ServiceNow (NOW) plans to cut up to 1,000 jobs, and its stock went up on the news.
That reaction surprised many people, given that layoffs usually signal trouble. Yet NOW’s stock price climbed toward $111 after the plan surfaced, up about 9% over five trading sessions.
The stock had fallen more than 24% year-to-date before the rally because investors had spent months worried that AI would eat into the software ServiceNow sells.
The job cuts, paired with a strong second-quarter report, directly pushed back against that fear.
So the question for investors holding or considering buying ServiceNow is simple. Why did cutting jobs make this stock more attractive?
Why ServiceNow cutting 1,000 jobs pushed NOW stock higher
The cuts equal about 3% of ServiceNow’s global workforce, Investing.com reported after speaking with people familiar with the plan.
Investors read the move as a sign of discipline, not distress. ServiceNow is shrinking overlapping roles while its revenue continues to grow by more than 20% a year.
Wall Street appears to believe the move shows a company can lift margins without slowing its top line, which matters most to investors, given their focus on future profit growth.
The timing helped too. The cuts landed right after an earnings report that many investors had treated as a make-or-break test.
What ServiceNow’s second-quarter earnings told investors
ServiceNow reported second-quarter revenue of $3.99 billion, up 24% from a year earlier, according to Investing.com. That beat the roughly $3.93 billion analysts expected.
Adjusted earnings came in at $0.90 a share, above the $0.86 forecast. The company also raised its full-year subscription revenue outlook.
The number that drew the most attention was AI. ServiceNow’s AI portfolio crossed $1 billion in annual contract value for the first time.
Annual contract value measures the yearly revenue locked into signed customer deals. Crossing $1 billion showed that customers are paying real money for ServiceNow’s AI tools, not just testing them.
That single figure undercut the biggest bear argument against the stock.
How the AI fear had dragged NOW down all year
For most of 2026, investors feared that AI agents would let companies automate their own workflows and stop paying for software like ServiceNow’s.
That worry hit the whole sector. Salesforce (CRM) and other enterprise names fell sharply on the same logic.
ServiceNow builds the software that large companies use to run IT support, employee requests, and customer service. If AI could do that work directly, many feared that demand for the software would shrink.
The second-quarter results argued the opposite. Customers running ServiceNow’s AI in production increased ninefold in nine months, Investing.com reported.
Rather than replacing ServiceNow, AI is becoming a product that the company sells.
The headcount math behind the layoffs
CEO Bill McDermott set a specific target. He told investors ServiceNow would finish 2026 with the same headcount it started with, even after buying three companies.
Here is what makes the cuts necessary:
Starting point: ServiceNow began 2026 with about 29,000 employees.
Current level: Hiring and acquisitions pushed headcount to roughly 30,000.
The gap: Returning to 29,000 requires cutting about 1,000 roles.
The three acquisitions driving the overlap are Armis, Veza, and Moveworks. Each brought its own staff, and some roles duplicated jobs ServiceNow already had.
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