ServiceNow's stock experienced a significant pre-market plunge of 5.23%, extending losses from the previous after-hours session. This sharp decline comes despite the company reporting better-than-expected fourth-quarter results and issuing forward guidance that exceeded analyst estimates.

The sell-off highlights intense market skepticism regarding traditional application software leaders, with investors worried that generative AI will reshape the industry landscape and potentially weaken the market positions of established giants like ServiceNow. While the company's primary generative AI product, Now Assist, is performing above expectations, these positive developments failed to alleviate investor anxieties about technological disruption.

Additionally, concerns about the company's aggressive mergers and acquisitions strategy contributed to the negative sentiment. ServiceNow has been spending heavily on acquisitions, including its $7.75 billion deal to buy cybersecurity startup Armis, which has pressured the stock according to market analysts. The negative sentiment was further reinforced by several analyst firms cutting their target prices for ServiceNow shares following the earnings release.