ServiceNow Stock Plunged 36%: Time to Buy?

Jul 9, 2026

Bobby Quant Team

💡 Key Takeaway

Despite a 36% drop on AI fears, ServiceNow's strong revenue growth and AI platform position it as a potential defensive play at a lower valuation.

What Happened to ServiceNow Stock?

ServiceNow (NOW) saw its stock price drop 36% in the first half of the year, according to S&P Global Market Intelligence. The decline was driven by market fears that agentic artificial intelligence (AI) could disrupt software-as-a-service (SaaS) companies like ServiceNow.

ServiceNow is a major player in organizational management, with over 8,800 clients using its platform to manage workflows. Its software is deeply embedded in clients' databases, helping unify and automate workplace processes.

When agentic AI emerged at scale a few months ago, SaaS stocks broadly sold off. Investors worried that companies could replace SaaS tools with AI agents that perform similar functions at lower cost.

However, ServiceNow has been proactive. It launched its Control Tower product over a year ago, which acts as a central hub connecting all of a client's AI agents and platforms. The Control Tower uses AI to analyze and optimize workflows, and it continuously improves with technological advances.

So far, ServiceNow has not seen business disruption. It reported a 22% year-over-year increase in subscription revenue in its 2026 first quarter, and management expects similar growth for the second quarter and full year.

Why It Matters for Investors

The 36% drop in ServiceNow's stock presents both a risk and an opportunity. The market is pricing in a worst-case scenario where AI makes SaaS obsolete, but ServiceNow's strong fundamentals suggest the sell-off may be overdone.

ServiceNow's Control Tower positions it as a key player in the AI ecosystem, not a victim. Companies still need a platform to manage and monitor AI agents, and ServiceNow's deep integration with clients gives it a competitive edge.

The stock now trades at 64 times trailing earnings, near its lowest P/E ratio ever. While still expensive, this is a significant discount from its historical valuation, reflecting the market's fear rather than a deterioration in business.

If ServiceNow continues to execute and AI adoption actually increases demand for its platform, the stock could rebound strongly. However, if AI truly disrupts SaaS pricing or demand, the stock could fall further.

Source: The Motley Fool
Analysis generated by Bobby AI quantitative model, reviewed and edited by our research team. This is not financial advice. Always do your own research before making investment decisions.

Bobby Insight

ServiceNow is a buy at current levels for long-term investors willing to tolerate volatility.

The 36% drop is an overreaction to AI fears. ServiceNow's subscription revenue grew 22% and its Control Tower product positions it as a beneficiary of AI adoption. At 64x earnings, near its lowest P/E, the risk/reward is attractive for patient investors.

What This Means for Me

If you hold ServiceNow, consider adding to your position at these lower levels if you believe in its AI strategy. If you don't own it, this pullback could be a good entry point, but keep position size modest given the valuation and uncertainty. Investors with exposure to other SaaS stocks should watch for similar AI disruption risks.