ServiceNow (NOW) shares have decreased by 29.8% over the past six months, significantly underperforming the Zacks Computer and Technology sector, which saw a return of 19.1%. Notably, Microsoft (MSFT) shares fell 12.9%, Salesforce (CRM) decreased by 27.2%, and Atlassian (TEAM) dropped 36.9%) during the same period.
The company is currently facing integration risks from multiple acquisitions, including Moveworks, Armis, Veza, and Pyramid Analytics. These acquisitions are expected to pressure profitability, with the Armis deal predicted to lower subscription gross margin by 25 basis points and operating margin by 75 basis points in 2026. Additionally, delays in several significant cloud deals in the Middle East, attributed to ongoing regional conflicts, reduced first-quarter subscription revenue growth by approximately 75 basis points.
ServiceNow also competes against robust players like Microsoft, Salesforce, and Atlassian, which have been achieving substantial growth. The company’s current stock valuation is considered premium, with a forward P/E ratio of 26.16X compared to the industry average of 16.91X. This prompts recommendations for a cautious approach, leading to a Zacks Rank of #4 (Sell) for the stock.
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