The Six Five team discusses ServiceNow Q2FY24 earnings.
If you are interested in watching the full episode you can check it out here.
Disclaimer: The Six Five Webcast is for information and entertainment purposes only. Over the course of this webcast, we may talk about companies that are publicly traded and we may even reference that fact and their equity share price, but please do not take anything that we say as a recommendation about what you should do with your investment dollars. We are not investment advisors and we ask that you do not treat us as such.
Transcript:
Daniel Newman: One more earnings, a pretty big banger, and the market and the street liked it, and that was ServiceNow. Had the chance to talk to CEO Bill McDermott. I usually have that wonderful opportunity on Earnings Day. He was fired up. I don’t know if you’ve ever paid any attention to Bill. He’s always pretty fired up. He’s a charismatic one, and he’s excited. And look, that company’s been banging on the drum of Generative AI with Now Assist. It’s been talking about its premium customers upgrading. It’s been giving lots of numbers. And what I probably love the most about this earnings, besides the fact that it beat on revenue, it beat on earnings, it delivered a strong guide, it showed a ton of proof points was the announcement and the focus, when something that’s just not been discussed a lot, Pat and that it’s RaptorDB, and what it is doing there.
Bill has been talking about the let’s just talk it about, you could use the word elimination. I might use the word in his spirit, evisceration of a whole lot of software that companies use, to in turning a bunch of really big important software platforms. I won’t name names. You can figure it out yourself, and turning them into databases for a ServiceNow to run on. And the whole idea of what they’re doing with RaptorDB is really a rapid ingestion platform, that can take private, public data sets, merge them together, create immediate role and industry-based dashboards, using custom AI LLMs that are being built by ServiceNow, to basically deliver value. So when you hear the a16zs, and the Sequoias, and these companies coming out saying, “Nobody’s going to make money on AI,” I think ServiceNow is like, “Hold on a minute here. We have a platform that you can buy right now, that you can ingest all your data, can remove lots of the complexity.”
Now again, I’m excited to talk to some of these customers. That’s the plan. I’m excited for Signal65 Economics to do some tearing down of the actual customer time to value, and the economic validation of this within different industries. But they’re building these vertical-based, LLM-capable, Generative AI tools, that can give dashboards across industries, and Pat, they can make it consumable right now. And I’m pretty fired up about this in concept. Again, I want to see it work. I want to talk to customers. I want to hear proof points. But what they’re doing is they’re basically saying, “Maybe that’s everyone else’s problem, that they can’t get value, and can’t start delivering revenue.” But I’ve talked about these multi-network effects, First network being the OEMs, and these servers. Of course the Zero network is your chip makers, your chip manufacturers, your IP companies, and you got your server, and infrastructure companies.
Then you have your ISVs, and this is where it’s all broken down for Generative AI. Everyone’s like, “Well, is there anyone actually consuming software, using it, and getting value?” Well, ServiceNow is saying, “We’ve got that. We make it available. We can bring it to industry, and you can start to deliver value and efficiency in your business immediately.” That was the hidden thing. You and I, think both called it out at the event. They didn’t spend a lot of time talking about it, but overall, they did Pat. So it was a strong quarter, lots of growth, good guide. They did have a transition of their president out. There’s a lot of speculation there. I’m going to hold on that for now. They got a new chief product officer they’re bringing in, but Pat, look, what that guy does, what Bill and his team do is they tend to hit their numbers, and beat their numbers, and did it once again.
Patrick Moorhead: Yeah. This is a company that is on the rise. They’re crushing it, and why are they crushing it, right? First of all, they make in their words, or paraphrasing it, bad software work well, right? Whether it’s an aged ERP, or SCM, or system that has a UI, that doesn’t work very well. And I’m going to put FSA, and IT operations on the side here, but that’s one play. But the big play here with Generative AI is to make things work better together, and actually have a transaction system to make things happen between the systems of record. And they are good at this. They’ve shown. I don’t know if anybody uses the bare Workday UI. They typically put ServiceNow in front of it, but with GAI, it’s connecting all those together. And Dan, you said it. Data, there are a lot of questions I had about its data strategy, and the company is bringing out more information about its unique database, vector database capabilities, to be able to do this. I also love that it has its own infrastructure. It might be able to connect to the Cloud, but it is all hybrid on-prem Cloud.
Daniel Newman: A lot of Dell over there, huh?
Patrick Moorhead: A lot of Dell over there. And that is money savings that just passes through. You are not paying the 1, 2, 3X multiple for public Cloud. So pretty exciting. I think it was a beat, beat, beat, beat, but there were some things like subscription forecasts that people were looking at. And also the stock has been high-flying for so long. It’s any type of a burp or something like that gets people concerned. Stocks up 45% on the year, and it’s just absolutely crushing it.
Daniel Newman: Don’t you wish we could buy and invest in the companies that we tend to see as good companies? I really wish I could.
Patrick Moorhead: Yeah. Totally.
Daniel Newman: Our money people can do it in a passive way, but we don’t get to jump in like we should. And just an adder, we got to wrap up. I’m at 5% here. This computer is old. It’s running battery quickly, but the SaaS space has been beaten up. ServiceNow has of course outperformed, because they’ve just outperformed. But software is where it’s at. Software is where it’s going to be at with AI. I’m just being really clear. The infrastructure and the chips they’ve gotten their bit of a moment.
Patrick Moorhead: Exactly.
Daniel Newman: Someone has to start using, consuming and implementing, and this stuff has to land in industry. The entire tech industry needs to come together, and start to show value with this, or the naysayers, pundits, bears, shorts will come out guns blazing. This is not VR guys. This is not VR or XR. Not to say that’s not a thing. It’s just not really a thing. AI is transformational. It is going to change every business. Believe us. Don’t believe us. I don’t care. But I promise you I’m right, and if you don’t believe me, you are wrong.
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.
