Bill McDermott’s new dream for ServiceNow’s role in the AI Revolution fully lived up to the company’s blowout Q2 numbers — including RPO up 29% to $23.9 billion — as he proclaimed AI is a “breakthrough innovation elixir unlike anything we’ve seen in human history.”
Those not familiar with McDermott and/or ServiceNow might think that’s just hot-air hyperbole. And those misguided souls who’ve thought McDermott has always been simply a slick salesman with fancy hair who was “lucky” to be at SAP during the ERP boom and “lucky” again to be at ServiceNow at the dawn of the AI Revolution might think it’s just more amped-up rah-rah stuff from the eternally optimistic author of Winners Dream.
But to anyone willing to put in the effort to try to grasp just how big and wide-ranging and disruptive this AI Revolution is already, and how much bigger and more transformative it’s going to get, McDermott supplied a lot of powerful evidence and perspective for that grand vision during ServiceNow’s Q2 earnings call last week.
I’ll offer several verbatim examples of that commentary in a moment, but first a few Q2 financial highlights:
- subscription revenue of $3.11 billion, up 22.5% as ServiceNow’s growth rate accelerated sharply from Q1’s 19%;
- total RPO up 29% to $23.9 billion;
- current RPO up 24.5% to $10.9 billion;
- 528 customers, more than $5 million in ACV (annual contract volume);
- customers spending more than $20 million up by more than 30% year/year;
- closed 11 deals in Q2 with ACV of more than $5 million, plus 78 with ACV of more than $1 million;
- all Top 20 deals included five or more ServiceNow products.
- ServiceNow raised full-year guidance for subscription revenue by $125 million, representing 20% year/year growth; and
- for Q3, ServiceNow is expecting subscription revenue of at least $3.26 billion, up at least 20%.
So clearly ServiceNow, ranked #6 on the Cloud Wars Top 10, has significant marketplace momentum to validate at least some of McDermott’s enthusiastic outlook. But is this AI thing really going to be “unlike anything we’ve seen in human history”?
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Here’s how McDermott framed out his new dream:
1. Efficiency is great, but growth is even better. “Yes, ServiceNow AI is driving substantial productivity increases for our customers,” McDermott said on the Q2 earnings call. “And while efficiency and productivity are major benefits, it doesn’t stop there. This [AI] is a breakthrough innovation elixir unlike anything we’ve ever seen in human history. People and AI together will create new businesses, new discoveries, and catalyze economic growth in every corner of the world.”
2. AI is changing and will continue to dramatically change the nature of work. “And I really do want to make this point clear: AI work is cross-functional work — it is not one-dimensional into a silo,” McDermott said. “Teams work on processes across functions. Organization charts are going to change. Work is going to be AI work, and it’ll be cross-functional. In our own company, we have 450,000 agents in the workflow right now. And all of the supporting functions from customer support to IT support to risk compliance, and security — most of this, now over 80%, is being done by agents. So agentic is real.”
3. McDermott’s unshakable belief that ServiceNow can fuse the old with the new in the Agentic Enterprise. “AI is the new UI. And that’s why the software-industrial complex of the 21st century is converging into ServiceNow as the extensible AI operating system for the Agentic Enterprise. This gives us a monumental future of value creation for our customers and shareholders.”
4. Promising CEOs end-to-end workflows — and making it happen. “And then when you look at the deals, all the big deals you look at all 20 of them, they have multiple instances in those functions of agentic AI,” McDermott said. “which means we’re winning at the departmental level. But we’re really winning with the CEO. We’ve become the CEO’s agentic AI story in enterprise software. And notice I didn’t say SaaS. We actually don’t live in a SaaS neighborhood. We live in an enterprise AI neighborhood. On a one-of-one platform. And that differentiation is now being imported to our customers and to our partners in a clear and articulate manner, and that’s why we’re different.”
Final Thought
Since his arrival at ServiceNow almost six years ago, Bill McDermott has focused relentlessly on a few key themes:
- his company’s ability to tie together old systems with new solutions;
- the inevitable and essential rise of AI;
- the power of workflows as a new model for business innovation;
- how ServiceNow’s opportunity to win does not require anyone else to lose; and
- the need for business leaders across every industry to dream big dreams and pursue greatness.
We can now add into that mix McDermott’s evangelism for the idea that AI is “a breakthrough innovation elixir unlike anything we’ve ever seen in human history.”
Ready for a glass of that elixir? Don’t wait — the future’s coming at us faster than ever before.
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