Data from S&P Global Market Intelligence shows that shares of ServiceNow (NYSE: NOW) climbed 33% in August as investors moved past concerns that artificial intelligence might make traditional software companies unnecessary.
The surge followed strong quarterly results from fellow enterprise software company Salesforce, which investors took as a signal that fears of a “SaaS-pocalypse” were tamed, for now. ServiceNow, a cloud-based enterprise software company, had been caught up in a broader sell-off of software stocks this year on worries that AI would replace the need for their products.
Salesforce’s Quarter Changed the Mood
The average estimate for Salesforce is ‘s second-quarter revenue rose to $11.3 billion, ahead of consensus estimates. Its non-GAAP earnings per share of $5.90 far outpaced Wall Street’.
Salesforce’s management also issued strong revenue guidance for its full fiscal 2027, with revenue estimates of about $46.3 billion at the midpoint, representing a nearly 12% increase from 2026.
The key number for ServiceNow investors was Salesforce’s AI “Agentforce” achievement. The product hit an annualized revenue run rate of $3.9 billion, up 210% from the year-ago quarter.
The reason it matters is that ServiceNow runs its own AI agents inside its software, automating jobs and smoothing workflow processes. Investors in ServiceNow are hoping that if Salesforce manages to expand its AI agent earnings and hold back AI rivals, then ServiceNow might follow a similar path.
The Known Sequence of Events
While the August rise was notable, the source offers no account of how it played out day by day across the month. What can be stated with certainty is the chain of events that followed it.
| Event | Detail | Timing |
|---|---|---|
| Salesforce Q2 results | Revenue of $11.3 billion, non-GAAP EPS of $5.90 | Reported before the August jump |
| Agentforce run rate | $3.9 billion annualized, up 210% year over year | Announced with Salesforce’s results |
| Bank of America price target | Raised to $150 from $130, buy rating maintained | In August |
| BTIG Research price target | Raised to $170 from $150, buy rating maintained | “More recently,” may not be August |
Salesforce reported strong quarterly results. Its revenue rose to $11.3 billion, ahead of consensus estimates, and its non-GAAP earnings per share of $5.90 far outpaced Wall Street’s average estimate.
This year, investors have shown hesitation toward ServiceNow and other software stocks, concerned that artificial intelligence will make traditional software unnecessary. Yet, though some companies are being disrupted, ServiceNow and its peers aren’t necessarily among them.
Why ServiceNow Traders Watched Salesforce
While ServiceNow and Salesforce don’t compete in every market, they sit side by side in the same space. Both offer cloud-based software to large enterprises, and both have added AI features to their main offerings.
There was concern that AI would make traditional software unnecessary. The idea was that a business could simply instruct an AI to handle its workflows instead of purchasing a software license.
The results from Salesforce’s recent quarter point toward a single explanation for why software firms are increasingly constructing their own artificial intelligence systems.
The 210% growth in Agentforce revenue run rate showed that customers are willing to pay for AI features that come bundled with their existing software. That is a direct rebuttal to the idea that AI will make software companies obsolete.
Shareholders who own ServiceNow stock are looking at Salesforce’s growth in AI agent revenue and its success against AI rivals as evidence that ServiceNow could follow a similar path. It is an indirect comparison, a hope built on what another company has done, rather than proof that ServiceNow itself has matched those results.
Price Targets Move Higher
Wall Street took notice of the shift in sentiment.
In August, Bank of America analyst Tal Liani raised his price target for ServiceNow stock to $150, up from $130, and maintained a buy rating.
A BTIG Research analyst has increased their price target on ServiceNow to $170 from $150, while keeping the buy rating in place.
The move has added some reason for ServiceNow shareholders to feel more hopeful. However, the stock is likely to stay unstable until investors decide whether AI will overwhelm some software stocks.
Answering this question is far from easy, and the discussion remains open.
The AI Question That Won’t Go Away
The core uncertainty is simple: will AI eat software?
Many businesses are being disrupted, yet ServiceNow and its peers appear to be exceptions. The Salesforce quarter provided proof that the biggest enterprise software firms can adapt.
Here is the bull case for ServiceNow:
- ServiceNow’s AI agents operate inside its existing software, automating tasks and streamlining workflows for customers who already use the platform.
- Salesforce’s Agentforce growth shows that customers will pay for AI features built into their enterprise software.
- If Salesforce can grow its AI agent revenue and fend off AI competitors, ServiceNow may be able to do the same.
- Bank of America’s Tal Liani and an analyst at BTIG Research have both raised their price targets, maintaining buy ratings.
- The stock jumped 33% in August, suggesting investors are willing to reprice the company on better AI news.
Here is the bear case:
- AI tools could eventually replace the need for some software functions entirely.
- Volatility is likely to continue until investors settle the AI question one way or the other.
What Remains Unknown
The next earnings report for ServiceNow is on its way, though the source offers no predictions about what it will contain.
Salesforce isn’t the only firm pushing automation through AI. The company’s own agents are built to take over jobs and speed up workflows, just as Salesforce is doing with Agentforce.
The larger market picture matters too. Shares tied to software have faced strain throughout the year due to concerns over artificial intelligence. Salesforce’s results for its latest period offered a brief respite, though it came from just one company and one quarter. That single result hardly settles what is happening across the whole field.
Worries persist among investors that AI could make traditional software obsolete, a concern that applies to ServiceNow and other software stocks alike. While disruption is hitting some companies, there’s no certainty that ServiceNow and its peers face the same fate.
What Investors Should Watch
The reason ServiceNow shares jumped 33% in August was that Salesforce showed enterprise software firms can expand their AI revenue. That performance convinced investors that ServiceNow has the potential to follow the same path.
Before the AI question is resolved, the stock may continue to move around a great deal, and that resolution could take either quarters or years.
There is no doubt that concerns about a “SaaS-pocalypse” have been put aside for the moment. Companies building software have proven they can include AI in their offerings and charge for it. Still, it remains unclear whether that will be sufficient to carry them through the shift toward AI.
ServiceNow shareholders currently have grounds for optimism. The growth figure from Salesforce’s Agentforce was the sort of result that alters opinions. It remains to be seen whether ServiceNow can match it when its next earnings report comes out.
If not, the volatility will continue.
Source: finance.yahoo.com
Get the Notebook.
The day's best stories and every fresh verdict, in plain English, in your inbox by seven. One email a day, no more.