ServiceNow (NOW) has had a difficult stretch in the market, with its stock under significant selling pressure. NOW stock is down about 40% since the start of the year and has fallen roughly 52% over the past twelve months and is hovering close to its 52-week low.
The significant selloff reflects growing concern about the impact of artificial intelligence (AI) on the broader software industry. Investors are increasingly wary that advances in agentic AI could reduce the reliance on traditional enterprise workflow solutions. These fears have weighed heavily on valuation multiples across the sector, and ServiceNow has not been spared.
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The selling pressure intensified following ServiceNow’s first-quarter earnings. Although ServiceNow delivered strong financials, the market reaction was negative, with the stock dropping 17.8% the following day.
Management indicated some weakness in subscription revenue due to delayed deals in the Middle East amid ongoing geopolitical tensions. Meanwhile, near-term margin pressure related to the Armis acquisition weighed on NOW stock.
Despite these headwinds, ServiceNow’s underlying fundamentals remain solid. It continues to generate solid growth in subscription revenue and remaining performance obligations (RPO), while customer deal metrics remain solid.
Importantly, ServiceNow is witnessing a meaningful acceleration in AI-driven revenue contributions, with the company now projecting $1.5 billion in AI-specific commitments by 2026. Adoption of its Now Assist, its generative AI-powered suite, has been particularly strong.
ServiceNow Sees Durable Growth
ServiceNow reported a strong first quarter, and its growth trajectory remains solid. The company’s subscription revenue reached $3.67 billion, rising 19% year-over-year (YoY) in constant currency. Growth came despite a modest headwind caused by delays in closing several large deals in the Middle East due to ongoing regional conflict. RPO stood at $27.7 billion, up 23.5%, offering solid demand visibility.
The company’s current RPO came in at $12.64 billion, growing 21%. Meanwhile, the renewal rate remained high at 97%, including contributions from Moveworks, which ServiceNow recently acquired. Moreover, ServiceNow’s customer base continues to scale meaningfully, with 630 clients now generating more than $5 million in annual contract value (ACV). Large deal activity remained healthy, with multiple high-value contracts signed during the quarter.
