The NOW Stock Selloff Nobody Saw Coming, and What It Says About AI Fatigue

The way ServiceNow has lost popularity has an almost subdued quality. No executive resigning under duress, no scandal, and no missed quarter. Just a stock that hit a three-year low last month and is currently hovering around $91 after trading above $211 in July of last year. The math seems strange for a business that generated $4.1 billion in net income from $13.2 billion in revenue in 2025. And yet, here we are.

According to Wall Street, ServiceNow became entangled in the AI software dragnet. ServiceNow suffered along with companies like SoundHound and Palantir when investors began to doubt the real returns on AI hype in the latter half of 2025. There’s a feeling that when the market is in a panic, it doesn’t care to tell the difference between a two-decade-old workflow giant that is profitable and an AI startup that is losing money. They were simply thrown overboard after being bundled together.

You can find ServiceNow somewhere in the workflow of practically every large enterprise IT department in North America. Over 80 billion workflows and 6.5 trillion transactions are processed annually by the company. Fred Luddy founded it in Santa Clara in 2004, long before the term “AI” was used in marketing. Since taking over as CEO in late 2019, Bill McDermott has managed the company with the kind of measured, slightly relentless discipline that, in the right circumstances, tends to work well with institutional investors. There hasn’t been a good vibe lately.

The fact that the underlying numbers consistently convey a different narrative than the chart is peculiar. Revenue for the first quarter increased by 19% year over year to $3.77 billion. Essentially future contracted revenue that has not yet been recognized, the company’s total remaining performance obligations increased by more than 23% to $27.7 billion. That’s a sizable pipeline of already-sold but unbooked business. A software analyst would typically cite this type of metric as evidence of durability. Rather, the stock continued to slide. Ahead of the company’s analyst day, BTIG maintained its outlook, while KeyBanc reaffirmed its rating just this morning due to concerns about bookings growth. The analysts’ differences seem more fascinating than their agreement.

With software stocks, it’s difficult to ignore how frequently this occurs. A few years ago, Salesforce experienced a similar period. Microsoft was dismissed as a legacy player in the early 2010s. There is a well-known trend in which a business that contributed to the definition of a category is written off because it is no longer innovative. For 2026, Gartner continues to rank ServiceNow as a leader in workplace experience applications. There is no end in sight for the platform. Whether investors are pricing for the upcoming year or the next ten is the question.

As this develops, it’s easy to interpret the selloff as illogical. Perhaps a change in the price at which stocks close to AI should be traded. Perhaps a more general cooling following the market surge in April. Although analyst targets are notoriously high, the consensus one-year price target is approximately $142, suggesting significant upside. The fact that ServiceNow is still expanding, profitable, and booking long-term contracts more quickly than it is recording revenue is more obvious. The market might rebound. When the numbers are this stubborn, it usually does, eventually.