ServiceNow’s Product Offensive Meets Investor Skepticism: Can Usage-Based Revenue Bridge the Chasm?

Despite a 49% stock plunge and hedge fund exits, ServiceNow posts 19% revenue growth, expands AI agents, and maintains 43 Buy ratings from analysts.

ServiceNow is pouring resources into AI agents and deepening platform partnerships at a time when its stock has been slashed by nearly half from peak levels. The disconnect between an improving operational picture and a market that has soured on legacy SaaS models has put the company at a critical inflection point.

Hedge funds have been quietly reducing their exposure. In the first quarter of 2026, 108 funds held the stock, down from 118 in the prior quarter. Columbia Threadneedle, writing in its Q1 investor letter, described ServiceNow as a “high-quality victim of the broad revaluation of SaaS business models,” pointing to the rising prevalence of native AI solutions that challenge traditional per-user licensing. That sentiment contributed to a 30%-plus plunge in the stock during Q1 alone. The shares now trade at €88.00, a 49% discount to the July 2025 high of €208.94, and have fallen another 4.3% in the past seven days.

Yet the underlying numbers tell a different story. Subscription revenue jumped 19% year-on-year to $3.67bn in the first quarter, and management raised its full-year growth forecast. Analysts remain overwhelmingly bullish: 43 of the 44 covering the stock rate it a Buy, with a consensus price target of $141.98. Benchmark recently lifted its target to $130 from $125 and reiterated its Buy rating.

Part of the optimism stems from ServiceNow’s ability to broaden its platform ecosystem. The company recently announced a strategic alliance with Inspira Enterprise, a cybersecurity and AI services firm, which will implement the full ServiceNow platform globally with a focus on AI governance, identity management, and cyber defense. Inspira has already deployed more than 50 AI agents through ServiceNow’s AI Control Tower across threat management and risk workflows, reporting a 40% increase in internal AI adoption and a 35% gain in operational productivity. For Inspira’s clients, the platform also provides a framework for regulatory compliance and AI portfolio management.

The partnership aligns with ServiceNow’s broader push to embed its technology deeper into enterprise operations. Over $1bn in transactions have now been processed through the AWS Marketplace, and new capabilities such as the Context Engine, Autonomous Data Analytics, and RaptorDB Pro are designed to feed real-time data to AI agents. At the annual Knowledge 2026 conference, the company unveiled a major expansion of its “Autonomous Workforce” with specialized AI agents for IT, customer management, employee service, and security. IT service desk and CRM variants are already available; IT AI specialists arrive in June, while security and risk specialists will enter preview in June and achieve general availability in September.

President and COO Amit Zavery drew a clear line under the strategic shift. “The era of sidecar AI is over,” he said. ServiceNow’s Context Engine, built on a foundation of 100 billion workflows and 7 trillion annual transactions, is meant to give AI agents the real-world context they need to operate reliably inside large enterprises.

The crucial test, however, is whether this product blitz can reshape the revenue model. The market is questioning the long-term viability of per-user licensing as companies turn to hyperscale AI services. A successful pivot to usage-based revenue could close the valuation gap between the stock price and underlying fundamentals. If that transition stalls, the structural headwinds will persist regardless of quarterly earnings results.

Right now, the market is in a wait-and-see posture. The shares closed at €87.34 yesterday, down about 5% on the week, with a relative strength index of 45.5—neutral territory. Collaborations like the one with Inspira offer a tangible path toward measurable revenue, but concrete numbers have yet to materialize. For investors, the question is whether product innovation and partnership momentum will finally win out over a market narrative that has turned decisively cautious.