Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Software stocks are falling. Service Now itself down seventeen percent,
Speaker 2: the biggest drop in six years, even though subscription revenue
Speaker 2: rose twenty two percent in the March quarter. Bloomberg Tech's
Speaker 2: co host Carolyn Hide joins US now with the CEO
Speaker 2: of Service Now, Bill McDermott.
Speaker 3: Carolyn Matt that.
Speaker 1: Is great context with which to turn to Bill, even
Speaker 1: though subscription growth is still twenty two percent, You beat
Speaker 1: on revenue. What more can you telemarket right now?
Speaker 4: Bill, I think it's very important to deal with facts.
Speaker 4: We're fifteen billion dollar enterprise software company, the fastest to
Speaker 4: ever get.
Speaker 3: They're growing at more than twenty percent.
Speaker 4: We had a beaten raised quarter and we reiterated our
Speaker 4: full year guidance. So that's the baseline for the conversation.
Speaker 4: And we are a growth company, and I'll take the
Speaker 4: interview anywhere you wanted to go.
Speaker 1: Let's talk about geopolitical headwinds. Let's talk about acquisition integration expenses.
Speaker 1: Maybe there's some of the areas that investors and the
Speaker 1: analysts have said, Look, it made for a bit more
Speaker 1: of a messy coreter than perhaps would have been easier
Speaker 1: for you to tell the story on what is the
Speaker 1: underlying growth rate of AI at the moment of adoption
Speaker 1: of the service and our products.
Speaker 4: Yeah, what you have to realize is AI is the product,
Speaker 4: it's the whole platform. So the platform is fully autonomous,
Speaker 4: so when a customer buys our AI platform, it is
Speaker 4: enabling every function of their company to be a native
Speaker 4: AI company.
Speaker 3: So it's all AI now. And that's another thing.
Speaker 4: We said we would do twenty and twenty twenty six
Speaker 4: a billion of net new annual contract value on pure
Speaker 4: AI additive to the platform. Yesterday we up it to
Speaker 4: a billion and a half and I think we'll run
Speaker 4: through that. If there's anything that the investors wanted, they
Speaker 4: probably wanted a bigger beat. So we're beating every quarter,
Speaker 4: Maybe they wanted a bigger beat. And then the second
Speaker 4: thing is, and it is true, we acquired a couple
Speaker 4: of companies, so let's talk about that. One was move Works,
Speaker 4: where in one quarter we only had in one quarter
Speaker 4: we did in one quarter what they never did in
Speaker 4: a whole year before they became part of Service Now.
Speaker 4: So the go to market machine knows how to take
Speaker 4: great innovation and monetize it. Secondly, we took VESA and Armist.
Speaker 4: Vesa just joined us, Armists just joined us on Monday.
Speaker 4: So the market might have said, are they doing M
Speaker 4: and A to cover up for any lack of growth
Speaker 4: in the core? How could that be true when it
Speaker 4: wasn't even in the number. And so these companies are
Speaker 4: fantastic because now you're going to manage the identity of
Speaker 4: humans and agents, which is really important when you are
Speaker 4: the rails and rules of every major corporation in the world.
Speaker 4: You want AI that works with humans and does so
Speaker 4: in a highly controlled manner.
Speaker 3: That's VESA.
Speaker 4: And then Armis is operating technology, where now you're managing
Speaker 4: all of the IoT of everything, networks, devices and so
Speaker 4: forth to keep these companies highly secure. As you know
Speaker 4: better than anybody, Caroline, cybercrime is the third largest economy
Speaker 4: in the world. Is a trillion dollar a month problem.
Speaker 4: And now we've opened up our TAM to six hundred
Speaker 4: billion TAM. So we're going after the biggest ocean of
Speaker 4: opportunity we've ever looked at. We're growing strong, and we're
Speaker 4: very confident in our full year guide. So I think
Speaker 4: the market is the best entry point that I could
Speaker 4: ever imagine for this stock.
Speaker 1: You've actually bought stock, and actually a lot of those
Speaker 1: in the AC suite are stopping automatically selling it. How
Speaker 1: much more do you think you have to buy to
Speaker 1: really shrug off push off this bear case that's got
Speaker 1: into the investor mindset.
Speaker 4: I think the bear case is really just the terminal
Speaker 4: value of software as the service companies. It has nothing
Speaker 4: to do with just service now. It's like anything that
Speaker 4: represents maybe it wasn't as big a guide beat as
Speaker 4: we are used to and so forth. It's just a
Speaker 4: real reality of where do the language models? And these
Speaker 4: are excellent companies. The hyperscalers are great companies, the language
Speaker 4: models are excellent companies. We did a deal yesterday with Gemini.
Speaker 4: We've done a deal with open Ai and Anthropic. We
Speaker 4: infuse them into our innovation cycle and they integrate with
Speaker 4: us to make sure that AI has done properly in
Speaker 4: enterprise and the ninety five billion workflows and seven trillion
Speaker 4: transactions we have reside over data that it.
Speaker 3: Took us twenty two years to build.
Speaker 4: So it's that context engine that we have that brings
Speaker 4: those language models to life. And they know that, but
Speaker 4: the market might think, hey, maybe I can do everything
Speaker 4: with a language model and build it myself, which is
Speaker 4: not going to happen. Every CIO and CEO will tell
Speaker 4: you service now for a fraction of my overall it
Speaker 4: spend does enormous work for me. Why how would I
Speaker 4: rebuild it with a language model and pay ten times more?
Speaker 4: So that's not even a viable comparison. But yet comparisons
Speaker 4: like that exist until proven different.
Speaker 1: What will prove it different? Bill, You're such an optimistic guy,
Speaker 1: and I can sort of sense it today that energy
Speaker 1: is being hit by the fact that stock is having
Speaker 1: the worst pummeling on record, and you've got RBC saying
Speaker 1: software sentiment is some of the lowest level in memory.
Speaker 1: What changes what shifts sentiment?
Speaker 3: Do you think leadership?
Speaker 4: You know, the most powerful thing a leader can do
Speaker 4: is change minds. And the best thing that can change
Speaker 4: people's minds is performance. And that's why I reiterated with
Speaker 4: great confidence, I'll full your guidance. I'll be in front
Speaker 4: of thirty thousand people in a few minutes firing them
Speaker 4: up on the game plan that we have well in order,
Speaker 4: the M and A that.
Speaker 3: We did will be additive to a great corporation.
Speaker 4: This is the fastest growing enterprise software company of all time,
Speaker 4: first to get to fifteen billion, it'll be the first
Speaker 4: to get to thirty two billion. And we're excited to
Speaker 4: have our shareholders join us in Nevada, Las Vegas in
Speaker 4: a couple of weeks to explain the mid term and
Speaker 4: long term plan of service now, which is to double
Speaker 4: the company in the next few years.
Speaker 3: So we're excited, we're ready to go.
Speaker 4: And I would really underplay the narrative that's out there
Speaker 4: on enterprise sofa and not just ours, but these large
Speaker 4: scale systems are not going to be replaced by language models.
Speaker 4: They'll be very complementary to the large scale systems, but
Speaker 4: not going to replace them. So we have been at
Speaker 4: this now for quite a while in the enterprise. I
Speaker 4: know how the enterprise works. People just need to keep
Speaker 4: their chin up and get really serious about making money
Speaker 4: at a down moment like this, It's never been like
Speaker 4: this before, so take advantage of it.
Speaker 1: We'll let you get to your talent meeting. Yeah, let's
Speaker 1: chanse up. Oh mcdammit. We so appreciate your time of
Speaker 1: service now, thank you, Carolyn, Hi
Speaker 2: We thank you as well, and our thanks to Bill
Speaker 2: from serve this now