UBS quietly resets outlook on AI software giant

A stock once viewed as a clear winner in the artificial intelligence (AI) boom is starting to lose some of its shine. Shares of ServiceNow have come under pressure after UBS quietly adjusted its outlook, prompting investors to reassess whether the AI-driven rally still has room to run, or if expectations have simply moved too far, too fast.

That shift in sentiment matters because ServiceNow (NOW) has long been positioned at the center of enterprise AI adoption. Founded in 2003, ServiceNow built its reputation on cloud-based platforms that help businesses automate workflows and streamline IT operations. Today, it sits firmly within both the S&P 500 and S&P 100, reflecting its importance in the broader software ecosystem.

But as AI evolves from opportunity to disruption, even market leaders like ServiceNow are facing a more complex reality.

UBS downgrades ServiceNow amid AI concerns

UBS downgraded ServiceNow to Neutral from Buy, cutting its price target to $100 from $170. That is a sharp reset for a company that the firm once viewed as the best-positioned application software player in the AI era.

Now, that confidence is fading. Why? Growing concerns that spending on non-AI software is tightening, and that could hit ServiceNow harder than expected.

What changed? UBS now sees growing pressure on traditional software budgets, especially for non-AI tools. That shift could limit upside for companies like ServiceNow, even as they invest heavily in AI.

The firm expects smaller earnings beats in the coming quarters and reduced upside to guidance. According to a press release, ServiceNow said that subscription revenue growth is projected at 18.5% to 19% in 2026, but that may not be enough to excite investors in the current environment.

Even more telling, UBS lowered its estimate for remaining performance obligation growth to 16%, down from 20%, according to a report from Investing.com. That signals slowing forward demand.

ServiceNow pushes AI across its entire platform

Despite the downgrade, ServiceNow is not backing away from AI. In fact, it is going all in. ServiceNow recently made AI a standard feature across its entire product portfolio. Instead of selling AI as an add-on, every offering now includes AI, data connectivity, workflow automation, and governance tools.

At the center of this push is its new Context Engine. This system connects real-time enterprise data, policies, and workflows to help AI make smarter decisions.

Think about it. Most companies spend months stitching together AI tools. ServiceNow wants to eliminate that process entirely. The platform already has visibility across billions of workflows and trillions of transactions. That data advantage could still prove powerful and likely translate into faster growth.

“Most organizations spend months assembling the pieces for enterprise AI. By the time they're ready, the goalposts have moved. ServiceNow brings it all together, so customers start with a complete AI-native experience across all products and packages, not a procurement project,” Amit Zavery, ServiceNow's president, CPO, and COO, said.

ServiceNow downgrade raises concerns about AI positioning

UBS’ downgrade centers on a key shift: weakening demand signals across the broader software sector. The firm pointed to budget pressure on non-AI application software, suggesting companies are becoming more selective about where they spend. Even though ServiceNow is investing heavily in artificial intelligence, UBS believes it may not be enough to fully offset those pressures.

As a result, expectations are being dialed back. That includes smaller-than-usual earnings beats in the upcoming quarters, limited upside to guidance, and slower momentum in subscription revenue growth.

UBS now expects constant-currency subscription growth of 19% in 2026, but with less room for upside surprises, a key driver that once fueled bullish sentiment.

Even more telling, the firm cut its remaining performance obligation (RPO) growth forecast to 16% by the end of 2026, down from 20%. That metric is closely watched because it reflects future contracted revenue.

So, the broader AI landscape is evolving quickly, and companies are prioritizing direct AI investments. Sometimes at the expense of traditional software platforms. That shift could be forcing ServiceNow to prove its AI value faster than expected.

ServiceNow stock also slides to a new 52-week low

The market reaction has been swift and painful. ServiceNow stock fell 7.58% to close at $83 for the week ended Apr. 10, after hitting a new 52-week low of $81.24 same day. The drop reflects growing anxiety about whether the company can maintain its competitive edge.

ServiceNow's longer-term picture looks even more concerning

Year-to-date down 45.82%

1-year return down47.03%

3-year return down 12.20%

5-year return down 21.70%

According to Yahoo Finance, and comparing it to the S&P 500’s strong gains over the same periods, the underperformance has become hard to ignore.

Other analysts are also turning cautious on ServiceNow

BTIG lowered its price target to $185 from $200

Stifel cut its target to $135 from $180

FBN Securities reduced its target to $160 from $220

Not all firms are bearish, though. BNP Paribas Exane maintained an Outperform rating with a $140 target, showing that opinion remains divided.

Here’s where things get interesting. The fundamentals don’t look weak. ServiceNow delivered strong fourth-quarter and full-year 2025 results on 28th January, beating expectations across key metrics:

Subscription revenue: $3.47 billion in Q4 2025, up 21% year over year (YOY)

Total revenue: $3.57 billion in Q4 2025, up 20.5% YOY

Current RPO: $12.85 billion, up 25%

Total RPO: $28.2 billion, up 26.5% YOY

Even its AI product, Now Assist, saw net new annual contract value more than double year over year.

“There is no AI company in the enterprise better positioned for sustainable, profitable revenue growth than ServiceNow.” Said ServiceNow Chairman and CEO Bill McDermott.

The company also authorized a $5 billion share repurchase program, signaling confidence in its long-term outlook. So why the disconnect? It may come down to expectations. ServiceNow isn’t just competing as a software company anymore. It’s being judged as an AI leader. And in that category, the bar is much higher.