ServiceNow Plunges 11% on Armis Acquisition Speculation: Is This the Catalyst for a Sector Shakeout?

Summary
• ServiceNow (NOW) slumps 11.7% intraday to $763.86, its lowest since April 2025
• Bloomberg reports $7B acquisition talks for cybersecurity firm Armis, unconfirmed by either company
• KeyBanc downgrades shares to 'Underweight,' citing AI-driven seat-count risks

ServiceNow’s sharp selloff has sent shockwaves through the Application Software sector, with shares plunging to a 9-month low amid swirling speculation about a $7 billion acquisition of Armis. The move follows a weekend Bloomberg report citing 'advanced talks,' though neither company has confirmed the deal. Meanwhile, technical indicators and options activity suggest heightened volatility as traders brace for potential regulatory scrutiny and sector-wide implications.

Armis Acquisition Talks Spark Turbulence in ServiceNow Shares
The plunge stems from Bloomberg’s report that ServiceNow is nearing a $7 billion deal for Armis, a cybersecurity firm specializing in operational technology (OT) security. Morgan Stanley noted this would be ServiceNow’s largest acquisition this year, raising concerns about growth sustainability and capital allocation. KeyBanc’s downgrade to 'Underweight' compounded the sell-off, warning that AI automation could erode demand for traditional SaaS models. The market’s reaction reflects skepticism about ServiceNow’s ability to integrate Armis without diluting margins or overpaying for a non-core asset.

Application Software Sector Under Pressure as Salesforce Trails ServiceNow's Slide
The Application Software sector mirrored ServiceNow’s decline, with Salesforce (CRM) down 3.0% as investors rotated out of AI-exposed SaaS names. The sector’s broader weakness underscores growing unease over AI-driven seat-count pressures and margin compression. While ServiceNow’s move is tied to a specific acquisition rumor, the sector’s synchronized drop highlights systemic concerns about SaaS growth models in a macro environment marked by cautious corporate spending.

GraniteShares 2x Long NOW Daily ETF (NOWL) and High-Leverage Call Options in Focus
• 200-day average: 912.45 (well above current price)
• RSI: 74.34 (overbought territory)
• MACD: -3.31 (bearish divergence)
• Bollinger Bands: Price at 763.86, below the lower band of 791.42

ServiceNow’s technical profile suggests a short-term oversold condition, with RSI near overbought levels and MACD signaling bearish momentum. The 200-day average remains a critical resistance at $912.45, while the 791.42 lower Bollinger Band could act as a near-term support. The GraniteShares 2x Long NOW Daily ETF (NOWL), down 23.2%, offers leveraged exposure but carries high volatility risk. For options, two contracts stand out:

• NOW20251219C775
- Type: Call
- Strike Price: $775
- Expiration: 2025-12-19
- IV: 36.41% (moderate)
- Leverage Ratio: 89.89% (high)
- Delta: 0.3827 (moderate sensitivity)
- Theta: -3.62 (high time decay)
- Gamma: 0.0117 (strong price sensitivity)
- Turnover: 1,358,809 (liquid)
- Payoff (5% downside): $0 (strike above projected price)
- Why: High leverage and liquidity make this ideal for a rebound trade if the $775 level holds.

• NOW20251219C770
- Type: Call
- Strike Price: $770
- Expiration: 2025-12-19
- IV: 37.05% (moderate)
- Leverage Ratio: 71.41% (high)
- Delta: 0.4430 (moderate sensitivity)
- Theta: -4.06 (high time decay)
- Gamma: 0.0119 (strong price sensitivity)
- Turnover: 188,913 (liquid)
- Payoff (5% downside): $0 (strike above projected price)
- Why: Balances leverage and delta for a directional bet on a rebound above $770.

If $770 breaks, NOW20251219C770 offers short-side potential. Aggressive bulls may consider NOW20251219C775 into a bounce above $775.

Backtest ServiceNow Stock Performance
The performance of NOW (New Oriental Online) after an intraday plunge of -12% in 2022 has been impressive, with a strategy return of 53.71% and a CAGR of 11.58% from January 1, 2022, to December 15, 2025. Despite a maximum drawdown of 0%, the strategy maintained a positive Sharpe ratio of 0.52, indicating good risk-adjusted returns.

ServiceNow at Crossroads: Strategic Acquisition or Overextended Bet?
ServiceNow’s 11.7% drop has exposed the fragility of its growth narrative, with the Armis acquisition rumors casting doubt on its capital allocation discipline. While the stock’s technicals suggest a potential rebound from the 791.42 Bollinger Band, the sector’s broader sell-off—led by Salesforce’s -3.0%—indicates systemic SaaS headwinds. Traders should monitor the $770 support level and the 200-day average at $912.45 for directional clues. For now, GraniteShares 2x Long NOW Daily ETF (NOWL) and the NOW20251219C770 call option offer high-leverage plays on a near-term reversal. Watch for $770 breakdown or regulatory reaction.