What Happened?

Shares of enterprise workflow software maker ServiceNow (NYSE:NOW) jumped 5.6% in the morning session after stocks rebounded, following a broad-based sell-off the previous day. The Nasdaq was down 4%, while the S&P fell 2.7% as concerns over the ongoing trade war continued to spread. While those concerns haven't exactly disappeared, it's likely some investors looked to take positions in some of the beaten-down stocks, especially some of the high-quality names that got caught up in the sell-off.

After the initial pop the shares cooled down to $815.32, up 4% from previous close.

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What The Market Is Telling Us

ServiceNow’s shares are not very volatile and have only had 8 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business. 

The biggest move we wrote about over the last year was 8 months ago when the stock gained 14.1% on the news that the company reported an impressive "beat and raise" quarter, which was powered by what management considered "elite-level execution." 

ServiceNow beat on the RPO (remaining performance obligations, a proxy for future revenues) line. Improvement in new large contract wins was another plus. Adjusted operating income also beat by a meaningful amount, and the company slightly raised its full-year guidance for subscription revenue and operating margin. 

Moving on to its AI capabilities, management provided promising insights. NowAssist (AI product) net new ACV doubled quarter-over-quarter and became the fastest-growing new product in the company's history. Notably, the company inked 11 NowAssist deals with $1 million+ ACV in Q2, two of which were over $5 million. 

Also, the company noted that Dell would be integrating NowAssist. Alongside similar deals, this could significantly accelerate ServiceNow's reach in the AI automation space. 

Overall, this was a strong quarter with the company's improved visibility in its deal pipeline providing strong conviction in its near term forecasts. Alongside its AI momentum, investors had ample reasons to stay positive.

ServiceNow is down 22.7% since the beginning of the year, and at $815.32 per share, it is trading 30.3% below its 52-week high of $1,170 from January 2025. Investors who bought $1,000 worth of ServiceNow’s shares 5 years ago would now be looking at an investment worth $2,805.

Today’s young investors likely haven’t read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.