Software Stocks Plunge Amid Market Stability, Analysts See Opportunity
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 4 days ago
0mins
Should l Buy NOW?
Source: stocktwits
- Market Sentiment Decline: Despite overall market stability, software stocks faced a severe downturn in Q1 2026, with the iShares Expanded Tech-Software Sector ETF (IGV) dropping over 24%, marking the worst quarterly performance since the 2008 financial crisis and indicating a valuation reassessment across the industry.
- Big Players Hit Hard: Major companies like Salesforce (CRM) and ServiceNow (NOW) saw declines exceeding 30% in Q1, while Workday plummeted nearly 40%, illustrating that even established firms are not immune to market pressures, leading to capital shifting towards energy and AI chip stocks.
- Impact of AI Technology: The emergence of advanced AI agents such as Anthropic's Claude Cowork and OpenClaw raises concerns about diminishing demand for traditional enterprise software, prompting software companies to invest heavily in AI infrastructure; however, tightening profit margins are causing investor skepticism regarding near-term returns.
- Diverging Analyst Opinions: Despite bearish market sentiment, Dan Ives from Wedbush Securities argues that the decline in software stocks is excessive, asserting that AI will drive increased spending in the enterprise software market, suggesting that the current downturn may present a buying opportunity.
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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: 102.000
Low
172.00
Averages
222.81
High
263.00
Current: 102.000
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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- ETF Trading Mechanism: Exchange-traded funds (ETFs) trade like stocks, where investors buy and sell 'units' that can be created or destroyed based on demand, impacting the fund's liquidity and market performance.
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See More
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- Salesforce Transformation: Salesforce has successfully broken down data silos by launching Data 360 and acquiring Informatica, establishing itself as a master of records for AI agents, and the market's underappreciation of this transition presents a great investment opportunity.
- AI Orchestration Opportunities: ServiceNow and UiPath hold significant potential in AI orchestration, with ServiceNow extending its IT management platform to manage AI agents through its AI Control Tower solution, enhancing clients' technical integration capabilities.
- Portfolio Construction: Investors can capitalize on the upcoming agentic AI boom by allocating $5,000 across these five stocks, which are expected to drive the market higher and create multiple winners.
See More
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- Market Potential: Agentic AI is viewed as the next major trend poised to drive market growth over the coming years, with Wall Street yet to fully recognize its potential; investors can capitalize on this opportunity by investing $5,000 in five related stocks.
- Changing Hardware Demands: The rise of agentic AI necessitates a reconfiguration of data center architectures, with high-performance central processing units (CPUs) expected to replace graphics processing units (GPUs) as the primary computing units, positioning AMD and Arm favorably as the data center CPU market is projected to reach $100 billion in the next five years.
- Salesforce's Advantage: Salesforce is positioning itself as a master of records for agentic AI by launching Data 360 and acquiring Informatica to break down data silos and provide clean, structured data; despite the market's tepid response to this transition, it lays a solid foundation for future growth.
- Leaders in AI Orchestration: ServiceNow and UiPath are at the forefront of AI orchestration, with ServiceNow's AI Control Tower helping clients manage AI agents and UiPath's Maestro platform optimizing task assignments, showcasing their critical roles in the agentic AI revolution.
See More
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- ServiceNow's Market Potential: Despite a 58% drop from its highs, ServiceNow has 42 out of 46 analysts rating it a buy, with a price target of $188, indicating an 80% upside, reflecting the market's underestimation of its deep integration and ongoing demand among enterprise customers.
- Strong Financial Performance: In Q4, ServiceNow reported a 21% year-over-year increase in subscription revenue and generated over $2 billion in free cash flow, showcasing its strong appeal and profitability in the enterprise market, with expectations for nearly 20% growth in subscription revenue by 2026.
- Microsoft's Cloud Growth: Microsoft’s stock is down 35% from its highs, yet analysts remain optimistic about its cloud and AI growth potential, with a price target of $589, suggesting a 63% upside, reflecting strong demand across multiple customer segments and geographic regions.
- AI-Driven Revenue Growth: Microsoft reported a 29% year-over-year increase in Microsoft 365 consumer cloud revenue, attributed in part to higher average revenue per user, indicating customers are willing to pay more for AI features, further enhancing the company's growth potential.
See More
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- Market Rebound Potential: Despite the sell-off in software stocks like ServiceNow and Microsoft, analysts predict an 80% upside for ServiceNow and a 63% potential for Microsoft, indicating sustained investor confidence in these companies.
- Strong Financial Performance: ServiceNow reported a 21% year-over-year increase in subscription revenue in Q4, with over $2 billion in free cash flow, demonstrating its deep integration with enterprise customers and ongoing market demand.
- Cloud Computing Growth: Microsoft’s cloud revenue grew 26% year-over-year, with management noting accelerating demand, suggesting a strengthening competitive position in the cloud and AI sectors, poised to leverage its large customer base.
- AI-Driven Value Enhancement: Despite facing risks from AI competition, demand for both Microsoft and ServiceNow remains robust, particularly with Microsoft 365 consumer cloud revenue rising 29%, indicating that AI features are enhancing customer willingness to pay and bolstering the company's growth potential.
See More
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- Price Volatility Analysis: The IYW ETF has a 52-week low of $117.55 and a high of $211.98, with the last trade at $182.53, indicating significant fluctuations over the past year that could influence investor decisions and market sentiment.
- Technical Analysis Tool: Comparing the current share price to the 200-day moving average provides valuable insights for investors, helping them assess market trends and potential buy or sell opportunities.
- ETF Trading Mechanism: Exchange-traded funds (ETFs) trade like stocks, where investors buy and sell 'units' that can be created or destroyed based on demand, impacting the fund's liquidity and market performance.
- Inflows and Outflows Monitoring: Weekly monitoring of changes in shares outstanding helps identify ETFs experiencing notable inflows (new units created) or outflows (old units destroyed), as these liquidity shifts can affect the performance of individual stocks held within the ETFs.
See More
Stifel Lowers ServiceNow Price Target to $135 Amid Weak Federal Spending
- Price Target Adjustment: Stifel has lowered its price target for ServiceNow from $180 to $135, primarily due to seasonally slow first-quarter performance and reduced spending by the U.S. federal government, while still maintaining a Buy rating, indicating confidence in the company's long-term prospects.
- Federal Revenue Outlook: Analysts noted a significant year-over-year decline in federal business, excluding Department of Defense data, compared to a strong 30% growth last year, suggesting management's revenue expectations may have been overly optimistic, impacting market confidence.
- Quarterly Performance Forecast: The expected cRPO growth for Q1 2026 is around 19.5%, below last quarter's 100 basis points, reflecting a modest start to enterprise business and weak U.S. federal data, which may raise concerns about future performance.
- Earnings Release Schedule: ServiceNow plans to release its Q1 2026 financial results post-market on April 22, with consensus estimates expecting adjusted earnings per share of $0.97 and revenue of $3.75 billion, indicating potential growth despite ongoing pressures.
See More
