ServiceNow (NYSE: NOW) has faced significant pressure in 2026 as concerns mount that AI advancements could diminish demand for enterprise software. Despite reporting strong first-quarter results that exceeded expectations, the company acknowledged during its recent analyst day that its own AI tools may lead to a reduction in user numbers over time. This admission triggered a sell-off, reflecting investor anxiety about future growth prospects.
However, ServiceNow’s fundamentals remain robust, with subscription revenue growing 19% year over year and a backlog of $27.7 billion, of which $12.6 billion is expected to be realized within the next year. The company’s strategic acquisitions, particularly of MoveWorks, Veza, and Pyramid, are anticipated to bolster growth, while management has set an ambitious target of $30 billion in subscription revenue by 2028, driven by its AI solution, Now Assist.
For market professionals, ServiceNow presents a compelling investment opportunity. Trading at under 6 times sales and a forward P/E of 22, the stock appears undervalued, especially given the projected 22% average annual earnings growth over the next two years. This post-earnings dip may offer a strategic entry point for long-term investors.
Source: fool.com