ServiceNow’s $2 Billion Buyback Couldn’t Stop the Bleeding — But Bargain Hunters Are Circling

The math doesn’t add up — and that’s precisely why ServiceNow investors are confused.

The software company delivered a first-quarter earnings beat, with revenue climbing 22% year-over-year to $3.77 billion and earnings per share of $0.97 edging past estimates. Its AI business is exploding: customers spending more than $1 million annually on Now Assist surged 130%, and total AI commitments are on track to hit $1.5 billion in 2026. Management even plowed $2 billion into share buybacks during the quarter.

Yet the stock cratered 17.7% in a single session, tumbling from $103.07 to $84.78 on Thursday before staging a partial recovery Friday to close at roughly $89. The 52-week high of $211.48 now looks like a distant memory, with the shares down about 44.6% year-to-date.

The Geopolitical Wrench

The culprit? The Middle East conflict. Several large on-premise deals in the region were delayed, costing subscription growth roughly 75 basis points. CFO Gina Mastantuono acknowledged to CNBC that she baked “a bit more caution” into the full-year guidance due to the geopolitical uncertainty and its potential to slow deal closures.

That admission spooked a market already on edge about growth quality. The remaining performance obligations — a key forward-looking metric — rose 22.5% to $12.64 billion. But analysts questioned how much of that was organic versus boosted by the company’s recent acquisition spree.

The Armis Hangover

ServiceNow closed its roughly $8 billion acquisition of Armis on April 20, adding to the March purchase of Veza. Both deals expand the security portfolio but come at a cost. GAAP gross margins slipped from 79% to 75%, weighed down by integration expenses. Non-GAAP operating margins inched up to 32%, but the GAAP picture tells a different story.

The market is now digesting a margin drag that could persist for several quarters. Management doesn’t expect normalization in margins and cash flow until 2027. For a stock that once commanded premium multiples on the promise of expanding profitability, that timeline stung.

Should investors sell immediately? Or is it worth buying ServiceNow?

Analyst Split Widens

Wall Street’s response was a flurry of target cuts, though most firms maintained positive ratings. BMO Capital trimmed its target from $120 to $115 (Outperform), Citi from $177 to $154 (Buy), DA Davidson from $220 to $190 (Buy), and Piper Sandler from $200 to $140 (Buy). The outlier: KeyBanc slashed its target from $115 to $85 with a Sell rating, citing the Middle East delays, weak cRPO growth, and margin pressure.

On the bullish end, Sanford C. Bernstein raised its price target to $226, arguing the long-term AI growth story remains intact. FBN Securities went the other direction, cutting to $120 and flagging margin uncertainty.

The consensus breakdown tells the story: 39 buy ratings, 4 holds, and 3 sells. Most analysts still believe in the narrative but are waiting for proof of execution.

Technical Damage and the Road Ahead

Before Friday’s bounce, the Relative Strength Index had plunged to an extreme reading of 16.8 — deeply oversold territory that typically attracts contrarian buyers. The stock flirted with its year-low of $81.24 before rebounding.

But the path back to the uptrend is steep. ServiceNow trades well below its 50-day moving average of $105.61. Technicians are watching the $100 level as the first hurdle to fill the gap left by the post-earnings selloff.

For the second quarter, management guided subscription revenue between $3.815 billion and $3.820 billion, representing roughly 22.5% growth. cRPO growth is expected at 19%. The critical question for Q2: whether that cRPO is organically driven or propped up by acquisition accounting.

Investors who bought the dip Friday are betting the AI story eventually overwhelms the near-term noise. But with geopolitical headwinds, margin compression from a multi-billion-dollar deal, and a stock that’s lost nearly half its value in 2026, the recovery will require more than just bargain hunters showing up at oversold levels.