Worries over the impact of generative artificial intelligence on software business models are overblown, according to Morgan Stanley, which on Wednesday upgraded ServiceNow stock to overweight.
"GenAI-related risks and federal concerns have overshadowed management's consistent execution and solid positioning to deliver GenAI capabilities," said Morgan Stanley analyst Keith Weiss in a report.
He added: "Investors appear to be 'missing the forest for the trees' on ServiceNow, with the company boasting multiple avenues to achieve its 2026 subscription revenue target, and more importantly, sustain 20%-plus free cash flow growth for the next several years."
AI Agents Push
ServiceNow and other enterprise software makers are rolling out autonomous, goal-driven AI "agents" that complete tasks on their own. ServiceNow's software tracks and manages services provided by information-technology departments. Also, its self-service tech portal enables company employees to access administrative and workflow tools.
"ServiceNow's expansive workflow automation capabilities and access to data spanning multiple business departments including IT, sales, human resources, finance, and others provide the company and its customers with a solid foundation and the context needed to build and offer agents across a multitude of workflows," said Weiss.
On the stock market today, ServiceNow stock climbed more than 1% to 940.68 in morning trading. ServiceNow stock has retreated 9% in 2025. Shares in big-cap software peer Salesforce are down 26% this year.
Further, Weiss noted that ServiceNow's subscription-based revenue model has been under pressure. It charges companies based on users, or "seats," that utilize its software. One worry for ServiceNow stock and other software makers is that companies will need fewer people as generative AI improves productivity. That potentially means less per-seat software licenses.
Another investor concern is that more companies could develop custom software in-house using generative AI coding tools.
Further, ServiceNow has expanded from its core business into software for human resources, customer service management and security. Also, ServiceNow recently has pushed into "front office" software (customer service, field service and supply chain management).
ServiceNow Stock Technical Ratings
In March, ServiceNow agreed to buy artificial intelligence software maker Moveworks for $2.85 billion, marking its biggest acquisition ever. Moveworks' platform features a generative AI assistant for employee support.
ServiceNow earnings for the quarter ending June 30 rose over 30% to $4.09 per share on an adjusted basis. Revenue climbed more than 22% to $3.215 billion, the Santa Clara, Calif.-based company said.
ServiceNow stock holds an Accumulation/Distribution Rating of B-minus. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading. A+ signifies heavy institutional buying; E means heavy selling. Think of a C grade as neutral.
Follow Reinhardt Krause on X, formerly Twitter, @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
