TLDR
- ServiceNow (NOW) is down ~32% year-to-date as AI concerns triggered a broad SaaS selloff
- CEO Bill McDermott says 50% of new business revenue now comes from non-seat-based pricing, including AI tokens
- Benchmark initiated coverage with a Buy rating and a $125 price target, calling the selloff “unwarranted”
- McDermott personally invested $3 million in NOW stock in February, calling it the best entry point
- The company forecasts 21% GAAP subscriber revenue growth and has a total addressable market of $600 billion
ServiceNow’s stock has taken a beating in 2026. Down about 32% year-to-date, it’s caught in a broader selloff that has hit SaaS companies hard since late 2025.
The trigger? AI models from companies like Anthropic and OpenAI advanced faster than expected, spooking investors who worried AI labs would hollow out demand for traditional business software.
CEO Bill McDermott is pushing back on that narrative. He insists ServiceNow isn’t a typical SaaS company and is actively repositioning the business around AI rather than running from it.
“We’re not a feature company and we’re not a function company, we’re a platform company,” McDermott said. He points to the company’s AI Control Tower product, which manages and governs AI agents, models, and workflows across enterprise systems.
One of the bigger moves McDermott revealed: 50% of ServiceNow’s new business revenue now comes from non-seat-based pricing. That’s the first time the company has disclosed that figure publicly.
Shifting Away From the Seat Model
The traditional software licensing model — charging per employee using the software — is under pressure as AI reduces the need for headcount growth. ServiceNow is shifting to a hybrid model where customers pay for both seats and AI usage tokens.
The idea is straightforward: as the platform does more work autonomously, customers buy more tokens. Revenue growth becomes less tied to how many people a company employs.
Goldman Sachs analyst Gabriela Borges has a 12-month price target of $216 on NOW. She expects organic growth estimates to be revised higher through the year, as customers who received bundled AI tokens start to pay for them after proving out the value.
“Those packages are going to start getting burnt through, such that customers are now going to come back to ServiceNow and say, ‘Hey, we proved the value of this particular product. We are now ready to pay for it,'” Borges said.
McDermott backed up his conviction with cash. In February, he personally bought $3 million worth of NOW stock.
Acquisitions and New Markets
ServiceNow has also been busy on the M&A front. In December, it announced a $7.75 billion deal to acquire cybersecurity firm Armis. It also picked up AI identity security company Veza and spent $2.85 billion on Moveworks, an AI assistant and reasoning agent platform.
McDermott addressed investor concerns about the acquisition pace directly on the Q4 earnings call, saying the company never bought assets to add revenue — only innovation.
The acquisitions push ServiceNow deeper into cybersecurity and customer relationship management, areas McDermott says expand the total addressable market to at least $600 billion, up from $90 billion when he took the job in 2019.
On April 1, Benchmark initiated coverage with a Buy rating and a $125 price target. Analyst Yi Fu Lee called the selloff driven by AI disruption fears “unwarranted” and described NOW as a beneficiary of the “Agentic AI super cycle.”
The company’s consensus analyst rating remains a Buy. ServiceNow’s price-to-earnings ratio stood at around 61 times trailing 12-month earnings as of Thursday.
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