ServiceNow(NOW)2024-10-24 01:30Financial Data and Key Metrics - Subscription revenue growth was 22.5% at constant currency, 200 basis points above the high end of guidance [4] - Current RPO (cRPO) grew 23.5% at constant currency, 150 basis points above guidance [4] - Operating margin exceeded 31%, more than 150 basis points above guidance [4] - Free cash flow margin was 17%, up over 800 basis points year-over-year [22] - The company closed 96 deals greater than 19.5 billion, representing 33% year-over-year constant currency growth [19] Business Line Performance - ITSM and ITOM were each in at least 15 of the top 20 deals, with double-digit deals over 1 million [5] - Customer workflows had 15 of the top 20 deals and 17 deals over 1 million [5] - Creative workflows were strong again, with 17 of the top 20 deals and 13 deals over 5 million and two over 0.5 trillion through innovations like RaptorDB and workflow data fabric [12][13] - The company is focusing on Agentic AI, aiming to be the control point for AI deployment across enterprises [9] Management Commentary on Operating Environment and Future Outlook - The company sees AI as a once-in-a-generation technological shift, with IDC forecasting a $20 trillion global impact by 2030 [9] - Management highlighted the growing strategic relevance of ServiceNow as the platform for modernizing enterprise systems [6] - The company is confident in its ability to deliver consistent growth, driven by AI and workflow automation [17] Other Important Information - ServiceNow announced a partnership with NVIDIA to co-create a shared vision on Agentic AI [11] - The company launched RaptorDB, a new ultrafast database built for AI-first enterprises, which processes transactions 12 times faster and analytics 27 times faster [12] - ServiceNow University was created to skill 3 million learners in the next few years [14] Q&A Session Summary Question: Market environment and demand outlook [26] - The market is value-based, with companies focusing on platforms that deliver real GenAI use cases [26] - ServiceNow's pipelines are strong, and global events are oversubscribed, indicating high demand [27] Question: Incremental opportunity with RaptorDB and data platform [28] - RaptorDB offers an upsell opportunity across the entire installed base, with seamless integration and faster performance [28] - The workflow data fabric allows access to any data source, aligning it with automated workflows [29][30] Question: Headcount growth and OpEx investment [32] - The company is increasing headcount, particularly in sales and R&D, to capitalize on AI and workflow data fabric opportunities [33] - R&D headcount growth is consistent, reflecting the focus on innovation [33] Question: Elite-level execution and durability [35] - ServiceNow attributes its execution to hiring great people, clear planning, and overcommunication [36] - The company believes it is far from hitting its peak and continues to innovate [37] Question: AI bookings and investment in AI infrastructure [40] - AI bookings are ramping up, with significant investments in AI infrastructure, including partnerships with GPU providers [40] - The company sees AI as a key driver of future growth [41] Question: Federal business update [62] - The federal business is strong, with no impact from partner issues and significant growth in net new ACV [63] - GenAI is a top priority for federal agencies, with ServiceNow being the standard platform for digital transformation [63] Question: Customer upgrades from Standard to Pro [66] - The company is seeing an uptick in customers upgrading from Standard to Pro, driven by GenAI adoption [66] - RaptorDB is also driving upgrades due to its performance benefits [67] Question: Autonomous agents and technology advancements [69] - ServiceNow's autonomous agents are powered by RaptorDB, workflow data fabric, and NVIDIA's NIM advancements [69] - These technologies are already in use, with significant traction expected in Q4 [70] Question: C-level executives' view on AI budgets [74] - IT budgets are growing, with GenAI and workflow automation being top priorities [75] - ServiceNow is gaining share in the market, with potential for further investment from other departments [76] Question: Amit Zavery's role and pricing expertise [77] - Amit Zavery's expertise in packaging and pricing is expected to enhance ServiceNow's product strategy [78] - His focus will be on engineering leadership and driving new growth opportunities [79]