ServiceNow's stock is having its worst quarter on record. What comes next?

MW ServiceNow's stock is having its worst quarter on record. What comes next?

By Hannah Pedone

Analysts think ServiceNow can improve performance later this year as early AI adopters stock up on more credits and as some pandemic-era contracts come up for renewal

Shares of ServiceNow are down 31.5% to start the year.

ServiceNow's stock has been in a rut - so much so that it's on track to post its largest quarterly decline on record.

While software stocks in general have come under pressure in the first three months of the year, the extent of ServiceNow's (NOW) declines has been even more dramatic. Shares are down 31.5% so far this year, while the iShares Expanded Tech-Software Sector ETF IGV, a proxy for software stocks, is down 26.3%.

Investors fear that artificial-intelligence agents will take over tasks performed by traditional software companies, and that competition from Anthropic, OpenAI and new AI startups will crowd the software market.

Application software stocks like ServiceNow have been hit especially hard, according to Bernstein analyst Peter Weed. That may reflect how investors view applications as most susceptible to AI disruption. In the case of ServiceNow specifically, there has also been concern about the company's recent guidance and what it suggests about the company's own AI traction.

But Weed said trends will improve in the second half of the year. He predicted an uptick in contract renewals for the company this year, as three-year contracts from the end of the pandemic era expire.

Weed also noted that customers who bought ServiceNow's AI products early on in 2024 and 2025 have been "eating through" AI credits from their initial purchases, and will need to buy new credit packages this year. That could drive further growth in the second half of 2026.

Read more: Microsoft's stock may extend a record stretch of lagging performance that's ignited fierce debate

Patrick Walravens, the head of technology equity research at Citizens JMP, said that investors are concerned that AI will weigh on ServiceNow's customer renewals and seat count, but added that ServiceNow will be able to integrate agents directly into its platform.

He said that ServiceNow works with major companies and can leverage those longstanding relationships to fend off competition from new vendors hawking agentic AI offerings. An upstart competitor would have to gain access to a customer's data and organize it. But ServiceNow has its own agent offering, and that can run alongside software that customers already get from ServiceNow.

See also: 7 software stocks set to thrive in the face of AI uncertainty

-Hannah Pedone

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March 31, 2026 12:11 ET (16:11 GMT)

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