Enterprise Software Sector Faces AI Disruption
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 3d ago
0mins
Source: seekingalpha
- Seat-Based Model Struggles: Truist Securities reported that companies with predominantly seat-based business models have been the worst performers since 2025, continuing to underperform into early 2026, indicating a lack of market confidence that could lead to declining revenues and profits for these firms.
- Price Target Reductions: Truist lowered price targets for several companies, including Atlassian from $210 to $150, GitLab from $42 to $35, PagerDuty from $16 to $12, and ServiceNow from $240 to $175, reflecting analysts' cautious outlook on their future performance amid ongoing market volatility.
- Impact of AI Narratives: Truist highlighted that companies like MongoDB, JFrog, and Snowflake have benefited from AI narratives, receiving Buy ratings, suggesting these firms possess stronger growth potential in the current market environment, which may attract more investor interest.
- Overall Market Decline: The iShares Expanded Tech-Software Sector ETF (IGV) fell 2.2% today and has declined 22% year-to-date, indicating the pressure faced by the entire software sector and diminishing investor confidence in future prospects.
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Analyst Views on NOW
Wall Street analysts forecast NOW stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for NOW is 222.81 USD with a low forecast of 172.00 USD and a high forecast of 263.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
32 Analyst Rating
30 Buy
2 Hold
0 Sell
Strong Buy
Current: 102.630
Low
172.00
Averages
222.81
High
263.00
Current: 102.630
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.
ServiceNow Reports Strong Q4 Results but Stock Plummets
- Performance Highlights: ServiceNow's Q4 sales increased by 20% year-over-year to $12.85 billion, with earnings per share at $0.92, reflecting strong growth and high profitability despite market challenges.
- High Renewal Rate: The company boasts a renewal rate of 98%, underscoring the critical role its software plays for over 8,000 clients, even as the market remains cautious about the future of SaaS.
- Market Concerns: With the rise of artificial intelligence, the market is apprehensive about the future of SaaS companies, leading to a 45% decline in ServiceNow's stock over the past year, with a current P/E ratio of 32, which remains reasonable for a company reporting double-digit growth.
- Strategic Shift: ServiceNow is actively integrating AI technologies, having formed significant partnerships with OpenAI and Anthropic to enhance product value and maintain its market leadership, although investor sentiment remains lukewarm, potentially creating future growth opportunities.
See More
ServiceNow Reports Strong Q4 Growth Amid SaaS Concerns
- Strong Client Base: ServiceNow serves over 8,000 global clients who rely on its workflow automation software to enhance operational efficiency, indicating robust demand despite market concerns surrounding software-as-a-service (SaaS).
- Impressive Financial Performance: Although ServiceNow's stock has plummeted 45% over the past year, its fourth-quarter report reveals double-digit growth with a price-to-earnings (P/E) ratio of 32, suggesting a reasonable valuation in the current market context.
- AI Integration Strategy: The company has secured significant partnerships with OpenAI and Anthropic to integrate ChatGPT and Claude LLM into its software, showcasing its proactive approach to enhancing product value and maintaining market leadership in the AI domain.
- Market Opportunity Analysis: Despite the current unpopularity of SaaS stocks, ServiceNow's ongoing growth and stable recurring revenue stream may present a buying opportunity for investors, particularly as AI technologies continue to evolve.
See More
ServiceNow Reports Strong Q4 Results but Stock Declines
- Significant Sales Growth: ServiceNow reported a 20% year-over-year sales increase in Q4, demonstrating strong market performance, and despite the stock decline, it reflects the company's potential in high-growth sectors.
- High Renewal Rate: The company achieved a 98% renewal rate, indicating high customer satisfaction with its services, which provides a solid foundation for future revenue stability and enhances investor confidence.
- AI Integration Strategy: ServiceNow has formed key partnerships with OpenAI and Anthropic to integrate ChatGPT and Claude LLM into its software, which not only enhances product value but may also strengthen its competitive position in the market.
- Market Reaction Tepid: Despite reporting earnings per share of $0.92, a 26% year-over-year increase, the stock has fallen 45% over the past year due to market concerns about the SaaS industry, potentially presenting a buying opportunity for investors.
See More
Investor Confusion in AI Competition
- Investor Sentiment Shift: Following earnings calls from tech giants like Microsoft, Google, and Amazon, investor confusion about future directions led to Amazon losing over $300 billion in market cap, reflecting strong skepticism regarding its $200 billion AI investment plan.
- Capital Expenditure Comparison: Google announced an increase in capital expenditures to $175 billion to $185 billion, exceeding the expected $115 billion to $120 billion, indicating a proactive approach in AI despite challenges from slowing ad revenues.
- Changing Competitive Landscape: With Alphabet's ongoing investments and successes in AI, YouTube's user base has grown to 750 million, and Waymo's self-driving business is outpacing Tesla, suggesting a strengthening competitive advantage that may attract more investor interest.
- Mixed Market Reactions: Despite OpenAI and Anthropic's strong performance in AI, Microsoft's Copilot sales have been disappointing, highlighting investor concerns about its future growth and reflecting differing levels of confidence across companies.
See More
ServiceNow Stock Outlook Remains Promising
- Price Target Revision: Truist lowered ServiceNow's price target from $240 to $175 while maintaining a Buy rating, indicating that despite market concerns over terminal value, short-term fundamentals remain solid, reflecting a focus on AI narratives.
- AI Competitiveness Enhancement: Jim Cramer highlighted ServiceNow's increasing competitiveness in the AI space, especially as vendors with seat-based models underperform, suggesting a strategic shift towards AI applications to enhance market positioning.
- Growth Potential: Goldman Sachs added ServiceNow to its US Conviction List, maintaining a Buy rating with a $216 price target, anticipating the company to achieve 20% organic growth annually through 2029, showcasing robust expansion opportunities in new domains.
- Intelligent Platform Advantage: ServiceNow's Now Platform offers comprehensive workflow automation solutions embedded with AI and machine learning, aimed at boosting productivity and maximizing business outcomes, further solidifying its market leadership in digital transformation.
See More
Software Stocks Face Unprecedented Selloff Amid AI Concerns
- Software Stock Selloff: Wedbush analyst Dan Ives highlighted that Wall Street's selloff of software stocks like Salesforce, ServiceNow, and Microsoft is unprecedented, indicating severe investor skepticism about their relevance in the AI era, which could lead to declining performance over the next few years.
- Historic Decline: Ives noted that in his 25 years of experience, he has never witnessed such a structural selloff, with software companies being perceived as lacking space in the AI age, reflecting a significant drop in market confidence that could result in a loss of about 5% of customers.
- AI Impact Analysis: While Ives acknowledged that AI disrupts the software industry, he argued that considering software as obsolete is an extreme view, citing Palantir as an example of how software can still thrive in the AI era, demonstrating that there is still room for software to succeed.
- Market Reaction: The stock prices of Microsoft, Salesforce, and ServiceNow have dropped 16.75%, 25.87%, and 30.47% respectively over the past month, indicating a pessimistic outlook from investors regarding the future prospects of these companies and reflecting a waning confidence in the software sector.
See More
ServiceNow Reports Strong Q4 Results but Stock Plummets
- Performance Highlights: ServiceNow's Q4 sales increased by 20% year-over-year to $12.85 billion, with earnings per share at $0.92, reflecting strong growth and high profitability despite market challenges.
- High Renewal Rate: The company boasts a renewal rate of 98%, underscoring the critical role its software plays for over 8,000 clients, even as the market remains cautious about the future of SaaS.
- Market Concerns: With the rise of artificial intelligence, the market is apprehensive about the future of SaaS companies, leading to a 45% decline in ServiceNow's stock over the past year, with a current P/E ratio of 32, which remains reasonable for a company reporting double-digit growth.
- Strategic Shift: ServiceNow is actively integrating AI technologies, having formed significant partnerships with OpenAI and Anthropic to enhance product value and maintain its market leadership, although investor sentiment remains lukewarm, potentially creating future growth opportunities.
See More
ServiceNow Reports Strong Q4 Growth Amid SaaS Concerns
- Strong Client Base: ServiceNow serves over 8,000 global clients who rely on its workflow automation software to enhance operational efficiency, indicating robust demand despite market concerns surrounding software-as-a-service (SaaS).
- Impressive Financial Performance: Although ServiceNow's stock has plummeted 45% over the past year, its fourth-quarter report reveals double-digit growth with a price-to-earnings (P/E) ratio of 32, suggesting a reasonable valuation in the current market context.
- AI Integration Strategy: The company has secured significant partnerships with OpenAI and Anthropic to integrate ChatGPT and Claude LLM into its software, showcasing its proactive approach to enhancing product value and maintaining market leadership in the AI domain.
- Market Opportunity Analysis: Despite the current unpopularity of SaaS stocks, ServiceNow's ongoing growth and stable recurring revenue stream may present a buying opportunity for investors, particularly as AI technologies continue to evolve.
See More
ServiceNow Reports Strong Q4 Results but Stock Declines
- Significant Sales Growth: ServiceNow reported a 20% year-over-year sales increase in Q4, demonstrating strong market performance, and despite the stock decline, it reflects the company's potential in high-growth sectors.
- High Renewal Rate: The company achieved a 98% renewal rate, indicating high customer satisfaction with its services, which provides a solid foundation for future revenue stability and enhances investor confidence.
- AI Integration Strategy: ServiceNow has formed key partnerships with OpenAI and Anthropic to integrate ChatGPT and Claude LLM into its software, which not only enhances product value but may also strengthen its competitive position in the market.
- Market Reaction Tepid: Despite reporting earnings per share of $0.92, a 26% year-over-year increase, the stock has fallen 45% over the past year due to market concerns about the SaaS industry, potentially presenting a buying opportunity for investors.
See More
Investor Confusion in AI Competition
- Investor Sentiment Shift: Following earnings calls from tech giants like Microsoft, Google, and Amazon, investor confusion about future directions led to Amazon losing over $300 billion in market cap, reflecting strong skepticism regarding its $200 billion AI investment plan.
- Capital Expenditure Comparison: Google announced an increase in capital expenditures to $175 billion to $185 billion, exceeding the expected $115 billion to $120 billion, indicating a proactive approach in AI despite challenges from slowing ad revenues.
- Changing Competitive Landscape: With Alphabet's ongoing investments and successes in AI, YouTube's user base has grown to 750 million, and Waymo's self-driving business is outpacing Tesla, suggesting a strengthening competitive advantage that may attract more investor interest.
- Mixed Market Reactions: Despite OpenAI and Anthropic's strong performance in AI, Microsoft's Copilot sales have been disappointing, highlighting investor concerns about its future growth and reflecting differing levels of confidence across companies.
See More
ServiceNow Stock Outlook Remains Promising
- Price Target Revision: Truist lowered ServiceNow's price target from $240 to $175 while maintaining a Buy rating, indicating that despite market concerns over terminal value, short-term fundamentals remain solid, reflecting a focus on AI narratives.
- AI Competitiveness Enhancement: Jim Cramer highlighted ServiceNow's increasing competitiveness in the AI space, especially as vendors with seat-based models underperform, suggesting a strategic shift towards AI applications to enhance market positioning.
- Growth Potential: Goldman Sachs added ServiceNow to its US Conviction List, maintaining a Buy rating with a $216 price target, anticipating the company to achieve 20% organic growth annually through 2029, showcasing robust expansion opportunities in new domains.
- Intelligent Platform Advantage: ServiceNow's Now Platform offers comprehensive workflow automation solutions embedded with AI and machine learning, aimed at boosting productivity and maximizing business outcomes, further solidifying its market leadership in digital transformation.
See More
Software Stocks Face Unprecedented Selloff Amid AI Concerns
- Software Stock Selloff: Wedbush analyst Dan Ives highlighted that Wall Street's selloff of software stocks like Salesforce, ServiceNow, and Microsoft is unprecedented, indicating severe investor skepticism about their relevance in the AI era, which could lead to declining performance over the next few years.
- Historic Decline: Ives noted that in his 25 years of experience, he has never witnessed such a structural selloff, with software companies being perceived as lacking space in the AI age, reflecting a significant drop in market confidence that could result in a loss of about 5% of customers.
- AI Impact Analysis: While Ives acknowledged that AI disrupts the software industry, he argued that considering software as obsolete is an extreme view, citing Palantir as an example of how software can still thrive in the AI era, demonstrating that there is still room for software to succeed.
- Market Reaction: The stock prices of Microsoft, Salesforce, and ServiceNow have dropped 16.75%, 25.87%, and 30.47% respectively over the past month, indicating a pessimistic outlook from investors regarding the future prospects of these companies and reflecting a waning confidence in the software sector.
See More
