ServiceNow heads into a make-or-break earnings report on July 22 with a curious mix of tailwinds and headwinds. The stock has clawed back about 5.5% in the past week to trade at €91.64, but that follows a brutal 10% monthly slide and an even steeper 18% single-day plunge after the company’s strong first-quarter numbers in April. Investors are still digesting the implications of the Armis acquisition and the strategic pivot toward autonomous AI agents — a shift underscored by the software giant’s latest Israeli deal.
On July 2, ServiceNow quietly agreed to acquire ai.work, a Tel Aviv-based startup founded just two years ago by Maor Ezer and Nir Nahum. The purchase price remains undisclosed but is estimated in the double-digit millions, marking the company’s fourth Israeli takeover this year alone. ai.work builds autonomous systems that handle complex approval workflows across corporate networks without human intervention. The move signals a clear departure from traditional workflow automation toward “agentic AI” — software that makes decisions and acts independently inside a client’s infrastructure.
That strategy got a powerful endorsement from Guggenheim analyst John DiFucci, who upgraded the stock from Neutral to Buy with a new price target of $125. DiFucci dismissed the prevailing pessimism around software stocks as a “hallucination,” arguing that ServiceNow’s deep integration into enterprise operations makes it a prime beneficiary of AI adoption, not a victim of disruption. The market’s skepticism, he suggested, overlooks how the company’s tools are becoming indispensable as artificial intelligence moves from chatbots to backend process control.
Yet for all the bullishness, the margin picture is sobering. ServiceNow’s subscription revenue surged 22% to $3.67 billion in the first quarter, but the integration costs from the Armis acquisition are weighing heavily on profitability. The company now guides for a subscription gross margin of 81.5%, an operating margin of 31.5%, and free cash flow of just 35% — all down from previous levels. Management promises a normalization by fiscal 2027 through internal efficiency programs and the leverage from its AI platform, but near-term dilution is undeniable.
Should investors sell immediately? Or is it worth buying ServiceNow?
The bull case rests on accelerating AI monetization. ServiceNow has more than doubled its revenue target for “Now Assist” from $1 billion to $1.5 billion. Customer retention remains stellar at 97%, and the number of clients spending millions annually has reached 630. The consensus price target of €123.66 implies substantial upside from current levels. Bears, however, point to the slowing organic growth: without acquisitions, the full-year revenue forecast barely budged. Geopolitical headwinds in the Middle East have already caused deal delays in the first quarter, and the company is bracing for more friction.
The next critical test comes on July 22 after the closing bell, when ServiceNow reports its second-quarter results. The company has guided for subscription revenue of roughly $3.82 billion, representing constant-currency growth of about 21%, with remaining performance obligations expected to rise 19.5% — a notable deceleration from the first quarter. The market will scrutinize those numbers for temporary effects versus a lasting slowdown. Equally important will be any update on the new AI-native license packages — Foundation, Advanced, and Prime — which have replaced the old pricing model and now need to show real customer traction.
Technically, the stock remains in a volatile corridor. The annualized swing range over the past month hit 82%, and the relative strength index sits at a neutral 54, offering no clear directional signal. With a high-profile acquisition, an analyst upgrade, and looming earnings all converging in the same week, ServiceNow shares are poised for another sharp move — possibly decisive for the rest of the year.
Ad
ServiceNow Stock: Buy or Sell?! New ServiceNow Analysis from July 3 delivers the answer:
The latest ServiceNow figures speak for themselves: Urgent action needed for ServiceNow investors. Is it worth buying or should you sell? Find out what to do now in the current free analysis from July 3.
ServiceNow: Buy or sell? Read more here...
