Yesterday’s Selloff Was Just the Beginning?

UBS downgraded ServiceNow (NOW) from Buy to Neutral with a $100 price target, citing concern that autonomous AI agents could disrupt enterprise software incumbents and compete with traditional workflow automation platforms.

ServiceNow’s premium valuation faces pressure from the AI agent disruption narrative, but the company’s strong fundamentals—21% revenue growth, doubled Now Assist ACV adoption, and $12.85B in remaining performance obligations—may justify the selloff.

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ServiceNow (NYSE:NOW) stock dropped 7.86% on Thursday, April 9, and continued lower Friday morning as a broader software sector selloff accelerated on fears that managed AI agents could disrupt enterprise software incumbents. Now UBS is piling on, cutting ServiceNow from Buy to Neutral with a fresh $100 price target — and the stock is already sitting at $88, below that new target.

For long-term investors, the real question is whether the competitive landscape for enterprise workflow automation is shifting in ways that make ServiceNow’s premium valuation harder to justify.

Ticker

Company

Firm

Action

Old Rating

New Rating

Old Target

New Target

NOW

ServiceNow

UBS

Downgrade

Buy

Neutral

N/A

$100

UBS’s analyst downgrade reflects growing concern that the AI agent wave, rather than being a pure tailwind for ServiceNow, could become a competitive threat. Enterprise buyers are increasingly evaluating whether purpose-built AI agents can replace or bypass traditional workflow platforms. That narrative weighed heavily on the software sector this week and appears central to UBS’s decision to step to the sidelines.

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Granted, ServiceNow’s fundamentals remain strong. Q4 FY2025 revenue came in at $3.568 billion, up 21% year-over-year, beating estimates of $3.532 billion. Now Assist net new ACV more than doubled year-over-year, and current remaining performance obligations grew 25% to $12.85 billion. Yet UBS clearly believes the risk-reward has shifted.

ServiceNow is an enterprise cloud platform built around IT service management and AI-driven workflow automation. Think of it as the operating system that large corporations use to route, track, and resolve everything from IT tickets to HR requests to security incidents. The company closed FY2025 with $13.278 billion in revenue, growing 21% year-over-year, and 603 customers generating more than $5 million in annual contract value.

ServiceNow stock is down 41% year-to-date, and the UBS price target of $100 now sits above the current share price — which tells you how fast this selloff has moved. The 52-week high is $211.48, making the current level look like a different stock entirely. The broader analyst community still carries a consensus price target of $183.99 with 43 Buy or Strong Buy ratings versus just 3 Holds and 1 Sell — so UBS is clearly in the minority here.

That said, the AI agent disruption thesis deserves serious attention. If autonomous agents reduce reliance on structured workflow platforms, ServiceNow’s sticky enterprise contracts could face longer-term renewal pressure even if near-term numbers hold up.

If you believe ServiceNow’s platform becomes the governance and orchestration layer for AI agents rather than a casualty of them, the selloff looks like an opportunity. CEO Bill McDermott made exactly that case in January, calling ServiceNow “the AI control tower for business reinvention.” Notably, McDermott purchased 28,682 shares in the open market on February 27 at prices between $104.6 and $105.96 — a meaningful vote of confidence near current levels.

On the other hand, if the AI agent disruption thesis proves correct and enterprise buyers begin routing around traditional platforms, the multiple compression could have further to run. The UBS downgrade is a signal worth taking seriously, even if the broader Street hasn’t followed yet.

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