ServiceNow Shares Face Pressure Following Major Acquisition

ServiceNow is navigating a period of significant change, with its recent stock split followed swiftly by the largest acquisition in the company's history. The $7.75 billion deal to acquire Armis is now under the market's microscope, raising questions about whether the transaction's costs could overshadow the potential of its core AI platform. Investor sentiment has turned cautious as a result.

Despite the acquisition news, ServiceNow's underlying business performance remains robust. For the third quarter of 2025, the company reported subscription revenue of $3.3 billion, representing a year-over-year increase of 22%. Its Remaining Performance Obligations (RPO) stood at $11.4 billion, also up 21%. These figures demonstrate sustained strong demand for its SaaS offerings.

The company's strategic focus on artificial intelligence continues unabated. Its "Now Assist" AI suite remains central, with a target to achieve $1 billion in Annual Contract Value by the end of 2026. However, the integration of Armis, a cybersecurity firm, is expected to shift some focus toward security solutions and place greater demands on capital allocation and execution.

Acquisition Details and Market Reaction

The specifics of the Armis deal are shaping near-term concerns:
* The all-cash purchase price is set at $7.75 billion.
* Financing will come from a combination of existing cash reserves and newly issued debt.
* Closure of the transaction is not anticipated before the second half of 2026, allowing time for regulatory reviews and integration planning.

Should investors sell immediately? Or is it worth buying ServiceNow?

This structure increases immediate liquidity pressure and creates uncertainty regarding the company's capital structure until the process is fully completed. The market's reaction has been discernibly negative. Technical indicators recently showed 24 bearish signals for the stock versus only two bullish ones, as of December 27.

Analyst Adjustments and Insider Activity

Market analysts have tempered their outlook in response to these developments. On December 27, TD Cowen reduced its price target on ServiceNow shares to $230 from $250 (split-adjusted), while maintaining a "Buy" recommendation. The firm cited caution over near-term capital allocation. Similarly, BMO Capital Markets also lowered its target price to $230. These revisions suggest a cooling of the valuation premiums previously attached to the company's AI narrative.

Adding to the cautious sentiment, there has been notable insider selling. Chief Financial Officer Gina Mastantuono reduced her holdings by approximately 3.2% through the sale of more than 2,000 shares in November and December. While such sales do not necessarily reflect long-term prospects, they often contribute to near-term negative market sentiment.

The Path Forward

In the short term, ServiceNow's stock performance is likely to be influenced by the market's appraisal of the Armis acquisition, the evolution of its debt profile, and the progress of integration efforts. The key challenge will be for the company to realize the planned synergies from Armis on schedule while maintaining stable growth in its AI business. The targeted closing date in the latter half of 2026 and its 2026 financial goals will provide concrete benchmarks for success.