Cloud Stocks: ServiceNow Goes on an Acquisition Spree in Israel

With the increased adoption of AI, the market has been concerned about the fate of software companies like ServiceNow (NYSE:NOW). Some analysts believe that the agentic AI market will disrupt Service now’s business model, resulting in its stock losing 40% of its value over the last year. ServiceNow meanwhile continues to deliver strong results and build its AI arsenal with plenty of acquisitions.

ServiceNow is one of the stars of the software industry. Many analysts believe that this is a generational buying opportunity into this stock, and enterprise gentrification is going to happen primarily through big vendors like ServiceNow. I am an investor in the company and share this point of view. The key concern is pricing. How would gentrification change the industry’s pricing model?

ServiceNow’s Financials

ServiceNow’s fourth quarter revenues grew 21% to $3.57 billion, ahead of the market’s forecast of $3.53 billion. EPS of $0.92 was also ahead of the market’s estimates of $0.88 per share.

By segment, subscription revenues rose 21% to $3.47 billion, ahead of the consensus estimate of $3.42 billion. Professional and Other Services revenues grew 13% to $102 million.

It ended the year with revenues growing 21% to $13.3 billion with an EPS of $1.69.

ServiceNow expects subscription revenues between $3.65-$3.66 billion for the first quarter and between $15.53-$15.57 billion for the year.

ServiceNow’s Acquisition Spree

ServiceNow has been on an acquisition spree over the last year. Last December, it announced the acquisition of Armis, a private US-Israeli cybersecurity company for internet-connected devices, for $7.75 billion. Armis was founded by in 2015 by Yevgeny Dibrov, Nadir Izrael and Tomer Schwartz to give organizations a real-time view and insight into protection of their assets and risks. Armis was hoping to go public by 2026-2027, but given the unpredictable market conditions, it chose the merger route instead.

The acquisition will help ServiceNow provide its customers with a unified, end-to-end security exposure and operations stack to help defend against AI-powered attacks. ServiceNow hopes to leverage the acquisition to accelerate its roadmap to autonomous, proactive cybersecurity.

The transaction is expected to close in the second half of 2026. Prior to the acquisition, Armis was privately held and did not disclose financials, but reports suggest that it had an annualized run rate of over $300 million as of August this year. It had raised $1.45 billion in funding from investors including Sequoia, CapitalG, and Insight Partners. In a funding round held in November last year, Armis had raised $435 million at a valuation of $6.1 billion.

Earlier last month, ServiceNow also announced plans to acquire Pyramid Analytics, a provider of unified, AI-powered business analytics, data science, and data preparation platform, for an undisclosed sum. Israel-based Pyramid Analytics was founded in 2009 by Omri Kohl, Avi Perez and Herbert Ochtma.

Unlike traditional analytics platforms, Pyramid’s solutions lets users query data conversationally to get quick responses. ServiceNow realizes that simply having access to data is not enough. It needs to build the tools needed to connect disparate data sources, extract meaningful insights, and take agentic action in the flow of work. ServiceNow is working to achieve that through its Workflow Data Fabric which connects, contextualizes, and controls data and then uses it to power AI agents and workflows with intelligence. With Pyramid Analytics, ServiceNow will be able to add a powerful AI-powered analytics layer to that tool and help customers unlock greater value from their data.

Prior to the acquisition, Pyramid Analytics was also privately held and did not disclose its financials. Reports suggest that it had raised $250 million in funding from investors including BlackRock, HIG Growth Partners, Clal Insurance, Kingfisher Capital, General Oriental, JVP, Maor Capital, Sequoia Capital, and Viola Growth.

Keeping with the theme, yesterday, ServiceNow also announced the acquisition of Israeli startup Traceloop for an estimated $60-$80 million. It was founded in 2022 by Nir Gazit and Gal Kleinman to build an AI observability solution. Traceloop’s platform is built on the open-source OpenLLMetry and automates evaluations of AI agents to detect failures and track real-world behavior before fixes are deployed. Its platform replaces the need for manual trial-and-error testing with automated evaluations that can be deployed at scale with greater confidence.

Traceloop will become part of ServiceNow’s AI Control Tower that is responsible for managing, governing and evaluating all AI systems across an organization. Prior to the acquisition, Traceloop was also privately held and did not disclose its financials. It is said to have raised $6.1 million in funds from investors including Sorenson Capital, Ibex Investors, Samsung NEXT, Y Combinator, and Grand Ventures.

Israel has exceptional capabilities in Cyber Security. ServiceNow buying into that talent pool and domain expertise is a good strategy. I also like their product roadmap of including security into their IT services stack in a more integrated way.

The Cybersecurity industry is also getting hammered in the market currently, and ServiceNow is feeling the pressure of that bear outlook. However, I am also a believer in the top Cyber Security platforms like Zscaler, Palo Alto Networks, Crowdstrike and Cloudflare. And I like ServiceNow’s Cyber Security strategy. The stock is a buy in my assessment.

Its stock is trading at $109.42 with a market capitalization of $119.4 billion. It touched a 52-week high of $211.48 last summer and had fallen to a 52-week low of $98 earlier last month. The recent geopolitical turmoil has not helped the stock much.

Disclosure: All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article. I am an investor in this company.

Photo Credit: Donny Gonzo / Flickr.com

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This segment is a part in the series : Cloud Stocks