ServiceNow CEO Bill McDermott on AI impact: It's been an amazing uptake in our business

Summary

Servicenow reported strong fourth quarter subscription revenue growth and raised fiscal year guidance, fueled by demand for its AI capabilities. CEO Bill McDermott touted Servicenow's early mover advantage in bringing large language models to its platform, enabling companies like Visa, Siemens and EY to boost productivity through AI use cases. McDermott highlighted partnerships with AWS and Microsoft, as Servicenow becomes an enterprise standard. Despite some ongoing economic caution, McDermott expressed confidence in Servicenow's growth, with $18B in RPO, 99% renewal rates and outperformance versus peers.

Takeaways

• 😊 ServiceNow had very strong Q4 results, with subscription revenue growth and raised guidance
• 🚀 There is huge appetite and momentum for ServiceNow's generative AI capabilities
• 💰 ServiceNow's AI solutions are delivering 40-52% productivity gains for customers
• ⚡️ ServiceNow's platform is becoming the standard for enterprise digital transformation
• 👍 Strategic partnerships expanding with Microsoft, Amazon AWS and others
• 😎 ServiceNow landing deals with leading companies like Visa, Siemens, EY and Chipotle
• 💡 Use cases span HR, IT, customer service, risk management and more
• 📈 Exceptional financial performance - growing revenue at the Rule of 55
• 🔒 99% renewal rates show extremely sticky customer relationships
• 🤑 Activist investors approaching ServiceNow for advice before targeting companies

Q & A

What has been the customer appetite for ServiceNow's generative AI solutions?

ServiceNow said there is a "strong appetite" for its generative AI solutions based on the momentum seen in the market and demand from customers.

How does ServiceNow's AI platform help companies like Visa and Siemens?

ServiceNow's AI platform helps companies like Visa resolve payment disputes end-to-end and helps Siemens boost HR productivity by resolving cases automatically instead of tying up people on phone calls.

What percentage productivity boost does ServiceNow's AI platform provide?

ServiceNow's CEO said their generative AI solutions on the ServiceNow platform provide anywhere between a 40-52% increase in productivity.

Why does ServiceNow's COO say the demand environment continues to be tough?

He says there is a "new normal" where large deals at big corporations require multiple approval layers including the CEO, so cycle times for major deals are longer.

What major companies are now standardizing on ServiceNow?

Microsoft, Amazon AWS, and many major banks and manufacturers are standardizing on ServiceNow as their digital transformation platform.

What is ServiceNow's current ACV, RPO growth rate and margins?

ServiceNow has $10 billion in ACV, $18 billion in RPO growing over 50%, and expanding margins.

Why are activists approaching ServiceNow before targeting companies?

Because they are blown away by ServiceNow's business model - 55% growth rate at scale, 99% renewal rates, and strong margins.

How does ServiceNow plan to keep up its high growth rate?

By expanding within current customers as they see the value, and landing in new major corporations who want to standardize on their intelligent digital transformation platform.

What makes ServiceNow's AI solutions different from others?

ServiceNow focuses on domain-specific AI use cases that boost productivity, versus generic AI. Their solutions are tied to specific examples and business outcomes.

What is the benefit of ServiceNow listing its products in the AWS Marketplace?

It allows AWS customers to easily purchase and deploy ServiceNow's solutions alongside other cloud services, with the same performance as ServiceNow's own cloud.