Investing.com -- Shares of ServiceNow (NYSE: NYSE: NOW ) dropped 5.5% as the company announced its definitive agreement to acquire AI firm Moveworks for $2.85 billion. The decline reflects investor concerns over the significant cash and stock deal, which aims to integrate Moveworks’ AI assistant and enterprise search technology with ServiceNow’s existing AI and automation capabilities.

The acquisition is a strategic move to enhance employee engagement and productivity by leveraging the combined technologies. ServiceNow, known for its AI-driven business transformation solutions, has been experiencing robust growth in its AI customer base, boasting nearly 1,000 AI customers and over $200 million in annual contract value for its Pro Plus AI solution as of December 31, 2024.

Despite ServiceNow’s strong gross profit margins of 79.18% and a revenue increase of 22.44% over the past twelve months to $10.98 billion, the stock’s downturn suggests investor skepticism surrounding the deal’s valuation and the immediate impact on the company’s financials. The market’s reaction may also be influenced by the anticipated closure of the transaction in the second half of 2025, which introduces a level of uncertainty regarding the regulatory approvals and closing conditions.

Moveworks has been recognized for its AI expertise and has seen significant adoption among Fortune 500 and Global 2000 companies. The acquisition is expected to drive further utilization of ServiceNow’s AI platform across various sectors, including CRM, by simplifying employee interactions with enterprise systems.

ServiceNow’s executive, Amit Zavery, expressed optimism about the transformative potential of the acquisition, stating that the combination of Moveworks’ AI-first experience with ServiceNow’s platform will "supercharge enterprise-wide AI adoption."

The transaction, which is payable in a mix of cash and stock, is being advised by J.P. Morgan Securities LLC and Tidal Partners LLC. As the deal progresses towards completion, investors will be watching closely for its impact on ServiceNow’s financial performance and market positioning in the increasingly competitive field of enterprise AI.

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