This article first appeared on GuruFocus.
ServiceNow (NYSE:NOW) has shifted into a more aggressive deal-making phase after years of avoiding large acquisitions, committing at least $12 billion this year to acquisitions and strategic investments. The company’s largest move came Tuesday with an agreement to buy cybersecurity startup Armis for $7.75 billion, a business focused on identifying and monitoring security threats across corporate devices. While the deal could be viewed as a logical extension of ServiceNow’s enterprise IT management platform, it has also resurfaced investor concerns given Chief Executive Officer Bill McDermott’s history of overseeing high-profile, and at times controversial, mergers during his tenure at SAP.
The Armis transaction follows closely behind ServiceNow’s recently completed $2.8 billion acquisition of Moveworks and a $750 million investment earlier this year in contact center software provider Genesys, alongside six additional deals with undisclosed values. This increased pace of activity has drawn scrutiny as application software companies contend with potential disruption from generative artificial intelligence. ServiceNow’s shares had declined 18% this year before news of the Armis deal emerged on Dec. 13, and have fallen a further 12% since, with some analysts suggesting the acquisition could be aimed at supporting decelerating revenue growth rather than serving as a purely incremental product addition.
Management has pushed back on comparisons to McDermott’s previous M&A strategy at SAP, arguing that ServiceNow occupies a different strategic position and does not need acquisitions to secure market traction. The company had previously emphasized organic growth and smaller tuck-in transactions, a position reiterated as recently as this month. Still, some analysts have described the renewed emphasis on large deals as reminiscent of earlier cycles, particularly as Wall Street expects ServiceNow’s revenue growth, excluding acquisitions, to dip below 20% in 2026, even as the company is projected to generate more than $13 billion in sales this year, representing a 21% increase from a year earlier.
