Why ServiceNow Stock Dropped Today

Actions of Service Now (NOW -3.44%) slipped today in response to news that a partner firm, Carahsoft Technology, was raided by the FBI yesterday in Virginia.

While the raid on the IT distributor does not directly implicate ServiceNow, analysts appear to fear the investigation could affect ServiceNow’s business.

As of 11:11 a.m. ET, the stock was down 2.9%.

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How ServiceNow is affected

Conformable Piper SandlerServiceNow has the largest exposure of any software company, and the move could disrupt some of ServiceNow’s contracts with the federal government.

He also said more than 40 percent of ServiceNow’s reported federal contracts come through Carahsoft. SAP and Okta were also affected by the investigation.

Investigators believe Carahsoft and its partners intended to overcharge government agencies. ServiceNow has not addressed this investigation, although the potential impact on the company still appears unclear.

Earlier this year, SAP agreed to pay $222 million in fines for bribery schemes in seven countries.

What’s next for ServiceNow

ServiceNow is one of the largest cloud software companies, and even if the Carahsoft investigation results in a fine, it’s unlikely to derail its business in a significant way. However, it is worth keeping an eye on this issue.

In a challenging environment for the software industry, ServiceNow continued to deliver steady growth with revenue up 22% to $2.63 billion in the second quarter and a 31% increase in performance obligations (RPO) remaining, up to $18.6 billion, showing the remaining pending. strong as well. In addition, operating margins continue to increase.

If the investigation isn’t part of a bigger problem, ServiceNow still looks well positioned for long-term growth.