ServiceNow CEO defends long-term bets as stock falls 43% from high

ServiceNow CEO Bill McDermott is defending the company's long-term strategy as its shares trade 43 percent below their 52-week high, arguing the platform model positions it to win as AI reshapes enterprise software.

"If the CEO isn't constantly pushing to stay ahead of markets, what's the point of the job?" McDermott said.

ServiceNow shares traded at about $111, down from a 52-week high of $194.72, caught in a broader rerating of SaaS companies driven by fears that AI-native tools will displace legacy platforms. The company has pushed into cybersecurity through acquisitions of Armis and Veza, and earlier acquired Element AI, co-founded by Turing Award winner Yoshua Bengio.

Gartner expects IT spending to grow 14.2 percent this year, driven by AI. McDermott argues ServiceNow's platform acts as a control tower over legacy systems, enabling AI models to interact securely across enterprise workflows — a bet that carries concentrated risk for a single company.

The defense comes eight years after Warren Buffett and Jamie Dimon warned in a Wall Street Journal op-ed that quarterly earnings guidance was pushing American companies toward short-term thinking at the expense of long-term strategy. The risk calculus has since shifted: rather than risk aversion, the C-suite now faces the opposite problem — placing outsized bets on AI with limited margin for error.

The platform argument

McDermott said ServiceNow was mistakenly caught in a rerating of SaaS companies driven by fear of AI-driven changes. He maintains the company is fundamentally different because it operates as a platform, not a point solution. "We never set out to buy revenue because we've always been a fast growth company. We set out to pursue opportunities of greater substance," he said.

The acquisitions tell the story. Element AI, announced in 2020, brought deep-learning expertise from one of the field's pioneers. Armis and Veza extended ServiceNow into the security operations market, where enterprises are spending heavily to protect AI workloads. The strategy mirrors what Microsoft has done with its Copilot stack and what Salesforce is attempting with Agentforce — embedding AI into the workflow layer rather than selling it as a standalone product.

"None of this is to suggest that markets shouldn't influence strategy. Quite the contrary, markets rule," McDermott said. "Having said that, today there's a palpable feeling out there that if you only do what you always did, you'll only get what you always got. The best CEOs will never surrender to complacency. Vision has to supersede fear."

The broader corporate world has absorbed more than just algorithms from the tech sector — it has taken on the VC mindset. Venture capital is built on longer time horizons, higher risk tolerance, and the potential for outsize payoffs tied to meaningful breakthroughs. That describes many CEOs today, but with one critical difference: VCs can spread risk across a portfolio of startups, while a CEO is all in on one company. ServiceNow's bet on AI-native workflows carries a unique concentration of risk — if the platform thesis fails to translate into revenue growth, the stock's 43 percent drawdown could deepen.

For investors, the question is whether the market has already priced in the worst. ServiceNow trades at a significant discount to its 52-week high, and the broader SaaS sector has been repriced as AI-native challengers emerge. But Gartner's 14.2 percent IT spending growth forecast suggests the enterprise software market is expanding, not contracting. The winners will be those who can demonstrate that AI expands their total addressable market rather than eroding it. ServiceNow's platform bet — connecting AI models to enterprise workflows across security boundaries — is one of the more ambitious attempts in the sector, but it also carries the highest execution risk.

This article is for informational purposes only and does not constitute investment advice.