Why ServiceNow Stock Plunged 36% in the First Half of the Year

ServiceNow (NOW) plunged 36% in the first half of 2026 as investors repriced SaaS companies amid fears that agentic AI could disrupt traditional software subscription models. The sell-off hit despite the company maintaining 22% year-over-year subscription revenue growth.

ServiceNow responded to the AI threat by launching Control Tower, a product designed to manage AI agents—positioning the company as infrastructure for the AI shift rather than a victim of it. The strategic pivot hasn't yet reversed sentiment, but it addresses the core market concern about platform obsolescence.

The stock now trades at a 64 P/E ratio, below its historical valuation levels. While still expensive on an absolute basis, the compression reflects both the AI uncertainty discount and slowing growth expectations. The Motley Fool notes the valuation gap could make NOW a defensive play if the company successfully navigates the AI transition.