- NOW
- ADBE
This article first appeared on GuruFocus.
ServiceNow shares jumped 6.4% in Monday regular trading, with the stock quoted at $140.98 as investors shifted toward software while unloading AI infrastructure names. ServiceNow (NYSE:NOW), the enterprise-workflow and automation software provider, stood out as money moved away from the semiconductor trade. Reuters reported that ServiceNow and Adobe gained more than 3% while the Philadelphia Semiconductor Index sank nearly 6%, highlighting how quickly investors are reconsidering where the next leg of AI returns may come from.
The numbers give that rotation some muscle. ServiceNow generated $3.877 billion of second-quarter subscription revenue, up 24.5% year over year, while current remaining performance obligations climbed to $13.2 billion and total RPO reached $29 billion. The more important AI number was $1 billion: ServiceNow said its AI products moved beyond that level in annual contract value during the quarter, while agentic-AI deployments multiplied ninefold in just nine months. That is a very different AI story from selling GPUs or building data centers. ServiceNow is trying to turn AI into a recurring software bill inside workflows customers already use.
There is also a sharp valuation signal in the picture. At $140.98, ServiceNow trades 41.49% below the $240.96 GF Value estimate, leaving a gap of almost $100 per share. The $1 billion of AI ACV is equivalent to roughly 25.8% of one quarter’s $3.877 billion subscription revenue, although ACV and recognized revenue are not directly comparable accounting measures. That distinction is important, but so is the direction: ServiceNow does not need an endless race toward larger frontier models to win. It needs enterprises to keep embedding AI into everyday work, and Monday’s rally suggests investors increasingly see that software-layer monetization as a potentially cleaner way to play the AI cycle.
