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Software stocks are falling. Service Now itself down seventeen percent, the biggest drop in six years, even though subscription revenue rose twenty two percent in the March quarter. Bloomberg Tech's co host Carolyn Hide joins US now with the CEO of Service Now, Bill McDermott.
Carolyn Matt that.
Is great context with which to turn to Bill, even though subscription growth is still twenty two percent, You beat on revenue. What more can you telemarket right now?
Bill, I think it's very important to deal with facts. We're fifteen billion dollar enterprise software company, the fastest to ever get.
They're growing at more than twenty percent.
We had a beaten raised quarter and we reiterated our full year guidance. So that's the baseline for the conversation. And we are a growth company, and I'll take the interview anywhere you wanted to go.
Let's talk about geopolitical headwinds. Let's talk about acquisition integration expenses. Maybe there's some of the areas that investors and the analysts have said, Look, it made for a bit more of a messy coreter than perhaps would have been easier for you to tell the story on what is the underlying growth rate of AI at the moment of adoption of the service and our products.
Yeah, what you have to realize is AI is the product, it's the whole platform. So the platform is fully autonomous, so when a customer buys our AI platform, it is enabling every function of their company to be a native AI company.
So it's all AI now. And that's another thing.
We said we would do twenty and twenty twenty six a billion of net new annual contract value on pure AI additive to the platform. Yesterday we up it to a billion and a half and I think we'll run through that. If there's anything that the investors wanted, they probably wanted a bigger beat. So we're beating every quarter, Maybe they wanted a bigger beat. And then the second thing is, and it is true, we acquired a couple
of companies, so let's talk about that. One was move Works, where in one quarter we only had in one quarter we did in one quarter what they never did in a whole year before they became part of Service Now. So the go to market machine knows how to take great innovation and monetize it. Secondly, we took VESA and Armist. Vesa just joined us, Armists just joined us on Monday. So the market might have said, are they doing M and A to cover up for any lack of growth
in the core? How could that be true when it wasn't even in the number. And so these companies are fantastic because now you're going to manage the identity of humans and agents, which is really important when you are the rails and rules of every major corporation in the world. You want AI that works with humans and does so in a highly controlled manner.
That's VESA.
And then Armis is operating technology, where now you're managing all of the IoT of everything, networks, devices and so forth to keep these companies highly secure. As you know better than anybody, Caroline, cybercrime is the third largest economy in the world. Is a trillion dollar a month problem. And now we've opened up our TAM to six hundred billion TAM. So we're going after the biggest ocean of opportunity we've ever looked at. We're growing strong, and we're
very confident in our full year guide. So I think the market is the best entry point that I could ever imagine for this stock.
You've actually bought stock, and actually a lot of those in the AC suite are stopping automatically selling it. How much more do you think you have to buy to really shrug off push off this bear case that's got into the investor mindset.
I think the bear case is really just the terminal value of software as the service companies. It has nothing to do with just service now. It's like anything that represents maybe it wasn't as big a guide beat as we are used to and so forth. It's just a real reality of where do the language models? And these are excellent companies. The hyperscalers are great companies, the language models are excellent companies. We did a deal yesterday with Gemini.
We've done a deal with open Ai and Anthropic. We infuse them into our innovation cycle and they integrate with us to make sure that AI has done properly in enterprise and the ninety five billion workflows and seven trillion transactions we have reside over data that it.
Took us twenty two years to build.
So it's that context engine that we have that brings those language models to life. And they know that, but the market might think, hey, maybe I can do everything with a language model and build it myself, which is not going to happen. Every CIO and CEO will tell you service now for a fraction of my overall it spend does enormous work for me. Why how would I rebuild it with a language model and pay ten times more?
So that's not even a viable comparison. But yet comparisons like that exist until proven different.
What will prove it different? Bill, You're such an optimistic guy, and I can sort of sense it today that energy is being hit by the fact that stock is having the worst pummeling on record, and you've got RBC saying software sentiment is some of the lowest level in memory. What changes what shifts sentiment?
Do you think leadership?
You know, the most powerful thing a leader can do is change minds. And the best thing that can change people's minds is performance. And that's why I reiterated with great confidence, I'll full your guidance. I'll be in front of thirty thousand people in a few minutes firing them up on the game plan that we have well in order, the M and A that.
We did will be additive to a great corporation.
This is the fastest growing enterprise software company of all time, first to get to fifteen billion, it'll be the first to get to thirty two billion. And we're excited to have our shareholders join us in Nevada, Las Vegas in a couple of weeks to explain the mid term and long term plan of service now, which is to double the company in the next few years.
So we're excited, we're ready to go.
And I would really underplay the narrative that's out there on enterprise sofa and not just ours, but these large scale systems are not going to be replaced by language models. They'll be very complementary to the large scale systems, but not going to replace them. So we have been at this now for quite a while in the enterprise. I
know how the enterprise works. People just need to keep their chin up and get really serious about making money at a down moment like this, It's never been like this before, so take advantage of it.
We'll let you get to your talent meeting. Yeah, let's chanse up. Oh mcdammit. We so appreciate your time of service now, thank you, Carolyn, Hi
We thank you as well, and our thanks to Bill from serve this now