Investing.com — ServiceNow shares have retreated sharply this year, declining roughly 43% amid a broader software sector drawdown.<\/p>\n
The stock, trading around $88 as of Tuesday, was dragged lower by an AI disruption narrative \u2014 concerns that artificial intelligence could erode demand for the kind of workflow automation software ServiceNow sells.<\/p>\n
However, Oppenheimer analyst Brian Schwartz pushes back on that view, arguing that ServiceNow may in fact be one of AI\u2019s clearer enterprise beneficiaries.<\/p>\n
While maintaining an Outperform rating on the stock, Schwartz has cut the price target on the stock to $130 from $175 \u2014 a move he attributes to lower software group multiples broadly.<\/p>\n
The analyst expects first-quarter revenue of $3.74 billion, up about 21% from a year earlier, with pro forma earnings of $0.96 per share.<\/p>\n
\u201cOur research mosaic around demand activity, AI momentum, performance, and execution weighed slightly positive for ServiceNow\u2019s business in 1Q. Thus, we expect some upside to consensus estimates,\u201d he wrote in a note.<\/p>\n
Oppenheimer estimates that federal government obligations have fallen 72% year-over-year in the quarter, to roughly $48 million, less than half the three-year seasonal average of $99 million.<\/p>\n
The decline is partly explained by a partial government shutdown and a tough year-ago comparison, but it remains a meaningful headwind to the company\u2019s Current Remaining Performance Obligations metric (cRPO), a closely watched indicator of future revenue.<\/p>\n
Industry checks also moderated from the prior quarter, with contacts flagging softer big-deal activity and weakness in the public sector. Against that, the same contacts reported “accelerating usage growth and expansion activity for ServiceNow\u2019s AI business,\u201d Schwartz noted.<\/p>\n
Overall, while AI disruption fears \u201cmay keep ServiceNow as a \u2019show-me-stock\u2019 post earnings,” Schwartz said, he believes that with the stock down 43% year-to-date and sentiment near a low, the risk\/reward looks attractive for long-term investors.<\/p>\n
The analyst sees ServiceNow on track to become “the first enterprise software name with a 10%-plus-of-revenue AI business, likely in 4Q26,” which he believes would restore its standing as an AI winner and drive multiple expansion.<\/p>\n
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