Software stocks have been under pressure in 2026 amid fears that artificial intelligence (AI) will reduce demand for enterprise software through a combination of agentic task completion and full-on displacement by generative AI-based apps.
ServiceNow (NOW +5.15%) -- a leading software-as-a-service (SaaS) solution for IT service management, HR, customer service, and more -- even admitted that its own AI tools will lead to fewer users over time at its recent analyst day. And despite management sharing first-quarter results that beat its outlook on both the top and bottom lines, investors sold off the stock over fears about the business’s future growth.
Despite the market’s concerns about the company, the stock's long-term outlook remains strong, and it could be a great investment opportunity right now.
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Is ServiceNow a good stock to buy right now?
ServiceNow grew subscription revenue by 19% year over year in the first quarter, prompting management to slightly raise its full-year guidance. But some analysts were concerned about how ServiceNow generates revenue growth.
The company’s top line benefited from three acquisitions last quarter: MoveWorks, Veza, and Pyramid. The latter two acquisitions closed in March and had a limited impact on the top line. The company did, however, benefit from MoveWorks throughout the entire quarter, but its impact would’ve been baked into management’s guidance.
However, management closed its acquisition of Armis earlier than anticipated in April, which could have led to an increase in full-year guidance. Management dismissed the notion during the earnings call and noted strong organic revenue growth.
Remaining performance obligation growth was again strong in the first quarter, climbing 25% year over year. That’s in line with its growth from the first quarter of 2025; the company now has a backlog of $27.7 billion, of which $12.6 billion will be realized over the next 12 months.
NYSE: NOW
Key Data Points
At ServiceNow’s analyst day, management outlined its path toward $30 billion in subscription revenue, up from $12.8 billion in 2025, and provided guidance for $15.7 billion in 2026. That growth will be driven by Now Assist, its AI solution, which it expects to reach 30% of annual contract value, up from about 10% this year. Furthermore, it expects to generate a Rule of 40 score above 60 that year, indicating strong operating margin expansion as it scales.
The company also aims to reduce stock-based compensation and increase share repurchases, ultimately improving earnings per share after neutral dilution in 2026. The result should be substantial earnings-per-share growth over the next five years.
Even if ServiceNow falls short of its long-term expectations, the stock looks like a bargain right now. It trades for less than 6 times sales expectations for the year and has a forward P/E ratio of just 22. That’s despite expectations for earnings per share to climb at an average rate of 22% over the next two years and a path toward consistent earnings growth through the end of the decade. That makes the stock a great buy after its post-earnings sell-off.
