Why ServiceNow Stock Popped 33% Last Month

Shares of ServiceNow (NYSE: NOW), a cloud-based enterprise software company, jumped last month as investors shook off their fears that artificial intelligence would eliminate the need for traditional software companies.

Salesforce shares popped 33% in August, according to data from S&P Global Market Intelligence, following strong quarterly results from fellow enterprise software company Salesforce.

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Fears of a "SaaS-pocalypse" were tamed, for now

Investors have been skittish about ServiceNow and other software stocks this year, worried that AI will eliminate the need for traditional software. And while some companies are being disrupted, it's not necessarily the case for ServiceNow and its peers.

The best example of this, and what helped ServiceNow stock jump last month, was Salesforce's recent quarterly results. Salesforce's second-quarter 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.

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.

Adding to the good news for Salesforce -- and by association, ServiceNow -- was the fact that the company's AI "Agentforce" achieved an annualized revenue run rate of $3.9 billion -- up 210% from the year-ago quarter.

That achievement was particularly important for ServiceNow investors because the company has its own AI agents that operate within its software, automating tasks and streamlining workflows. ServiceNow investors hope that if Salesforce can grow its AI agent revenue and fend off AI competitors, ServiceNow may be able to do the same.

Rising optimism for ServiceNow stock, but volatility is likely

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. More recently, an analyst at BTIG Research raised their price target for ServiceNow to $170 from $150, while maintaining a buy rating.

That's provided some additional optimism for ServiceNow shareholders, but the stock will likely remain volatile until investors settle on whether AI will overpower some software stocks. It's a difficult question to answer, and while I personally think companies like ServiceNow can benefit from AI, I understand that it isn't a closed debate just yet.

ServiceNow shareholders will get more insights when the company reports its third-quarter results in late October. But I suspect that ServiceNow and its peers will continue to experience frequent share price fluctuations as investors process the threat of AI in real time. That doesn't mean ServiceNow shares aren't worth owning, but just know it could be a bit of a ride for a little while longer.

Bank of America is an advertising partner of Motley Fool Money. Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Salesforce and ServiceNow. The Motley Fool has a disclosure policy.