ServiceNow Inc. (NYSE: NOW) shares tumbled nearly 6% on Wednesday, extending a two-day slide as the broader software sector retreated following the Federal Reserve's latest policy meeting. The stock closed at $95.48, down $5.86, after hitting an intraday low of $95.13. More than 31.8 million shares changed hands, well above average volume.
Fed's Hawkish Stance Weighs on Growth Stocks
The selloff came after the Fed held interest rates steady but signaled a more hawkish approach under new Chair Kevin Warsh. The central bank's statement suggested policy could remain tighter or even see another rate hike, dampening enthusiasm for high-growth technology names. The S&P 500 dropped 1.21%, while the Nasdaq Composite slid 1.34%, according to LSEG data.
Michael James, managing director at Rosenblatt Securities, described the Fed's message as a “hawkish tilt,” citing what he called a “commitment to deliver price stability” from the central bank. Rising interest-rate expectations can weigh on software stocks like ServiceNow, since higher yields reduce the present value of future earnings.
Software Sector Rout
Software stocks fell broadly on Wednesday. Salesforce Inc. (NYSE: CRM) dropped 4.1%, Oracle Corp. (NYSE: ORCL) gave up 2.5%, and Adobe Inc. (NASDAQ: ADBE) tumbled 5.3%. The iShares Expanded Tech-Software Sector ETF (NYSEARCA: IGV) fell 2.3%. ServiceNow's decline outpaced both Salesforce and Oracle, according to MarketWatch.
Analyst Support Remains
Despite the market selloff, sell-side support for ServiceNow remained intact. Benchmark analyst Yi Fu Lee raised the price target to $130 from $125 on June 15, following a fireside chat with Darren Yip, ServiceNow's head of investor relations and market insights. The firm reiterated its view that ServiceNow is a “top large cap value pick,” citing what it called one of the “cleanest operating models” in SaaS (software-as-a-service).
Strong Q1 Results, but Risks Loom
ServiceNow's first-quarter earnings remain the dominant story for the company. Subscription revenue climbed 22% year-over-year to $3.67 billion. Current remaining performance obligations (cRPO), which represents contracted revenue due in the next year, increased 22.5% to $12.64 billion.
CEO Bill McDermott said the company's AI growth was “far exceeding even our own expectations.” CFO Gina Mastantuono noted that ServiceNow beat the high end of its guidance, increased free cash flow, and “returned capital to shareholders.”
However, downside risks remain. Reuters reported in April that first-quarter subscription revenue growth took a 0.75 percentage point hit from Middle East deal delays. Additionally, the company's acquisition of Armis is expected to pressure 2026 cash flow and margins. COO Amit Zavery pushed back on concerns that AI tools could cut into traditional software demand, telling Reuters, “I am not worried about the narrative.”
Market Context
ServiceNow shares had already fallen 2.71% on Tuesday, settling at $101.33, as the Dow Jones Industrial Average climbed while the S&P 500 slipped. The trading calendar could spur sharper action this week: with U.S. equity markets closed on Friday, June 19 for Juneteenth, Thursday will be the week's last full regular session. The Nasdaq wraps up its regular session at 4 p.m. Eastern.
