ServiceNow (NYSE: NOW) shares came under pressure after UBS downgraded the stock to Neutral from Buy, while sharply cutting its price target to $100 from $170, signaling a notable shift in sentiment toward one of the leading enterprise software companies. (Investing.com)

The downgrade reflects growing concerns about the company's positioning in an increasingly AI-driven software landscape, as well as broader pressures across the application software sector.

Waning Confidence in AI Positioning

UBS had previously viewed ServiceNow as one of the best-positioned companies for the AI era, even maintaining it as its only Buy-rated name in the application software space.

However, the firm now says its confidence in that thesis has weakened, citing increasing competition and uncertainty around how AI will reshape enterprise software demand.

The downgrade suggests that ServiceNow may no longer hold a clear advantage relative to peers as AI capabilities become more widespread across the industry.

Budget Pressure on Non-AI Software

A key driver behind UBS's revised outlook is growing evidence that enterprise customers are cutting back on spending for non-AI software products.

As companies reallocate budgets toward AI initiatives, traditional workflow and application software providers may face:

• Slower deal cycles
• Increased pricing pressure
• More selective enterprise spending

UBS noted that these trends could persist, potentially weighing on ServiceNow's near-term growth trajectory.

Expectations for Slower Growth Momentum

The firm also lowered expectations for ServiceNow's financial performance, projecting:

• "Skinnier-than-normal" earnings beats in upcoming quarters
• More limited upside to 2026 revenue guidance
• Reduced estimates for key forward metrics such as remaining performance obligations

 

UBS now expects subscription revenue growth to remain solid but sees less room for upside surprises, a key factor that had previously supported the stock's premium valuation.

Stock Already Under Pressure

The downgrade comes after a significant pullback in ServiceNow's shares, which are trading near 52-week lows and have declined sharply over the past year.

Despite the selloff, UBS noted that the stock still trades at a relatively elevated valuation multiple, suggesting limited margin for error if growth expectations continue to moderate.

Divergence From Broader Analyst Sentiment

Interestingly, UBS's cautious stance contrasts with broader Wall Street sentiment, where the majority of analysts still maintain Buy or Strong Buy ratings on the stock.

This divergence highlights an ongoing debate around:

• The sustainability of enterprise software growth
• The impact of AI on existing business models
• Whether recent declines represent a buying opportunity or a structural shift

The post UBS Downgrades ServiceNow to Neutral, Slashes Price Target on AI Concerns appeared first on PRISM MarketView.

COMTEX_477271860/2927/2026-04-15T01:00:31