Enterprise software has a credibility problem this quarter, and ServiceNow finds itself caught in the crossfire. The workflow automation specialist is rolling out a high-profile mapping partnership with Esri and positioning its platform as the control tower for corporate AI, yet its share price lags far behind where analysts say it should be. The disconnect will be tested on July 22, when the company reports second-quarter earnings.
Shares of ServiceNow recently traded at €91.62, trimming 0.15% on the day. Over the past week the stock has slipped roughly 2.9%, but the one-month picture remains positive at a 1.9% gain. The 14-day relative strength index sits at a neutral 50.7, and the annualised volatility reading of around 58% confirms that this is no sleep-at-the-wheel holding. More telling is the chasm between the current price and the consensus analyst target of €123.30 — an implied upside of 34.6% that reflects the market’s lingering doubt about ServiceNow’s ability to monetise its AI tools at scale.
That doubt received fresh oxygen on July 14, when IBM pre-announced disappointing second-quarter numbers and ignited a sector-wide sell-off. IBM’s management suggested that corporate customers were temporarily redirecting software budgets toward AI hardware — GPU servers, storage chips, the infrastructure backbone — leaving software vendors to fend for scraps. ServiceNow’s stock was the collateral damage even though the company itself hadn’t said anything new. The question the market has yet to answer is whether ServiceNow is simply a victim of this shift or, as the company’s bull thesis holds, it actually becomes more essential as the software layer that orchestrates all that new hardware.
In the meantime, ServiceNow is building a fresh avenue into the physical world. The just-launched ArcGIS for ServiceNow integrates Esri’s mapping and geospatial data directly into the company’s AI-powered workflows. The pitch is straightforward: a location-triggered event — a power outage, a network fault, a public-safety incident — automatically generates a ticket, work order, or escalation inside the enterprise. The partnership aims at sectors where ServiceNow has historically been thin: government agencies, utilities, energy companies, telecoms, and hospitals. Esri brings deep relationships in those verticals, though the long procurement cycles typical of public-sector and utility contracts mean any revenue contribution will take quarters, not weeks, to materialise.
Should investors sell immediately? Or is it worth buying ServiceNow?
Financially, the foundation remains solid. In the most recent quarter, ServiceNow earned $0.97 per share on revenue of $3.77 billion, representing year-over-year growth of 22.1% — in line with expectations. Subscription revenue, the engine of the model, is forecast to grow 21% to 21.5% on a currency-adjusted basis in the current period, aided in part by the acquisition of cybersecurity specialist Armis. BNP Paribas is among the optimists heading into the print, highlighting three supportive factors: easier comparisons in the US federal business, stabilised organic subscription growth, and the ongoing integration of Armis.
The longer-term narrative, however, rests on something bigger. ServiceNow has set a 2030 goal of deriving more than 30% of average contract value from its “Now Assist” generative-AI add-ons. The company wants to be the traffic cop that routes AI workloads across the enterprise — deciding which agents get access to what data, which workflows get automated, and how humans stay in the loop. That role is precisely why the market’s current skittishness matters. The infrastructure phase of the AI boom (buy GPUs, build data centres) was the easy part. The hard part — translating that raw compute into productive, auditable business processes — is just beginning.
Tuesday’s earnings report will show whether the hard part is already gaining traction. If subscription growth hits or exceeds the guided range, and if management can cite early interest from verticals served by the Esri deal, the 34.6% valuation gap will look less like a fantasy. Until then, the stock remains in a waiting game — tethered to a hardware-budget scare that may prove fleeting but hasn’t yet been disproved.
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