ServiceNow Inc. shares climbed sharply in late New York trading Thursday, outperforming the broader market as investor enthusiasm for AI-related enterprise software stocks returned. The stock rose $7.31 to $109.43, while the S&P 500 gained 0.59% and the Nasdaq Composite advanced 0.90%.
Snowflake's AWS Deal Sparks Rally
The rally was ignited by Snowflake, whose shares surged more than 33% after the data software company raised its annual revenue outlook and announced a five-year, $6 billion agreement with Amazon Web Services. Investors interpreted the AWS deal as evidence that some cloud software firms are successfully converting AI demand into tangible sales growth. "It just shows how quickly sentiment can turn when AI helps the top line," said Matt Britzman, senior equity analyst at Hargreaves Lansdown.
ServiceNow's Q1 Performance
ServiceNow reported first-quarter subscription revenue of $3.671 billion, up 22% year-over-year, while total revenue reached $3.770 billion, also up 22%. The company's cRPO—contracted revenue expected to be recognized over the next year—rose 22.5% to $12.64 billion. CEO Bill McDermott stated in April that the company's "AI growth is far exceeding even our own expectations."
AI Strategy and Long-Term Goals
At its May analyst day and Knowledge conference, ServiceNow positioned itself as the primary control layer for enterprise AI, targeting more than $30 billion in subscription revenue by 2030. The company expects over 30% of annual contract value to come from AI-related offerings. Jon Sigler, EVP and general manager of the AI Platform, noted a "major gap between adoption and accountability" for enterprise customers.
Wall Street Remains Divided
Despite the positive momentum, analysts remain split on AI's impact across the sector. Bank of America maintained a buy rating on ServiceNow, citing its deep entrenchment in large company workflows, which makes it "difficult to challenge." However, Salesforce shares dropped after its revenue outlook raised concerns about AI risks and slowing growth, highlighting the uneven nature of the rally.
Challenges Ahead
ServiceNow still faces questions about whether AI can drive stickier revenue faster than it brings cost pressures. Reuters reported in April that Middle East government deals were delayed, slowing first-quarter subscription growth, and the Armis acquisition is expected to impact 2026 free cash flow margin by about 200 basis points. COO Amit Zavery expressed confidence, saying, "I am not worried about the narrative," but acknowledged no visibility on when regional conflicts might end.
Thursday's jump appears more like a sentiment reset than a definitive verdict. ServiceNow's AI narrative is back in favor after a tough period for software-as-a-service stocks, but the real test remains: converting governance, workflow automation, and AI agent talk into measurable billing growth, not just improved conference presentations.
