ServiceNow: Generational Buy or Generational Short?

Is the company the winner of the context layer?

ServiceNow’s stock has been cut in half while their every fundamental metric improved. This is either one of the best buying opportunities in enterprise software, or it’s the lipstick on a dying pig.

This divergence is happening because of, you guessed it, AI. The company is attempting to execute one of the most complex corporate pivots in technology history: simultaneously transitioning from per-seat to consumption pricing, absorbing $12 billion in acquisitions, repositioning from a workflow tool to an AI agent orchestration platform, and doing all of this while the entire SaaS sector loses roughly $300 billion in market cap in a single day. Not easy!

More importantly, ServiceNow is the perfect case study by which to think about the future of the software sector more broadly. The reasons are 3-fold:

1. They are a theoretical beneficiary of the shift away from systems of records and point applications to the context layer.

2. The stock at ~24x forward earnings either represents a PEG ratio of ~1.1—a level rarely seen for a 20%+ SaaS grower outside of a broad sector selloff—or it’s a value trap dressed in temporarily strong fundamentals.

3. It is a public stock so you can (theoretically) make bucco cash by being long or short. Yay money!

Now to be clear, I will never, ever, ever give a stock recommendation in this newsletter. Your portfolio is between you, God, and the IRS. That said, the market sits on a knife edge. Valuations can swing by 20% on the basis of a blog post from Anthropic. In moments of chaos like this, there is absolutely money to be made which makes this post especially timely. We can pressure test my thesis about the context layer and decide whether to gamble accordingly.

There are two plausible futures for ServiceNow. Either it compounds into one of the most valuable enterprise software companies in history. Or AI turns its core advantage into a commodity. Which future we get depends on a simple question. Namely, what type of company is ServiceNow?

I break it down in 3,000 words below the paywall.

The accidental product, the intentional platform