Is This Beaten-Down AI Stock a Buy at Current Levels?

ServiceNow (NYSE: NOW) has been one of the hardest-hit names in this year's rotation out of software. Shares are down about 60% from their prior highs as investors worry that artificial intelligence (AI) could disrupt enterprise software.

But the company's first-quarter results were solid, and management continues to frame ServiceNow as the operating system that will control, secure, and monitor AI agents. While there are uncertainties about the long-term impact of AI on the software market, I think Wall Street is likely underestimating ServiceNow's value to enterprises.

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Demand for ServiceNow's AI product is growing rapidly

There's no mistaking ServiceNow's momentum heading into 2026. In the first quarter, subscription revenue grew 19% year over year to nearly $3.7 billion on a constant-currency basis. That beat expectations and led management to raise its full-year outlook. ServiceNow now expects full-year subscription revenue (adjusted for currency changes) to increase 20.5% to 21%.

These strong results partly reflect the demand for Now Assist. The company's flagship AI product is generating $1 billion in annual revenue and is on track to reach $1.5 billion by year-end. That growth matters because it speaks to ServiceNow's competitive position. Now Assist is being integrated into ServiceNow's automation engine, Action Fabric, effectively turning Now Assist into the AI brain behind tasks across the platform.

In 2025, 91% of net new annual contract value came from deals that included five or more products, spanning areas like app development, sales management, and security. Customers aren't just experimenting with ServiceNow's AI -- they're expanding it across the enterprise.

Nvidia validates ServiceNow's opportunity

This growing adoption of its platform shows that ServiceNow is well-positioned to become the orchestration and governance layer for AI agents operating autonomously across the enterprise. Its collaboration with Nvidia adds weight to its strategy.

At ServiceNow Knowledge 2026, Nvidia CEO Jensen Huang appeared on stage with ServiceNow CEO Bill McDermott. The companies unveiled Project Arc, an autonomous desktop agent for IT administrators and developers. Project Arc will run on Nvidia's hardware, models, domain-specific skills, and software. This joint announcement with the AI chip leader strengthens ServiceNow's position to become the operating system for agentic AI.

ServiceNow's biggest edge is data

AI is moving fast, and no one can know with certainty what the enterprise software market will look like in 10 years. Still, ServiceNow brings something to the table that can't be easily replicated. Its platform runs 100 billion workflows each year, spanning 7 trillion transactions -- and that volume is growing 25% year over year.

That creates a data moat, which is probably the most important competitive advantage to have in the AI era. As that data set expands, it continuously feeds ServiceNow's AI, improving performance over time.

A risk to watch is a broader slowdown in enterprise software spending. But at a forward earnings multiple of about 25, investors are already paying a reasonable price. Analysts expect roughly 25% annualized earnings growth, which could translate into attractive long-term compounding from these lower share prices.

John Ballard has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia and ServiceNow. The Motley Fool has a disclosure policy.