The numbers are impressive, the stock is not. ServiceNow heads into its Financial Analyst Day on May 4 with a dramatically upgraded artificial intelligence revenue forecast, yet its shares have been hammered since the start of the year. The disconnect between operational momentum and market sentiment has rarely been wider.
Management now expects its “Now Assist” AI suite to generate at least $1.5 billion in revenue by 2026, up sharply from a prior target of $1 billion. Crucially, the company counts only the incremental revenue directly attributable to AI — not the base subscription fees. Chief Financial Officer Gina Mastantuono noted that customers are funding these AI investments by cutting costs elsewhere in their budgets.
The shift in how ServiceNow gets paid is equally striking. Half of all new business now comes from consumption-based models such as token usage or infrastructure billing, rather than traditional per-user licenses. Analysts will be pressing for granular detail on how this pricing evolution supports long-term growth when the company hosts its investor day in Las Vegas next week.
The Armis Hangover
A key reason for the market’s caution sits squarely on the balance sheet. ServiceNow’s $8 billion acquisition of cybersecurity specialist Armis has expanded its security ecosystem — the software now runs at nine of the ten largest U.S. companies — but the integration is taking a toll on profitability.
Should investors sell immediately? Or is it worth buying ServiceNow?
Mastantuono has warned that the deal will weigh on operating margins and free cash flow through 2026, with a normalization not expected until 2027. GAAP gross margins took a noticeable hit in the first quarter from integration costs and amortization charges. For a company that has long prided itself on operational discipline, the near-term margin compression has spooked investors.
The broader subscription revenue outlook remains robust. ServiceNow lifted its full-year guidance to a range of $15.73 billion to $15.78 billion, representing currency-adjusted growth of roughly 21%. Outstanding performance obligations stand at $27.7 billion, up 23% on a constant-currency basis from a year ago. Yet the market wants to know how much of that expansion is organic versus acquisition-driven.
A Stock Under Pressure
Since January, ServiceNow shares have lost about 30% of their value, with after-hours trading showing further weakness even after the raised forecasts. Some analysts have trimmed their price targets, though the consensus remains bullish: 43 of 54 Wall Street analysts rate the stock a buy, with a median target of $140.
The May 4 analyst day represents a critical inflection point. Management is expected to lay out detailed data on AI adoption rates, the long-term implications of the consumption-based pricing model, and a clear timeline for when the heavy investments in partnerships with OpenAI, Google, and NVIDIA will translate into sustainable returns. For a stock that has shed a third of its value in four months, the presentation needs to deliver more than just big numbers — it needs to prove that the profit engine is still intact.
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