Consecutive large-scale acquisitions questioned by the market! ServiceNow (NOW.US) urgently denies rumors of acquiring Decagon

According to Zhitong Finance APP, ServiceNow (NOW.US) on Tuesday denied reports that it intended to acquire conversational artificial intelligence (AI) startup Decagon. Amit Zavery, President, Chief Product Officer and COO of ServiceNow, said in a statement: "We have noticed incorrect information circulating in the market today regarding our acquisition strategy. To be clear, ServiceNow has no interest in acquiring Decagon and has no such intention."

Previously, there were reports that Decagon, which focuses on using AI to automate customer service, had held preliminary acquisition discussions with ServiceNow and other potential buyers. Following these reports, ServiceNow's stock price initially reacted negatively.

In response, Jefferies analyst Samad Samana said that given ServiceNow’s recent flurry of M&A activity, investors are concerned about large-scale acquisitions, so the initial negative stock reaction was unsurprising. However, the analyst also pointed out that Decagon could enhance ServiceNow’s customer service management product capabilities, which is one of the key drivers of the company’s growth. Jefferies reiterated its "buy" rating on ServiceNow stock and maintained a price target of $140.

Buying Spree Everywhere! Investors Wary of ServiceNow’s Acquisition Strategy

Reportedly, since 2025, ServiceNow has announced several multi-billion-dollar acquisitions to expand its AI, customer relationship management (CRM), and cybersecurity business capabilities. Earlier in 2025, ServiceNow acquired AI assistant and enterprise search company Moveworks for approximately $2.85 billion. In December 2025, the company agreed to acquire cybersecurity company Armis for $7.75 billion in cash. This deal was completed in April 2026 and is expected to expand ServiceNow’s security and risk management business. Also in December 2025, ServiceNow agreed to acquire identity security company Veza for approximately $1.25 billion. This transaction closed in March 2026. In addition, ServiceNow acquired AI-driven sales software provider Logik.io for $506 million.

After closing deals totaling more than $11 billion, investors remain skeptical about ServiceNow’s acquisition strategy. Investors are questioning whether these acquisitions are truly accelerating ServiceNow’s established strategy or if they represent a need for the company to seek new growth drivers via M&A. They also worry about whether the heavy investment in M&A over a short period can genuinely create sufficient returns, or if these deals will increase the company's financial burden and drag down profitability.

Completion of acquisitions does not mean synergies will be realized immediately. ServiceNow needs to integrate the acquired companies’ technologies, staff, products, and sales teams into its existing platform, which may entail extra integration costs. For example, some market analysts have pointed out that the Armis acquisition is expected to put some pressure on ServiceNow’s profit margin and free cash flow profit margin in 2026. The company needs to absorb related costs first, before gradually achieving revenue synergy and operational efficiency improvements. If the adoption rate of new products is slower than expected, or if cross-selling between different businesses falls short, the returns from the acquisitions could be delayed.

Meanwhile, investors worry that ServiceNow may deviate from its "primarily organic growth" strategy. ServiceNow's original core strengths were its enterprise software platform, subscription revenue, and workflow automation. Continuous large-scale acquisitions may raise concerns that the company is increasingly dependent on external M&A for business expansion rather than mainly relying on in-house product innovation and customer growth. Fortunately, when ServiceNow responded to the Decagon acquisition rumor on Tuesday, it also made it clear that it remains a company focused primarily on organic growth and that there are currently no major strategic gaps that require large acquisitions to fill.

In addition, rapid changes in the AI industry make acquisition prices and technology values uncertain. ServiceNow’s aggressive acquisition of AI, cybersecurity, and enterprise software firms aims to strengthen its platform amid the disruption of traditional software by AI technology. But with rapid technological iteration and shifting competition, even targets with strong technology or customer resources may eventually face heightened competition, technological changes, or shifting customer needs.

For investors, after ServiceNow has completed a series of acquisitions, the next metrics to watch include whether subscription revenue growth can be sustained, whether margins and free cash flow can withstand integration costs, and whether newly acquired technologies can truly drive customer growth and cross-selling. ServiceNow’s third-quarter results, scheduled for release on October 28, may provide clues to these questions for investors. According to Koyfin data, the market expects the company’s Q3 revenue to grow 20% year-on-year to $4.09 billion, with adjusted earnings per share expected to rise 6% year-on-year to $1.02.