The stark divide between ServiceNow’s operational performance and its stock price has never been wider. While the company closed its last fiscal year with robust growth, its shares ended last week at a 52-week low of $83, marking a 41% decline since the start of the year. This chasm was driven home by a dramatic downgrade from UBS, which slashed its price target from $170 to $100.
UBS analyst Karl Keirstead, who had maintained the sole ‘Buy’ rating on ServiceNow in the application software sector, shifted his stance to ‘Neutral’. The reassessment followed detailed customer conversations that revealed three critical challenges. Some clients are exploring building their own workflow automation using AI agents instead of expanding ServiceNow deployments. The Customer Service Management segment, accounting for roughly 10% of revenue, is seen as vulnerable to AI-driven efficiency gains that could curb license growth. Furthermore, ServiceNow is not consistently named by customers as the preferred orchestration layer for AI agents.
The analyst also cited broader budget pressures, with more than half of enterprise clients reporting cuts to traditional software spending to fund AI infrastructure investments. Consequently, UBS lowered its growth forecast for ServiceNow’s remaining performance obligations through 2026 from 20% to 16%.
This skepticism stands in sharp contrast to the company’s recent financial results. For the full year 2025, revenue grew 21% to $13.3 billion, while contractually secured future revenue jumped 27%. The fourth quarter of fiscal 2025 saw revenue of $3.57 billion, a 20.7% year-over-year increase that also beat earnings per share expectations. Remaining performance obligations climbed 25% to $12.85 billion.
Should investors sell immediately? Or is it worth buying ServiceNow?
ServiceNow’s strategic response to the AI wave is a comprehensive platform overhaul, unveiled on April 9. The centerpiece is a new “Context Engine,” designed to link AI agents with a company’s institutional knowledge and decision history. The platform leverages a vast dataset of 85 billion processed workflows and seven trillion transactions. Simultaneously, ServiceNow is opening its ecosystem to external developers through a “Build Agent Skills” program, allowing them to create applications using third-party tools like Claude Code or OpenAI Codex.
However, analysts have noted a lack of transparency in the new pricing model. Developers receive an initial 25 to 100 free API calls, but the subsequent cost structure remains unclear, posing a potential challenge for enterprise budgeting.
The company’s flagship AI product, Now Assist, reported an annual contract value exceeding $600 million, with new business doubling in Q4 year-over-year. Management aims to push this figure past $1 billion by the end of 2026, banking on partnerships with Anthropic and OpenAI and the acquisition of Moveworks. For the full year 2026, ServiceNow targets subscription revenue growth of more than 20% and a free-cash-flow margin of 36%.
All eyes are now on the earnings report scheduled for April 22, after the US market close. This will serve as a critical test. ServiceNow’s own subscription revenue guidance for Q1 2026 is $3.65 to $3.655 billion, implying constant-currency growth of 18.5% to 19%. This sits notably below the analyst consensus of $3.75 billion. The management must demonstrate that Now Assist growth is accelerating and provide data to counter concerns about AI-driven seat compression. With the stock at multi-year lows and a significant gap between its forecast and street expectations, there is little room for disappointment.
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