ServiceNow and Salesforce Fall 5%: Is the Market Mispricing Both NOW and CRM?

ServiceNow (NYSE:NOW | NOW Price Prediction) stock and Salesforce (NYSE:CRM) stock are both sliding roughly 5% in Tuesday’s session, a simultaneous drop that puts two of enterprise software’s most prominent names in the same uncomfortable spotlight. NOW is trading around $106, while CRM has fallen to the $184 area.

The selloff isn’t coming from bad earnings. Both companies reported strong results recently. The anxiety is more existential: investors are asking whether AI agents will hollow out the traditional software licensing models that built these businesses in the first place. That fear is doing real damage to valuations that were already under pressure.

Neither company is a stranger to pain this year. NOW is down roughly 31% year-to-date, while CRM has lost about 30% since January. Today’s move is the latest chapter in a prolonged re-rating of enterprise software.

AI Agents: Threat or Tailwind?

The bear case is evident: if AI agents can autonomously complete tasks that previously required licensed software workflows, the per-seat, per-module pricing structures that companies like ServiceNow and Salesforce depend on face structural pressure. Why pay for a workflow license when an agent handles the workflow? That logic, even if overstated, is enough to spook a market already nervous about tech valuations.

The bull case runs in the opposite direction. ServiceNow’s platform governs workflows, audits them, integrates them across enterprise systems, and provides the connective tissue that AI agents actually need to function at scale. As ServiceNow CEO Bill McDermott has argued, the rise of agentic AI doesn’t replace the need for that infrastructure; it amplifies it.

A recent analysis explored exactly this tension: can ServiceNow actually beat AI? McDermott’s answer was yes, and the company’s platform positioning supports that confidence.

Salesforce is making a similar argument with Agentforce. The platform reached an $800 million annual run rate, growing 169% year over year, with 29,000 deals closed in the most recent quarter. Combined with Data Cloud, the two products generated $2.9 billion in combined recurring revenue, up 200% year over year.

What the Fundamentals Actually Say

ServiceNow’s most recent quarter showed revenue of $3.57 billion, up 20.7% year over year, with an EPS of $0.92 against an estimate of $0.89. Contracted remaining performance obligations grew 25% to $12.85 billion, which reflects real, locked-in future revenue. Now Assist, ServiceNow’s generative AI product suite, more than doubled its net new annual contract value year over year.

Salesforce, meanwhile, posted full-year revenue of $41.53 billion, up roughly 10%, with Q4 EPS of $3.81 against an estimate of $3.05, a beat of nearly 25%. The company authorized a $50 billion share repurchase program and raised its quarterly dividend. Moreover, Salesforce’s total remaining performance obligations hit $72.4 billion, up 14% year over year. Overall, Salesforce remains in good financial health.

The valuation gap between the two tells a stark story. ServiceNow trades at a trailing P/E of around 66x, but its forward multiple compresses to around 26x as earnings scale.

Salesforce, by contrast, trades at a trailing P/E of roughly 25x and a forward multiple of around 15x. Analysts have a consensus price target of around $189 on NOW stock and around $274 on CRM stock, implying meaningful upside from current levels for both.

Insiders Aren’t Running for the Exits

ServiceNow CEO Bill McDermott made open market purchases of common stock in late February at prices around $104 to $106 per share. Thus, McDermott is betting that his company’s business model is broken. On the Salesforce side, two directors purchased a combined 5,141 shares in mid-March at around $194 per share. These are open market buys at depressed prices, a positive sign amid share-price volatility.

A widely discussed thread on r/investing framed the Salesforce question bluntly: “Salesforce generates more free cash flow than ServiceNow and Workday combined. So why does it trade at one-third of their valuation?” The post drew 201 upvotes and 61 comments; the market has not answered that question satisfactorily.

NOW and CRM Could Be Mispriced

Whether today’s decline represents a mispricing or a rational reassessment depends entirely on how AI agents develop over the next two to three years. If they commoditize enterprise workflows, the bears have a point.

On the other hand, if they require the governance, integration, and orchestration infrastructure that both ServiceNow and Salesforce are actively building, today’s prices reflect a disconnect between market sentiment and the underlying business metrics.

The insiders are buying, the analysts are bullish, and the fundamentals are intact. The evidence from insiders and fundamentals leans toward mispricing for NOW stock and CRM stock.