By Nate Wolf
Like so many other software stocks, ServiceNow has plummeted to start 2026. Investors shouldn't buy the dip, according to UBS.
Analysts at the investment bank downgraded ServiceNow to Neutral from Buy and slashed their price target to $100 from $170 in a research note. The workflow automation company isn't getting replaced by artificial intelligence, UBS said, but enterprises aren't opening their wallets for non-AI tools either.
ServiceNow stock dropped 6.2% to $84.23 on Friday. Shares have fallen 45% this year as investors sell off software names on fears about encroachment by AI.
One of those fears -- that AI will cause head count reductions in areas reliant on software -- is real, UBS said after speaking with software customers. At particular risk is ServiceNow's customer service management, or CSM, segment, which accounts for around 10% of total revenue.
"The functional area flagged by most customers as ground-zero for AI-driven headcount reductions was customer support, resulting in some seat growth risk in ServiceNow's CSM segment," wrote analyst Karl Keirstead.
ServiceNow didn't immediately respond to Barron's request for comment.
Fortune 500 budgets for non-AI software are under pressure because of the uptick in AI-related data and infrastructure spending, UBS said. ServiceNow is being proactive about engaging and integrating AI, but the analysts didn't hear strong customer buy-in for using the software for agentic AI orchestration.
ServiceNow had been the lone Buy-rated application software stock in UBS's coverage until this week.
"To date, our view has been that ServiceNow is better-positioned for this AI era relative to other application software firms," Keirstead wrote. That view has weakened.
Others on Wall Street disagree. BNP Paribas analyst Stefan Slowinski upgraded ServiceNow to Outperform from Neutral last month, pointing out that the company's Now Assist generative AI product surpassed $600 million in annual contract value in the fourth quarter.
"We believe software businesses need to demonstrate core business stabilization, credible AI monetization growth, and quality margins," Slowinski wrote. "We see these qualities in ServiceNow."
Write to Nate Wolf at nate.wolf@barrons.com
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(END) Dow Jones Newswires
April 10, 2026 10:51 ET (14:51 GMT)
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