Why ServiceNow Stock Plunged 36% in the First Half of the Year

ServiceNow (NYSE: NOW) stock dropped 36% in the first half of the year, according to data provided by S&P Global Market Intelligence. The market has been worried about the impact of agentic artificial intelligence (AI) on software-as-a-service (SaaS) stocks like ServiceNow, but ServiceNow is pushing back with its own AI platform.

Out with SaaS, in with AI?

ServiceNow is a major player in organizational management, with more than 8,800 clients who rely on it to manage their workflows. Its platform is embedded into these clients' databases, unifying and automating various workplace processes.

When agentic AI first came out on a major scale a few months back, SaaS stocks plunged. The market has been worried about how SaaS companies will fare if clients can get the same value through AI agents that can be customized to do the same thing.

Image source: Getty Images.

ServiceNow has been ahead of the curve, and it launched its Control Tower product just over a year ago. The Control Tower acts, as the name implies, as a single point connecting all of the client's AI agents and platforms, as well as the rest of the organization. And it uses AI to analyze how it all works and provide insights. After all, even if AI agents can take care of the work of some employees, companies still need to set up, monitor, and manage them. And since it's also based in AI and machine learning, it's continually upgraded to improve along with advances in technology.

At least for now, the response has been positive, and ServiceNow hasn't seen a disruption in its business. It reported a 22% year-over-year increase in subscription revenue in the 2026 first quarter, and management is guiding for similar growth in the second quarter and for the full year.

Is ServiceNow stock priced to buy?

At the current price, ServiceNow stock trades at 64 times trailing 12 months. That's a hefty price tag, but it's actually a lot lower than it's been over the past few years. In fact, it's just off its lowest P/E ratio ever as it starts to climb back higher. Investors have been willing to pay a high premium for the stock, since it has a strong economic moat as the platform of choice for a large percentage of the country's top companies.

That kind of valuation can hardly be called a bargain, especially in the changing AI landscape, but it could still be a defensive play as more workflow goes toward AI, and investors could feel comfortable taking a small position right now.

Jennifer Saibil 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.