ServiceNow shares climb 7% even as UBS cautions AI risks to growth outlook

TLDRs;

• ServiceNow’s stock jumped 7% even after a UBS warning that AI disruption might soften long-term software demand.
• UBS significantly reduced its price target, pointing to a growing corporate shift in spending toward AI infrastructure.
• ServiceNow’s customer service software business is viewed as the most vulnerable to risks from AI-driven automation.
• Analysts are divided in their opinions as ServiceNow speeds up its strategy to integrate AI throughout its platform.

(SeaPRwire) –   ServiceNow shares climbed 7% in pre-market activity amid renewed discussions about artificial intelligence’s potential to transform enterprise software demand. This upward movement occurred in spite of a cautious downgrade by UBS, which emphasized increasing risks of disruption from the accelerating adoption of AI in corporate workflows.

Although the stock demonstrated positive early trading sentiment, analysts continued to disagree on whether the recovery was based on fundamental strengths or represented short-term volatility caused by market repositioning.

UBS downgrade sparks debate

UBS changed its rating on ServiceNow from buy to neutral, substantially lowering its price target from $170 to $100. The bank contended that automation driven by AI is posing a growing threat to conventional software subscription models, particularly as businesses reallocate budgets to AI infrastructure. UBS analyst Karl Keirstead observed that confidence in the company’s long-term growth has diminished as a growing number of enterprises indicate intentions to cut spending on older software platforms.

ServiceNow, Inc., NOW

The downgrade also lowered the forecast for ServiceNow’s growth in remaining performance obligations by the end of 2026 to 16%, down from a prior projection of 20%. This revision strengthened worries that demand for software tools not focused on AI could keep decelerating as companies reorganize their spending focus.

AI disruption becomes central risk

The UBS analysis paid special attention to ServiceNow’s Customer Service Management division, which accounts for approximately 10% of total revenue. The bank suggested this segment is at increased risk if AI tools substantially decrease the necessity for large customer support teams. In that event, fewer user “seats” or licenses would be needed, which would have a direct effect on recurring revenue.

More widely, UBS pointed out a structural change in corporate budgets, with investment increasingly directed toward AI models, cloud computing, and data infrastructure. This transition is slowly putting pressure on traditional enterprise software providers, fueling concerns that generative AI could reduce pricing power industry-wide.

ServiceNow doubles down on AI strategy

Reacting to the changing environment, ServiceNow has quickened the pace of its own AI integration plan. In early April, the firm declared that AI features, workflow automation tools, security functions, and data connectivity would now be built into all its products as standard components. Executives said the objective is to provide a completely “AI-native experience” to clients instead of offering AI as a separate, optional feature.

Notwithstanding near-term worries, the company has upheld a relatively positive long-term forecast. ServiceNow had earlier forecast 2026 subscription revenue in the range of $15.53 billion to $15.57 billion, surpassing Wall Street’s predictions at that time. The company also posted a 20.5% year-over-year increase in fourth-quarter revenue, indicating sustained enterprise adoption prior to the recent intensification of AI disruption concerns.

Mixed analyst signals keep investors split

While UBS adopted a cautious view, other firms stayed more positive. Bernstein reaffirmed its Outperform rating and held a $219 price target, contending that major enterprise customers continue to value security, auditability, and reliability, domains in which ServiceNow stays competitive even within an AI-influenced market.

Concurrently, BNP Paribas had earlier emphasized strong advancements in AI monetization, citing over $600 million in annualized contract value generated by its Now Assist product. This difference highlights an escalating division among analysts: whether AI is a danger that diminishes revenue from legacy software, or an accelerator that broadens the reach of ServiceNow’s platform.