The 1 Big Risk Every ServiceNow Investor Should Understand

ServiceNow (NYSE: NOW) has made a solid comeback of late, despite the ongoing pessimism in the software-as-a-service (SaaS) industry.

The company recently delivered strong results, investors have embraced its growing portfolio of artificial intelligence (AI) products, and many now see ServiceNow as a potential winner in the next phase of enterprise AI.

The bullish argument is straightforward. As businesses deploy more AI agents, they will need a way to manage, monitor, and coordinate all the work those systems create. ServiceNow hopes to become the platform that handles those workflows.

It is an appealing vision. But before investors buy into that story, they should consider one important question: Will AI create more workflows than it eliminates? The answer could have a major impact on ServiceNow's long-term prospects.

Image source: Getty Images.

The traditional software model may be changing

Historically, businesses purchased software to help employees perform specific tasks.

A company might use one application for customer support, another for human resources, and another for approving expenses or managing inventory. ServiceNow built a highly successful business by enabling systems to communicate with one another through automated workflows.

The model worked because software applications often work independently. Someone needed to coordinate information between departments and systems.

But artificial intelligence may change how employees interact with software altogether. Instead of opening multiple applications and following predefined workflows, employees may increasingly rely on AI assistants that can perform tasks on their behalf.

Consider a simple example. Today, a new employee joining a company might trigger a series of workflows. A manager submits a request; IT prepares a laptop; human resources creates employee records; security grants system access; and finance updates payroll information.

Tomorrow, a manager may simply tell an AI assistant: "Prepare everything for our new employee starting next Monday." The AI could automate much of the process behind the scenes, coordinating tasks across multiple systems with little direct human involvement.

If that happens on a large scale, businesses may require fewer traditional workflows than investors currently expect. For a company that relies on managing the ever-more-complicated workflow for its customers, that is a risk it cannot ignore.

ServiceNow believes it is part of the solution

To be fair, ServiceNow's management sees the future very differently.

The company argues that AI agents will still require governance, security controls, approvals, compliance checks, and monitoring. In other words, even if AI handles more work, organizations will still need a system to determine what actions AI agents can take and how those actions are tracked.

That is the opportunity ServiceNow is pursuing. The company is investing heavily in becoming an AI-native business, embedding AI into every product, feature, and interaction on its platform. It also aims to become the AI Control Tower, helping customers manage ever more complex AI-driven workflows.

So far, customers appear receptive to that strategy, which explains the company's ongoing revenue growth -- up 22% year over year in the first quarter of 2026. Particularly, its Now Assist (AI service) customers spending over $1 million in annual contracts grew 130% year-over-year in the same period.

In short, the company's growth remains strong, suggesting that AI is currently acting as a tailwind rather than a threat.

Investors should watch one key question

The debate on whether AI is an enabler or destroyer of ServiceNow's business model ultimately comes down to the same question: Will AI generate more workflows than it eliminates?

If the answer is yes, ServiceNow could emerge even stronger than it is today. Every AI agent would create actions, approvals, decisions, and processes that require oversight. ServiceNow's platform could become increasingly valuable as organizations deploy thousands of AI-powered workers.

However, if AI eventually becomes capable of managing many of those processes independently, the long-term opportunity may prove smaller than investors expect. And that's what investors should recognize: the biggest risk facing ServiceNow isn't a recession, competition, or slowing demand.

It's the possibility that AI changes enterprise software in ways that are difficult to predict today.

What does it mean for investors?

ServiceNow has built one of the highest-quality software businesses in the market. Its recurring revenue, high switching costs, and expanding product portfolio have created tremendous value for shareholders over time.

The company's next chapter may be even larger if it succeeds in becoming the control center for enterprise AI.

But that future is not guaranteed. If AI gradually reduces the number of workflows within organizations, it may shrink ServiceNow's addressable market.

And that's the biggest risk that investors should watch closely in the coming years.

Lawrence Nga has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ServiceNow. The Motley Fool has a disclosure policy.