WEBVTT - ServiceNow CEO Bill McDermott Talks Q1 Earnings

0:00:02.520 --> 0:00:17.440
<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

0:00:12.400 --> 0:00:17.320
<v Speaker 2>Software stocks are falling. Service Now itself down seventeen percent,

0:00:17.440 --> 0:00:21.760
<v Speaker 2>the biggest drop in six years, even though subscription revenue

0:00:21.840 --> 0:00:25.319
<v Speaker 2>rose twenty two percent in the March quarter. Bloomberg Tech's

0:00:25.360 --> 0:00:27.840
<v Speaker 2>co host Carolyn Hide joins US now with the CEO

0:00:27.920 --> 0:00:29.520
<v Speaker 2>of Service Now, Bill McDermott.

0:00:29.520 --> 0:00:30.400
<v Speaker 3>Carolyn Matt that.

0:00:30.520 --> 0:00:33.519
<v Speaker 1>Is great context with which to turn to Bill, even

0:00:33.640 --> 0:00:37.520
<v Speaker 1>though subscription growth is still twenty two percent, You beat

0:00:37.600 --> 0:00:40.440
<v Speaker 1>on revenue. What more can you telemarket right now?

0:00:40.479 --> 0:00:44.040
<v Speaker 4>Bill, I think it's very important to deal with facts.

0:00:45.200 --> 0:00:49.159
<v Speaker 4>We're fifteen billion dollar enterprise software company, the fastest to

0:00:49.159 --> 0:00:49.640
<v Speaker 4>ever get.

0:00:49.680 --> 0:00:51.720
<v Speaker 3>They're growing at more than twenty percent.

0:00:52.479 --> 0:00:55.760
<v Speaker 4>We had a beaten raised quarter and we reiterated our

0:00:55.760 --> 0:00:59.600
<v Speaker 4>full year guidance. So that's the baseline for the conversation.

0:01:00.360 --> 0:01:03.360
<v Speaker 4>And we are a growth company, and I'll take the

0:01:03.400 --> 0:01:05.360
<v Speaker 4>interview anywhere you wanted to go.

0:01:06.160 --> 0:01:11.319
<v Speaker 1>Let's talk about geopolitical headwinds. Let's talk about acquisition integration expenses.

0:01:11.520 --> 0:01:14.200
<v Speaker 1>Maybe there's some of the areas that investors and the

0:01:14.240 --> 0:01:16.320
<v Speaker 1>analysts have said, Look, it made for a bit more

0:01:16.360 --> 0:01:19.160
<v Speaker 1>of a messy coreter than perhaps would have been easier

0:01:19.160 --> 0:01:20.920
<v Speaker 1>for you to tell the story on what is the

0:01:21.040 --> 0:01:23.399
<v Speaker 1>underlying growth rate of AI at the moment of adoption

0:01:23.520 --> 0:01:25.160
<v Speaker 1>of the service and our products.

0:01:25.600 --> 0:01:28.560
<v Speaker 4>Yeah, what you have to realize is AI is the product,

0:01:28.600 --> 0:01:32.240
<v Speaker 4>it's the whole platform. So the platform is fully autonomous,

0:01:32.240 --> 0:01:35.840
<v Speaker 4>so when a customer buys our AI platform, it is

0:01:35.959 --> 0:01:40.119
<v Speaker 4>enabling every function of their company to be a native

0:01:40.200 --> 0:01:41.200
<v Speaker 4>AI company.

0:01:41.720 --> 0:01:44.520
<v Speaker 3>So it's all AI now. And that's another thing.

0:01:44.720 --> 0:01:47.520
<v Speaker 4>We said we would do twenty and twenty twenty six

0:01:47.560 --> 0:01:53.320
<v Speaker 4>a billion of net new annual contract value on pure

0:01:53.400 --> 0:01:56.560
<v Speaker 4>AI additive to the platform. Yesterday we up it to

0:01:56.600 --> 0:01:58.400
<v Speaker 4>a billion and a half and I think we'll run

0:01:58.480 --> 0:02:02.440
<v Speaker 4>through that. If there's anything that the investors wanted, they

0:02:02.640 --> 0:02:06.520
<v Speaker 4>probably wanted a bigger beat. So we're beating every quarter,

0:02:06.600 --> 0:02:08.680
<v Speaker 4>Maybe they wanted a bigger beat. And then the second

0:02:08.720 --> 0:02:11.400
<v Speaker 4>thing is, and it is true, we acquired a couple

0:02:11.480 --> 0:02:15.160
<v Speaker 4>of companies, so let's talk about that. One was move Works,

0:02:15.360 --> 0:02:17.840
<v Speaker 4>where in one quarter we only had in one quarter

0:02:18.280 --> 0:02:21.440
<v Speaker 4>we did in one quarter what they never did in

0:02:21.480 --> 0:02:24.160
<v Speaker 4>a whole year before they became part of Service Now.

0:02:24.520 --> 0:02:26.679
<v Speaker 4>So the go to market machine knows how to take

0:02:26.760 --> 0:02:31.919
<v Speaker 4>great innovation and monetize it. Secondly, we took VESA and Armist.

0:02:32.040 --> 0:02:35.320
<v Speaker 4>Vesa just joined us, Armists just joined us on Monday.

0:02:35.720 --> 0:02:37.960
<v Speaker 4>So the market might have said, are they doing M

0:02:38.000 --> 0:02:40.840
<v Speaker 4>and A to cover up for any lack of growth

0:02:40.840 --> 0:02:43.160
<v Speaker 4>in the core? How could that be true when it

0:02:43.200 --> 0:02:46.240
<v Speaker 4>wasn't even in the number. And so these companies are

0:02:46.280 --> 0:02:49.240
<v Speaker 4>fantastic because now you're going to manage the identity of

0:02:49.320 --> 0:02:52.720
<v Speaker 4>humans and agents, which is really important when you are

0:02:52.760 --> 0:02:55.959
<v Speaker 4>the rails and rules of every major corporation in the world.

0:02:56.280 --> 0:02:59.760
<v Speaker 4>You want AI that works with humans and does so

0:02:59.880 --> 0:03:01.480
<v Speaker 4>in a highly controlled manner.

0:03:01.760 --> 0:03:02.680
<v Speaker 3>That's VESA.

0:03:02.800 --> 0:03:06.840
<v Speaker 4>And then Armis is operating technology, where now you're managing

0:03:06.960 --> 0:03:10.560
<v Speaker 4>all of the IoT of everything, networks, devices and so

0:03:10.639 --> 0:03:14.240
<v Speaker 4>forth to keep these companies highly secure. As you know

0:03:14.320 --> 0:03:18.640
<v Speaker 4>better than anybody, Caroline, cybercrime is the third largest economy

0:03:18.639 --> 0:03:21.240
<v Speaker 4>in the world. Is a trillion dollar a month problem.

0:03:21.600 --> 0:03:24.520
<v Speaker 4>And now we've opened up our TAM to six hundred

0:03:24.560 --> 0:03:27.760
<v Speaker 4>billion TAM. So we're going after the biggest ocean of

0:03:27.800 --> 0:03:31.079
<v Speaker 4>opportunity we've ever looked at. We're growing strong, and we're

0:03:31.200 --> 0:03:33.959
<v Speaker 4>very confident in our full year guide. So I think

0:03:34.000 --> 0:03:36.640
<v Speaker 4>the market is the best entry point that I could

0:03:36.680 --> 0:03:38.440
<v Speaker 4>ever imagine for this stock.

0:03:39.560 --> 0:03:42.520
<v Speaker 1>You've actually bought stock, and actually a lot of those

0:03:42.520 --> 0:03:46.160
<v Speaker 1>in the AC suite are stopping automatically selling it. How

0:03:46.240 --> 0:03:48.000
<v Speaker 1>much more do you think you have to buy to

0:03:48.320 --> 0:03:51.160
<v Speaker 1>really shrug off push off this bear case that's got

0:03:51.200 --> 0:03:52.400
<v Speaker 1>into the investor mindset.

0:03:53.200 --> 0:03:56.240
<v Speaker 4>I think the bear case is really just the terminal

0:03:56.320 --> 0:03:59.520
<v Speaker 4>value of software as the service companies. It has nothing

0:03:59.600 --> 0:04:03.760
<v Speaker 4>to do with just service now. It's like anything that

0:04:03.880 --> 0:04:06.960
<v Speaker 4>represents maybe it wasn't as big a guide beat as

0:04:07.000 --> 0:04:09.680
<v Speaker 4>we are used to and so forth. It's just a

0:04:09.720 --> 0:04:13.000
<v Speaker 4>real reality of where do the language models? And these

0:04:13.040 --> 0:04:16.520
<v Speaker 4>are excellent companies. The hyperscalers are great companies, the language

0:04:16.520 --> 0:04:19.520
<v Speaker 4>models are excellent companies. We did a deal yesterday with Gemini.

0:04:19.600 --> 0:04:22.560
<v Speaker 4>We've done a deal with open Ai and Anthropic. We

0:04:22.640 --> 0:04:25.719
<v Speaker 4>infuse them into our innovation cycle and they integrate with

0:04:25.839 --> 0:04:29.560
<v Speaker 4>us to make sure that AI has done properly in

0:04:29.760 --> 0:04:33.159
<v Speaker 4>enterprise and the ninety five billion workflows and seven trillion

0:04:33.240 --> 0:04:36.360
<v Speaker 4>transactions we have reside over data that it.

0:04:36.320 --> 0:04:37.960
<v Speaker 3>Took us twenty two years to build.

0:04:38.040 --> 0:04:41.280
<v Speaker 4>So it's that context engine that we have that brings

0:04:41.320 --> 0:04:44.640
<v Speaker 4>those language models to life. And they know that, but

0:04:44.680 --> 0:04:48.000
<v Speaker 4>the market might think, hey, maybe I can do everything

0:04:48.040 --> 0:04:50.400
<v Speaker 4>with a language model and build it myself, which is

0:04:50.400 --> 0:04:53.720
<v Speaker 4>not going to happen. Every CIO and CEO will tell

0:04:53.760 --> 0:04:57.120
<v Speaker 4>you service now for a fraction of my overall it

0:04:57.480 --> 0:05:00.400
<v Speaker 4>spend does enormous work for me. Why how would I

0:05:00.520 --> 0:05:04.039
<v Speaker 4>rebuild it with a language model and pay ten times more?

0:05:04.320 --> 0:05:08.120
<v Speaker 4>So that's not even a viable comparison. But yet comparisons

0:05:08.160 --> 0:05:10.160
<v Speaker 4>like that exist until proven different.

0:05:11.080 --> 0:05:14.120
<v Speaker 1>What will prove it different? Bill, You're such an optimistic guy,

0:05:14.120 --> 0:05:16.640
<v Speaker 1>and I can sort of sense it today that energy

0:05:16.680 --> 0:05:18.480
<v Speaker 1>is being hit by the fact that stock is having

0:05:18.560 --> 0:05:21.880
<v Speaker 1>the worst pummeling on record, and you've got RBC saying

0:05:21.880 --> 0:05:24.279
<v Speaker 1>software sentiment is some of the lowest level in memory.

0:05:24.839 --> 0:05:27.880
<v Speaker 1>What changes what shifts sentiment?

0:05:28.040 --> 0:05:29.960
<v Speaker 3>Do you think leadership?

0:05:30.160 --> 0:05:32.760
<v Speaker 4>You know, the most powerful thing a leader can do

0:05:32.839 --> 0:05:35.680
<v Speaker 4>is change minds. And the best thing that can change

0:05:35.720 --> 0:05:40.279
<v Speaker 4>people's minds is performance. And that's why I reiterated with

0:05:40.400 --> 0:05:43.360
<v Speaker 4>great confidence, I'll full your guidance. I'll be in front

0:05:43.400 --> 0:05:46.720
<v Speaker 4>of thirty thousand people in a few minutes firing them

0:05:46.800 --> 0:05:49.280
<v Speaker 4>up on the game plan that we have well in order,

0:05:49.839 --> 0:05:50.720
<v Speaker 4>the M and A that.

0:05:50.640 --> 0:05:53.680
<v Speaker 3>We did will be additive to a great corporation.

0:05:54.320 --> 0:05:57.640
<v Speaker 4>This is the fastest growing enterprise software company of all time,

0:05:58.000 --> 0:06:00.360
<v Speaker 4>first to get to fifteen billion, it'll be the first

0:06:00.440 --> 0:06:03.880
<v Speaker 4>to get to thirty two billion. And we're excited to

0:06:03.920 --> 0:06:08.400
<v Speaker 4>have our shareholders join us in Nevada, Las Vegas in

0:06:08.440 --> 0:06:12.359
<v Speaker 4>a couple of weeks to explain the mid term and

0:06:12.480 --> 0:06:14.880
<v Speaker 4>long term plan of service now, which is to double

0:06:14.920 --> 0:06:16.400
<v Speaker 4>the company in the next few years.

0:06:16.440 --> 0:06:18.480
<v Speaker 3>So we're excited, we're ready to go.

0:06:19.040 --> 0:06:22.200
<v Speaker 4>And I would really underplay the narrative that's out there

0:06:22.240 --> 0:06:25.599
<v Speaker 4>on enterprise sofa and not just ours, but these large

0:06:25.640 --> 0:06:29.440
<v Speaker 4>scale systems are not going to be replaced by language models.

0:06:29.480 --> 0:06:32.240
<v Speaker 4>They'll be very complementary to the large scale systems, but

0:06:32.440 --> 0:06:35.320
<v Speaker 4>not going to replace them. So we have been at

0:06:35.320 --> 0:06:37.719
<v Speaker 4>this now for quite a while in the enterprise. I

0:06:37.760 --> 0:06:40.000
<v Speaker 4>know how the enterprise works. People just need to keep

0:06:40.000 --> 0:06:43.680
<v Speaker 4>their chin up and get really serious about making money

0:06:43.960 --> 0:06:46.120
<v Speaker 4>at a down moment like this, It's never been like

0:06:46.200 --> 0:06:48.200
<v Speaker 4>this before, so take advantage of it.

0:06:48.400 --> 0:06:50.880
<v Speaker 1>We'll let you get to your talent meeting. Yeah, let's

0:06:50.920 --> 0:06:53.520
<v Speaker 1>chanse up. Oh mcdammit. We so appreciate your time of

0:06:53.600 --> 0:06:56.640
<v Speaker 1>service now, thank you, Carolyn, Hi

0:06:56.720 --> 0:06:59.239
<v Speaker 2>We thank you as well, and our thanks to Bill

0:06:59.360 --> 0:07:00.520
<v Speaker 2>from serve this now