Key Stats for ServiceNow Stock
- Pre-market Price Change for ServiceNow stock: -5%
- $NOW Share Price as of Dec. 12: $865
- 52-Week High: $1,198
- $NOW Stock Price Target: $1,151
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What Happened?
ServiceNow (NOW) stock is down 5% in pre-market trading after Bloomberg reported the company is in advanced talks to acquire cybersecurity startup Armis in a deal potentially worth up to $7 billion.
If completed, this would be ServiceNow’s largest acquisition ever, nearly 2.5 times bigger than its March agreement to buy AI developer Moveworks for $2.85 billion.
The deal could be announced within days, according to sources familiar with the negotiations. However, people close to the talks cautioned that discussions could still fall apart or another bidder might emerge.
Armis, founded by Israeli military veterans and based in San Francisco, specializes in asset intelligence platforms that help organizations identify and secure connected devices across their networks.
In August, Armis CEO Yevgeny Dibrov revealed that the company had reached $300 million in annual recurring revenue and was planning an IPO for 2026.
ServiceNow’s acquisition would head off those public listing plans and represent a significant strategic expansion into cybersecurity.
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What the Market Is Telling Us About ServiceNow Stock
The adverse reaction to ServiceNow stock suggests investors are questioning whether $7 billion is too steep a price, especially coming just months after the Moveworks deal.
The company is clearly making aggressive moves to expand beyond its core IT service management platform, but large acquisitions always carry integration risks and dilution concerns.
That said, the pullback may be shortsighted given ServiceNow’s recent operational momentum. The company just reported stunning third-quarter results that shattered expectations across the board.
- Subscription revenue grew 20.5% year over year in constant currency, a full percentage point above the high end of guidance.
- Current remaining performance obligations (cRPO) grew 20.5% in constant currency, beating guidance by 2.5 points.
- Operating margin hit 33.5%, three full points above guidance, while free cash flow margin reached 17.5%.
- The company closed 103 deals with net new annual contract value (ACV) exceeding $1 million, including six over $10 million.
Notably, ServiceNow’s AI products are on pace to exceed $500 million in ACV this year, putting the company well ahead of schedule to hit its $1 billion target for 2026.
CEO Bill McDermott called ServiceNow “one of the most durable, consistent, overperforming growth companies in the enterprise software industry”.
Now Assist, the company’s AI offering, had 12 deals over $1 million in Q3, including one over $10 million. AI Agent Assist consumption increased 55 times since May, creating what McDermott called “the foundation of a beautiful hockey stick.”
The security and risk business that Armis would bolster is already a $1 billion ACV business for ServiceNow, the company’s fifth to cross that threshold.
The deal would deepen ServiceNow’s capabilities in an area where AI is creating massive new security challenges.
Companies adopting multiple AI technologies need visibility, control, and incident management across their entire estate. ServiceNow’s AI Control Tower addresses exactly this need, with deal volume more than quadrupling quarter over quarter in Q3.
CFO Gina Mastantuono highlighted that the company raised full-year guidance again, lifting subscription revenue expectations by $55 million at the midpoint and increasing operating margin targets by 50 basis points to 31%. Free cash flow margin guidance jumped 200 basis points to 34%.
She attributed the margin expansion to AI-driven operational efficiencies, noting that ServiceNow is “the only enterprise software company in the world that for the last 10 years has operated above the rule of 50-plus.”
The Armis acquisition, if completed, would give ServiceNow deeper expertise in asset intelligence and device security at a time when enterprises are struggling to manage sprawling AI deployments.
Armis helps organizations identify every connected device in their environment, assess vulnerabilities, and enforce security policies. That capability fits naturally with ServiceNow’s AI Control Tower, which provides governance and oversight for AI initiatives.
However, at $7 billion, ServiceNow would be paying roughly 23 times Armis’ $300 million in annual recurring revenue. That’s a premium valuation, though not entirely out of line for high-growth cybersecurity assets.
Investors should remember that ServiceNow stock has been a consistent winner, up nearly 100% in the last three years, even after Monday’s drop.
For long-term holders, the Armis deal represents ServiceNow doubling down on its vision of becoming the AI platform for business transformation.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
