For most of the first half of 2026, enterprise software stocks traded like companies on their way out. ServiceNow fell as much as 51% from its highs and Salesforce shed roughly 40% of its value, as investors bet that AI agents built by customers themselves, or by open-source tools, would erode demand for the subscription platforms both companies sell (The Motley Fool, 2026). In the back half of July, that trade started to reverse, and the reason was specific: both companies reported that AI is now showing up as measurable, recurring revenue inside their existing products.
ServiceNow's AI business crossed $1 billion, and the stock moved on it
ServiceNow reported second-quarter 2026 results on July 22, showing total revenue of $3.99 billion, up 24% year over year, ahead of the $3.93 billion analysts had expected (Investing.com, 2026). The headline number inside the report was AI annual contract value crossing $1 billion for the first time, up more than 40% quarter over quarter, with agentic AI production deployments up ninefold over nine months and first-time agentic AI buyers up 45% year over year (Enterprise DNA, 2026; Salesforce Ben, 2026).
The stock responded immediately. ServiceNow shares were up 6% to $97.36 on July 24 as the earnings sank in, then up another 8% to roughly $107 by July 27 as the broader software sector rallied alongside it (247wallst.com, 2026a; 247wallst.com, 2026b). Salesforce and Workday moved on the same days: Salesforce climbed 4% on July 24 and a further 7% to $176 by July 27, while Workday jumped 10% to $149 (247wallst.com, 2026b).
The rally is a reversal of a specific fear, not a general bounce
The scale of the move only makes sense against how far these stocks had fallen. The decline earlier in the year has been described in coverage as a "SaaS-pocalypse," triggered in part by rapid adoption of coding agents and open-source automation tools that raised a genuine question: if a company can build its own workflow automation with an AI agent, why keep paying ServiceNow or Salesforce for it (The Motley Fool, 2026)? That question was never fully answered by either company's marketing. It was answered, provisionally, by a quarter of contract value data.
Salesforce's own AI product, Agentforce, had already shown a version of this pattern earlier in the year: annual recurring revenue reached $1.2 billion in Salesforce's first fiscal quarter of 2027, ended April 30, up 205% year over year (Yahoo Finance, 2026, citing Salesforce Q1 FY27 results). ServiceNow's July 22 report was the second data point in the same direction from a second vendor, which is why the market treated it as confirmation rather than a one-off.
None of this settles the underlying debate. Gartner has estimated that of the vendors marketing "agentic AI" features, only a small fraction, roughly 130 by its count, offer functionality that meets its own bar for the term, and the firm has projected that more than 40% of agentic AI projects will be canceled by the end of 2027 over cost and unclear value (Gartner, as cited in Forbes and MarTech, 2026). The July rally reflects two vendors' reported numbers, not an industry-wide resolution of whether "agentic AI" claims across the sector are real.
Incumbents are also buying their way into AI capability, not just reporting it
The same week, SAP completed its acquisition of Prior Labs, the Freiburg-based tabular foundation model startup behind TabPFN, on July 17, committing more than 1 billion euros over four years to run it as an independent frontier AI lab focused on structured business data such as spreadsheets, ERP tables, and operational databases (SAP, 2026; Tech.eu, 2026). Unlike most enterprise AI deals this year, the bet is explicitly not about large language models or chatbots. It is a wager that the biggest untapped AI opportunity in enterprise software sits inside structured data that LLMs are not built to handle well.
The same trend showed up on the supply side. Fireworks AI, which sells inference infrastructure to companies including Cursor, Uber, Shopify, and DoorDash, raised a $1.505 billion Series D at a $17.5 billion valuation on July 16, and said it had surpassed $1 billion in annualized revenue run rate, up fivefold year over year, while its daily token volume nearly tripled from 15 trillion to more than 40 trillion (CNBC, 2026; Fortune, 2026). The round is a signal that enterprise buyers are running real production AI workloads at meaningfully higher volume than a year ago, not just piloting them.
What to watch next
ServiceNow's next test is whether AI ACV growth holds its pace into the third quarter, given that most of the July 2026 rally was built on a single quarter of data after a steep prior decline. SAP has committed capital to Prior Labs over four years, not a single quarter, so the more relevant near-term marker is whether Prior Labs ships a commercial product inside SAP's enterprise stack rather than continuing to operate as an independent research lab.
Sources
- The Motley Fool, "ServiceNow Is Down 51% as Wall Street Bets AI Will Gut Its Business. July 22 Will Show Who's Right." - https://www.fool.com/investing/2026/07/20/servicenow-is-down-51-as-wall-street-bets-ai-will/
- Investing.com, "ServiceNow Q2 2026 slides: revenue beats, margins face AI pressure" - https://www.investing.com/news/company-news/servicenow-q2-2026-slides-revenue-beats-margins-face-ai-pressure-93CH-4807204
- Enterprise DNA, "ServiceNow Hits $1B in AI Revenue as Agentic Use Surges" - https://enterprisedna.co/resources/news/servicenow-ai-acv-1-billion-agentic-enterprise-q2-2026/
- Salesforce Ben, "ServiceNow Just Hit $1B in AI Revenue: Should Salesforce Be Concerned?" - https://www.salesforceben.com/servicenow-just-hit-1b-in-ai-revenue-should-salesforce-be-concerned/
- 24/7 Wall St, "ServiceNow Surges 6%, Salesforce Climbs 4% as Government AI Deals Lift Enterprise Software" - https://247wallst.com/investing/2026/07/24/servicenow-surges-6-salesforce-climbs-4-as-government-ai-deals-lift-enterprise-software/
- 24/7 Wall St, "Salesforce Surges 7%, ServiceNow Jumps 8%, Workday Jumps 10% as Software Rebounds on AI Rotation" - https://247wallst.com/investing/2026/07/27/salesforce-surges-7-servicenow-jumps-8-workday-jumps-10-as-software-rebounds-on-ai-rotation/
- Yahoo Finance, "CRM's Q2 Earnings Coming Up: Rising Agentforce Adoption to Aid Sales" - https://finance.yahoo.com/markets/stocks/articles/crms-q2-earnings-coming-141500807.html
- Forbes, "Why 40% Of Agentic AI Projects May Be Canceled By 2027" - https://www.forbes.com/sites/robertszczerba/2026/07/07/why-40-of-agentic-ai-projects-may-be-canceled-by-2027/
- SAP News Center, "SAP Completes Prior Labs Acquisition" - https://news.sap.com/2026/07/sap-completes-prior-labs-acquisition/
- Tech.eu, "SAP acquires Prior Labs just 18 months after launch in 1B+ euro deal" - https://tech.eu/2026/07/17/sap-acquires-prior-labs-just-18-months-after-launch-in-eur1b-deal/
- CNBC, "Nvidia-backed Fireworks hits $17.5 billion valuation as companies pursue cheaper AI models" - https://www.cnbc.com/2026/07/16/fireworks-nvidia-cloud-ai-startup-value.html
- Fortune, "Fireworks Raises a $1.5 Billion Series D to Lead the Specialized Intelligence Revolution" - https://fortune.com/press-releases/fireworks-raises-1-5b-series-d-reaches-1b-arr-2026-07-16/