Recommendations: The Motley Fool's analyst team has excluded ServiceNow from their list of the 10 best stocks, suggesting a lack of confidence in its investment value, which may affect investor buying decisions.
- Market Comparison Analysis: With Stock Advisor's average return of 986% compared to the S&P 500's 208%, ServiceNow appears to be at a relative disadvantage in investors' minds, potentially leading to capital outflows.
- Potential Alternative Choices: The 10 stocks highlighted by analysts are believed to offer significant returns in the coming years, and ServiceNow's absence from this list may prompt investors to seek more attractive investment opportunities.
See More
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- Dell's AI Infrastructure: Dell (DELL) is establishing the physical infrastructure necessary for AI through its AI Factory, with AI-optimized server sales contributing $9 billion to last quarter's $33.4 billion revenue, and a record backlog of $43 billion suggests significant future growth potential.
- ServiceNow's Competitive Edge: ServiceNow (NOW) reported a 19% year-over-year revenue increase and an 11% rise in operating income, despite its stock halving since July, analysts rate it a strong buy with a consensus price target of $140.63, indicating a 40% upside from current levels.
- Future Growth in AI Sector: Precedence Research forecasts that the global edge AI market will grow at an average annual rate exceeding 20% through 2035, positioning Qualcomm to capture a significant share of this rapidly expanding market due to its technological advancements.
See More
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- Edge Computing Outlook: CEO Amon emphasizes that the biggest opportunity in 2026 lies in edge computing, with global edge AI industry projected to grow at an average annual rate exceeding 20%, suggesting Qualcomm's strategic positioning could yield significant market share.
- Dell AI Factory Growth: Dell's AI Factory aids companies in establishing the necessary physical infrastructure for AI, with AI-optimized server sales contributing only $9 billion to last quarter's total revenue, yet the $64 billion in orders and a record backlog of $43 billion indicate strong growth potential.
- ServiceNow's Market Performance: Although ServiceNow's stock has dropped over 50% since July, its revenue grew 19% year-over-year and operating income increased by 11%, showcasing its competitive edge in AI applications and IT service management, with analysts largely rating it a strong buy.
See More
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- Interest Rate Impact: A drop in the 10-year Treasury yield can boost SaaS valuations by 5-10%, highlighting the market's sensitivity to long-duration cash flows, particularly given the high renewal rates of these contracts.
- Market Sentiment Shift: With progress in Iran peace talks, market sentiment has calmed, leading investors to focus on SaaS companies that can leverage AI to extend their competitive moats, suggesting a healthier market environment compared to the previous day's broad sell-off.
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