What Happened?
Shares of enterprise workflow automation company ServiceNow (NYSE: NOW) fell 10.8% in the afternoon session after reports revealed the company was in talks to acquire cybersecurity startup Armis for $7 billion.
Armis, which specializes in securing internet-connected assets, recently surpassed $300 million in annual recurring revenue (ARR). This would be the company's largest-ever deal and would be outside of ServiceNow's core competency of ITSM (IT Service Management) and ITOM (IT Operations Management).
Separately, KeyBanc downgraded the stock to "Underweight," citing risks to IT, back-office seat counts as AI automation takes hold. There has been a debate within software regarding whether AI will help companies in the space (by expanding capabilities and upsell) or hurting them (reducing seat counts and overall demand).
Adding to the concerns, volatility in the software space increased as investors rotated out of the technology sector and into defensive names. With tech giants like Oracle and Broadcom facing scrutiny over rising costs and shrinking margins, Wall Street continued to rotate away from AI-related names.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy ServiceNow? Access our full analysis report here.
What Is The Market Telling Us
ServiceNow’s shares are not very volatile and have only had 9 moves greater than 5% over the last year. Moves this big are rare for ServiceNow and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 8 months ago when the stock gained 15.2% on the news that the company reported strong first-quarter 2025 results, with cRPO (current remaining performance obligations) and RPO (remaining performance obligations) both beating.
Although reported revenue roughly met expectations, profitability outperformed, leading to beats for adjusted operating income and adjusted EPS. Revenue from the US public sector grew net-new ACV (annual contract value) over 30% in the quarter, which is better than many investors expected under the new Trump administration. Overall, the result was impressive, especially considering how the markets were worried about the health of ServiceNow's enterprise customers and their appetite to spend amid an uncertain macro backdrop.
ServiceNow is down 26.9% since the beginning of the year, and at $770.38 per share, it is trading 34.2% below its 52-week high of $1,170 from January 2025. Investors who bought $1,000 worth of ServiceNow’s shares 5 years ago would now be looking at an investment worth $1,461.
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