Investing.com -- UBS downgraded ServiceNow (NYSE: NOW) to neutral from buy in a note on Friday, cutting its price target to $100 from $170, as the bank reassesses whether the enterprise software company's competitive position is as resilient to artificial intelligence disruption as previously believed.

Analyst Karl Keirstead said ServiceNow had been UBS's only buy-rated application software stock precisely because the firm viewed it as better positioned than peers for the AI era.

"Given that our confidence in that view has weakened and we're hearing more anecdotes of non-AI apps software budget pressure, we're moving to a Neutral rating despite the material YTD de-rating in the stock to 15x 2026 FCF," Keirstead wrote.

UBS flagged three specific concerns from customer conversations. First, while clients showed no desire to replace ServiceNow as a system of record, some reportedly expressed interest in using AI to custom-build workflow automation apps or handle service management tickets in a more agentic way.

Second, customer support was identified as the functional area most at risk from AI-driven headcount reductions, creating seat growth risk in ServiceNow's CSM segment, which accounts for roughly 10% of revenues.

Third, UBS did not hear consistent buy-in for using ServiceNow at the agent orchestration layer.

On budgets, Keirstead noted that over half of enterprise customer conversations now include anecdotes of containing non-AI software spend, as AI infrastructure investment crowds out core software budgets.

“We now also expect skinnier-than-normal beats in the coming quarters, more limited upside to the guidance for stable organic c/c sub revs growth of 19% in 2026 and we’re trimming our cRPO growth estimates to exit 2026 at 16% c/c, down from our previous estimate of 20%,” UBS concluded.