NOW: 45% Drop Validates the Valuation Bears
$83. That is where ServiceNow trades today, after falling 45% year-to-date from a $211 high. UBS just cut from Buy to Neutral with a $100 target. The thesis from the bears — that a 99x P/E on $1.67 in TTM EPS left no margin for error — is playing out in real time. Avoid. The downgrade is not the story. The story is why the multiple was never justified. ServiceNow generated $401M in net income on $3,568M in Q4 2025 revenue — an 11.2% net margin. That is a fine business. But the market priced it at an EV/EBITDA of 210x. At those levels, the company needed to execute perfectly in a zero-interest-rate world forever. That world ended, and now enterprise IT budgets are being redirected to AI infrastructure rather than SaaS workflow tools. The spending shift is structural, not cyclical. Fortune 500 companies began trimming non-AI software budgets in December 2025. ServiceNow is in the path of that reallocation. Even with strong revenue growth — Q4 hit $3,568M, up from $3,088M in Q1 — the stock's valuation still prices in years of flawless execution at a P/S of 44.6x. That math only works if nothing goes wrong. Something has.