ServiceNow (NOW) shares closed Friday at $102.13, gaining 2.45% on the day and posting a 7.4% weekly advance. The stock's performance was marked by sharp swings, including an 8.78% surge on Monday followed by declines Tuesday and Thursday, before recovering ahead of the Memorial Day holiday weekend. U.S. markets are closed Monday and will resume trading Tuesday.
Analyst Optimism and Shareholder Approval
Bank of America analyst Tal Liani reinstated coverage on ServiceNow with a Buy rating and a $130 price target. Liani expressed confidence that ServiceNow will benefit from, rather than be disrupted by, new AI solutions. The positive sentiment contrasted with a downgrade of Salesforce to Underperform. Meanwhile, a regulatory filing Friday revealed that shareholders approved an increase of 38 million shares to the company's 2021 equity incentive plan, which is used for employee compensation but also poses potential dilution for existing investors.
AI Debate and Market Context
The software sector continues to be influenced by AI developments. While agentic AI—software capable of autonomous action—raises concerns about reduced demand for traditional licenses, it also creates opportunities for products that manage and monitor these new agents. ServiceNow is positioned as a core workflow control platform for enterprises. The broader market saw the S&P 500 log its eighth consecutive week of gains, and the Dow Jones Industrial Average closed at a record high Friday. The iShares Expanded Tech-Software Sector ETF (IGV) rose 1.61%, with ServiceNow outperforming the sector ETF on the day.
Earnings and Guidance
ServiceNow's first-quarter results continue to set the tone. Subscription revenue reached $3.671 billion, up 22% year-over-year. The company raised its full-year subscription revenue guidance to a range of $15.735 billion to $15.775 billion. Current remaining performance obligations (cRPO), a key metric for future revenue, came in at $12.64 billion, also up 22.5%. Chairman and CEO Bill McDermott highlighted that customers view ServiceNow as their "AI control tower," with AI growth "far exceeding" expectations. CFO Gina Mastantuono emphasized the next phase centered on agentic AI, workflow orchestration, security, and data fabric within a single platform.
Risks Remain
Despite the positive outlook, risks persist. First-quarter subscription revenue growth was reduced by 75 basis points due to delayed deals in the Middle East linked to regional conflicts. COO Amit Zavery noted uncertainty about when these conflicts will resolve. Additionally, the acquisition of Armis is expected to pressure operating margins and free cash flow this year.
As trading resumes Tuesday, investors will watch whether ServiceNow's rally holds and whether AI continues to be a tailwind for the company rather than a headwind for the broader software sector.
