The Six Five team discusses ServiceNow Q1/24 earnings.
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Transcript:
Daniel Newman: So look, I had the chance to spend a little time this week. I talked to Bill McDermott.
Patrick Moorhead: Of course you did. By the way, time out a second. You were everywhere. As I was on planes for 10 hours, and in a city for 14, you were just crushing it on there. Look at that smile. I love that.
Daniel Newman: Well, it’s funny, because you and I go in waves. There’s days I’m sitting at my desk, I’m not even traveling, and I’m not doing any commentary and I’m looking at it and I’m like… Because I see you and I see everybody else on them, and then there’s, like I said, it comes and goes. I’m saying that it really, really comes and goes. There’s days where it’s you, there’s days where it’s me. This week I was really busy. Next week, I’ll be doing a bunch of press, too, because by the way, next week’s another Earningspalooza, so tune into us. You’re going to want more of this.
But look, ServiceNow is really interesting, Pat. You’re talking about a mid-double digits growth company that’s achieving at the top of its expectations quarter after quarter, beyond just being a very, very positive cheerleader to the market, Bill McDermott’s executing, and he’s really got a vision that software and the way enterprise software is built and consumed is going to completely change. And so overall, you saw a 25% growth in the company’s subscription revenue. It trades at a really, really high multiple, because it keeps growing into it every quarter that passes, but they’re seeing big growth on big deals. They saw 100% growth of their $5 million+ deals this quarter. They saw 300% growth in their million dollar plus deals this quarter.
That’s a really big deal when you’re talking about a company that’s almost entirely subscription based. And what they’re basically doing is they’re infusing GenAI in every workflow across the business. So, they are really the company that meets what I talked about three years ago when I said deflationary technology would become the hottest thing in the next wave of growth. Because as we grow and we implement AI, what’s effectively happening is companies are trying to figure out first how to optimize their workflows, lower their costs, accelerate revenue and growth.
ServiceNow has the technology for HR, for digital experiences, for ITSM that allows companies to reduce those expenses, and then drive into growth, and they’re being rewarded. They’re working very closely across the board with whether it’s working with NVIDIA on the front end or working with the biggest SIs on the back end. ServiceNow is powering a lot of that. And so in my conversation with McDermott, he was really doubling down on the fact that companies are turning to them to build these workflows to, as I like to say, prune to grow with their businesses.
But Pat, they did guide, it was a little softer than the market had wanted, so it actually sold off.
So, even though the results were really good and the company’s numbers, once again, everything from their CRPO to their ACV all grew robustly, the market sold on the news, and so they are going to need to apparently grow even faster, but the results were really good, Pat, and I look forward to you and I both will be on at their investor day and Bill McDermott’s going to be the opening keynote speaker of our Six Five Summit, so tune in to hear more about that.
Patrick Moorhead: I’m really looking forward to… I’ve never actually met Bill before and I’ve never met a tech CEO I didn’t like. No, I’m just kidding. Is that selfie analysis, Dan.
Daniel Newman: Well, did you take a selfie?
Patrick Moorhead: Well, I will. Well, maybe, if he lets me.
Daniel Newman: I just posted that. So, there’s my opinion about ServiceNow, everybody.
Patrick Moorhead: I love that. No, ServiceNow is an incredibly interesting company. They literally started doing what you would expect, hence their name, which is service. It was customer service and they were the backend glue for multiple companies, even infrastructure providers, folks like Dell.
Daniel Newman: Or ITSM.
Patrick Moorhead: Exactly, and then you take that to the next level, which is you expand the definition of service, which is we can service our field, we have FSF, we can service IT. Oh, there’s ITSM, and then you keep doing that to the nth degree where ServiceNow is very quickly transforming themselves into a CX play for a variety of audiences, by the way, for human resources, and then even basically a strategic dashboard, strategic portfolio management.
So I’ll be honest, I look 10 years ago what the company was and where it is now, and sometimes they say leaders are leaders at the top are the absolute key to some sort of change, and sometimes they aren’t. Bill has absolutely turned this company into this next generation company and quite frankly, with an AI opportunity. I hear about ServiceNow with my conversations with senior management all the time, and I got to tell you, in at least customer service management and IT management, they’re going to be the de facto AI driver for those enterprises. So again, look forward to the upcoming conference. Man, I’m going to just soak myself. I’ve never been to their conference before and I’m really looking forward to it.
Daniel Newman: Strap in. It’s always a good one, very high energy. I expect AI be a very popular topic this year. Don’t be surprised, because beyond AI, what I’m thinking is there might also be a little bit of coverage of generative AI while we’re there as well, and then there’s possibly some stuff like machine learning, AI workflow as in automation, AI-empowered… Oh wait, that’s all AI.
Patrick Moorhead: Hey, Dan’s being very sarcastic right now, for those who don’t know Dan.
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
