**ServiceNow (NYSE: NOW) is facing significant market challenges as its stock has plummeted nearly 50% since last summer amid a broader software sell-off linked to rising artificial intelligence (AI) options. The company’s AI product line is projected to reach $1 billion in annual contract value (ACV) this year, despite escalating delivery costs affecting overall gross margins, which dipped 150 basis points last year.**
**ServiceNow’s enduring asset, a Configuration Management Database that governs enterprise operations, is at risk as companies explore AI-driven alternatives. With around 85% of large companies already using its services, the shift toward AI represents a critical growth strategy for the company, which is concurrently navigating competitive pressures from players like Microsoft. The company’s free cash flow margins expanded to over 34% last year, bolstered by $11 billion committed to acquisitions aimed at enhancing AI capabilities.**
