ServiceNow (NOW) Stock Drops 43% — Is the Dip Worth Buying?

TLDR

• Oppenheimer cut its ServiceNow price target from $175 to $130, while keeping an Outperform rating
• NOW stock is down 43% year-to-date, trading around $88
• Q1 earnings are due April 22; Oppenheimer expects revenue of $3.74 billion, up ~21% year-over-year
• Federal government obligations fell 72% year-over-year in Q1, a headwind for the cRPO metric
• Oppenheimer analyst sees NOW potentially becoming the first enterprise software company with a 10%+ AI revenue share by Q4 2026

ServiceNow has had a rough 2026. The stock is down roughly 43% year-to-date, trading around $88 on Tuesday, as concerns about AI disruption have weighed heavily on the enterprise software sector.

ServiceNow, Inc., NOW

Oppenheimer analyst Brian Schwartz cut his price target on NOW from $175 to $130, citing lower multiples across the software group. He kept his Outperform rating intact.

Schwartz does not buy the AI disruption thesis against ServiceNow. His view is that the company could actually be one of enterprise AI’s clearer beneficiaries.

InvestingPro data puts NOW’s fair value at $130, suggesting the stock is undervalued at current levels.

Q1 Earnings on April 22

Oppenheimer expects Q1 revenue of $3.74 billion, up about 21% from a year ago, with pro forma earnings of $0.96 per share. Schwartz said his research pointed to “some upside to consensus estimates.”

The firm flagged a soft patch in the federal government segment. Oppenheimer estimates federal obligations fell 72% year-over-year in Q1, to around $48 million — less than half the three-year seasonal average of $99 million.

A partial government shutdown and a tough year-ago comparison both played a role in that drop. It remains a headwind for ServiceNow’s cRPO metric, a closely watched indicator of future revenue.

Beyond the federal drag, industry checks showed weaker big-deal activity and softness in the public sector versus the prior quarter.

On the other side of the ledger, those same industry contacts reported “accelerating usage growth and expansion activity for ServiceNow’s AI business,” according to Schwartz.

AI Growth in Focus

ServiceNow boasts a 77.5% gross profit margin and generated $4.6 billion in free cash flow over the past twelve months.

The company has been integrating AI across its entire portfolio, including enhancements to data connectivity, workflow execution, and security — all at no additional cost to customers.

It also launched the Context Engine, a system that uses ServiceNow’s existing data structures to inform AI agent decisions.

Analyst opinions are mixed. Bernstein kept an Outperform rating. JMP Securities upgraded the stock to Market Outperform. UBS went the other direction, downgrading to Neutral from Buy over concerns about the company’s AI positioning. BTIG trimmed its price target but held its Buy rating.

Schwartz acknowledged that AI disruption fears “may keep ServiceNow as a ‘show-me-stock’ post earnings.” But with sentiment near a low and the stock off 43%, he views the risk/reward as attractive for long-term investors.

He sees ServiceNow on track to become the first enterprise software name with a 10%-plus AI revenue share, likely in Q4 2026.

Earnings are scheduled for April 22.

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