ServiceNow Is Down 51% as Wall Street Bets AI Will Gut Its Business. July 22 Will Show Who's Right.
2026-07-20 19:26
•Daniel Sparks •The Motley Fool
••••• •• Axe Capital view
Is AI Overhyped in Enterprise Software? Watch ServiceNow
Despite a 51% selloff, ServiceNow’s solid growth challenges fears that AI will destroy its business.
ServiceNow’s stock is battered, down over half from its peak, as Wall Street frets AI might obsolete its core software. Yet its latest quarter tells a different story: subscription revenue grew 22% year-on-year, and large contracts are up sharply. Even AI-related product customers more than doubled, suggesting ServiceNow is embracing AI rather than being crushed by it. For South African investors, this matters through the USD/ZAR lens—any rebound in global tech growth tends to support the rand by attracting risk appetite and dollar inflows. Keep in mind, though, if AI developments rapidly cut enterprise software spending, this optimism could be premature. The July 22 earnings will be the real eye-opener. Until then, it’s worth watching but not rushing in. this is just my opinion and not financial advice
I would watch ServiceNow closely around earnings but hold off buying. For rand exposure, staying selectively long USD/ZAR around global tech sentiment shifts makes sense.
- NOW
- USD/ZAR
- Faster-than-expected AI disruption to enterprise software budgets
- Renewed US dollar strength hurting emerging market currencies
6/10
ServiceNow stock has plummeted 51% from its 52-week high amid fears that AI will disrupt its enterprise software business. However, Q1 results show strong subscription revenue growth of 22% YoY and robust contract metrics, contradicting the disruption thesis. The company's July 22 earnings report will be a critical test of whether the market's pessimism is justified or represents an overreaction.
This article was originally published by The Motley Fool and has been adapted here for Axe Capital Trading News.
Publisher: The Motley Fool
Author: Daniel Sparks
Categories: Equities, Earnings, Technology, AI, Semiconductors
Tickers: NOW, CRM
Sentiment: Mixed - Despite the 51% stock decline, Q1 results show strong fundamentals: 22% YoY subscription revenue growth beating guidance, 22.5% cRPO growth, 80% increase in large deals, and 130% YoY growth in AI product customers. The author argues the market's fear is running ahead of facts, and the stock appears undervalued at 24x forward earnings for a 20%+ grower with 44% free cash flow margin. Mentioned as another software stock dragged down by AI-disruption concerns, trading 40% below its 52-week high. The article uses it as a comparable example of how broad AI anxiety has affected enterprise software valuations.
Keywords: ServiceNow, AI disruption, enterprise software, subscription revenue, earnings report, valuation, growth stocks
Insights:
- NOW: Positive: Despite the 51% stock decline, Q1 results show strong fundamentals: 22% YoY subscription revenue growth beating guidance, 22.5% cRPO growth, 80% increase in large deals, and 130% YoY growth in AI product customers. The author argues the market's fear is running ahead of facts, and the stock appears undervalued at 24x forward earnings for a 20%+ grower with 44% free cash flow margin.
- CRM: Negative: Mentioned as another software stock dragged down by AI-disruption concerns, trading 40% below its 52-week high. The article uses it as a comparable example of how broad AI anxiety has affected enterprise software valuations.