NEW YORK, June 3, 2026, 13:07 (EDT)
ServiceNow fell about 6% Wednesday midday, giving up ground as other software stocks also dropped. Shares had bounced back quickly lately, with the workflow software group seen as one of Wall Street’s more straightforward AI plays for corporates.
The stock last traded at $120.14, down $7.51, or roughly 5.9%. It opened at $127.99 and hit a low of $119.32 earlier. The iShares Expanded Tech-Software Sector ETF slipped 4.3%. That was steeper than the SPDR S&P 500 ETF, which dropped 0.7%, and the Invesco QQQ Trust, down 0.4%.
Software stocks are back in favor. After weeks of worry that AI could take over parts of the software industry, investors are building up positions again, betting that AI agents will still need plenty of business systems to handle them. Reuters said Wednesday that the software ETF has rebounded almost 42% since its April low and is now off less than 2% for the year, reversing an earlier 30% drop.
U.S. stocks fell back from record highs on Wednesday, with software names down about 4% as recent leaders saw heavy selling, Reuters said. Eric Parnell, chief market strategist at Great Valley Advisor Group, said, “come so far, so fast,” that the market is open to almost any reason to pull back. Reuters
ServiceNow is often used as a shorthand in the debate. The Santa Clara, California company offers cloud software aimed at large firms, letting them route, approve, automate and audit tasks between departments. It’s not an AI model name, more a backbone for business workflow. Bulls say that’s what makes it important.
Peers took a hit too. Salesforce dropped 4.4%, Microsoft was down 3.8%, and Datadog lost 7.3%, latest market data showed. The stocks tend to move together, as investors look for signs on which software names can drive AI adoption into higher usage, pricing, and steady demand, and which end up losing out as automation cuts seats or spending.
Software’s rebound is turning into what some see as a stock-picker’s market, according to analysts and investors talking to Reuters. Daniel Morgan at Synovus Trust said AI is “remapping the industry rather than destroying it.” Thomas Blakey at Cantor pointed to Snowflake and MongoDB results, saying “software companies will be beneficiaries of AI.” Nvidia’s Jensen Huang added to Monday’s move, calling this an “incredible time to be a software company.” Reuters
ServiceNow picked up a fresh buy rating from Bank of America analyst Tal Liani in May, who put a $130 price target on the stock as he resumed coverage. Liani said ServiceNow could “benefit from, rather than be replaced by” AI, TheStreet reported, quoting his note. He cited the company’s AI Control Tower, Action Fabric, hybrid pricing and its deals for Armis and Veza as elements of its enterprise AI governance stack. TheStreet
ServiceNow (NOW) reported first-quarter subscription revenue up 22% to $3.67 billion, with total revenue also rising 22% to $3.77 billion. Current remaining performance obligations increased 22.5% to $12.64 billion. CEO Bill McDermott said growth from AI is “far exceeding even our own expectations.” ServiceNow Investor Relations
Investors had a calendar item from ServiceNow to look for. President and Chief Product Officer Amit Zavery, CFO Gina Mastantuono and data-and-analytics executive Gaurav Rewari were set to speak at three investor conferences on June 3. The events are run by William Blair, Bank of America, and Evercore.
ServiceNow’s push is about control more than chatbots. Back in May, the company said it was expanding its AI Control Tower tool to help companies manage discovery, observation, governance, security and measurement of AI systems across the business. Jon Sigler, executive vice president and general manager of AI Platform at ServiceNow, said companies were running into a gap between “adoption and accountability” while deploying AI. ServiceNow Newsroom
The risk for ServiceNow is that shares already price in a lot of future gains. If enterprise software budgets weaken, if AI pricing takes time to hit the top line, or if automated systems lower seat-based sales before usage fees can fill the gap, ServiceNow’s high valuation could fall back. The company said first-quarter subscription revenue growth took a 75-basis-point headwind—0.75 percentage point—from big delayed on-premise deals in the Middle East, showing timing on large contracts still matters.
Wednesday’s fall doesn’t just hit ServiceNow, it puts this year’s software rally on the spot. The simple question is back: will AI make enterprise software cheaper, or will it become the must-have layer for companies trying to let machines take over more work? The answer still isn’t clear, and ServiceNow shares are caught in the middle.
