ServiceNow is increasingly integrating its security and risk management solutions into key deals, with 16 of its top 20 deals now including these offerings. The deeper its software becomes in enterprise operations, the more entrenched it is in the long-term infrastructure.
ServiceNow CEO Bill McDermott recently stated that the security unit’s growth is outpacing that of leading cybersecurity firms. He noted that 80% of the company’s largest deals now include its cyber solutions. Meanwhile, the stock has taken a hit as investor sentiment toward SaaS stocks has cooled. With the rise of AI in automating enterprise workflows, many believe the long-term value of traditional software is under threat. This shift in perception has led to a significant drop in ServiceNow's valuation.
Palo Alto's dominance and limitations
Palo Alto Networks, a leader in the cybersecurity space, showed strong results in June, with next-generation firewall bookings surging nearly 40%—the fastest growth for hardware in a decade. Its next-gen security recurring revenue hit $8.1 billion, up 60% year-over-year. CEO Nikesh Arora dismissed the ongoing SaaS market downturn as dead for cyber, highlighting the resilience of the sector. Palo Alto deploys a vast network of 125 million global sensors, collecting 17 petabytes of daily telemetry. However, Arora pointed out a major issue: many cyber defenses still produce false positives in about a quarter of cases. He also criticized AI models for failing at the most complex stages of implementation, calling it a recurring flaw in the industry.
ServiceNow's enterprise advantage
Despite the limitations of AI in security, the reality is that problems still need human resolution. ServiceNow's unique strength lies in its
Control tower solution, which gives IT teams a complete picture of enterprise operations. As businesses grow and absorb new units, they often operate on outdated systems, leading to fragmented data and operations. This complexity makes AI deployment riskier and more unpredictable without a clear data structure. ServiceNow's configuration management database handles trillions of transactions, linking workflows across enterprise platforms. Acquisitions have added device visibility and identity governance to its capabilities, increasing its security and risk coverage. Although ServiceNow and Palo Alto have little overlap at the moment, the latter still holds a dominant position in the cybersecurity field.
McDermott's strategy to expand into a cybersecurity leader appears to be working. ServiceNow is now valued at 24 times forward earnings, a notable drop from its five-year average of 50. He believes that fear of the SaaSpocalypse could ease as the challenges of managing AI in real-world business environments become harder to ignore. With the potential to improve enterprise AI outcomes, ServiceNow may gain further traction in the market.