The paragraph is a transcript from the beginning of ServiceNow's Third Quarter 2024 Earnings Conference Call. The operator introduces the call, indicating it is being recorded, and then Darren Yip, Group Vice President of Investor Relations, takes over. He introduces the key speakers and outlines the purpose of the call, which is to review Q3 2024 results and provide guidance for Q4 and the full year 2024. He emphasizes that the information includes forward-looking statements and refers to potential risks and uncertainties, advising listeners to consult their SEC filings for more details. He also notes the use of non-GAAP financial measures along with GAAP measures, providing a reference to their earnings press release for reconciliations. Finally, he hands the call over to Bill McDermott, the CEO.

The paragraph outlines ServiceNow's strong performance and strategic growth. It highlights the company's exceptional execution in Q3, surpassing all top line and profitability metrics, with significant subscription revenue and operating margin growth. ServiceNow secured numerous high-value deals, with key products like ITSM, ITOM, IT asset management, and customer workflows featuring prominently in these deals. The company's consistent ability to execute in a challenging macro environment sets it apart as a benchmark for elite performance. Additionally, ServiceNow's growing strategic relevance is emphasized as a key factor in its success.

ServiceNow has positioned itself as a key platform for business transformation in the AI era, integrating and orchestrating disparate systems to provide a cohesive user experience. With the rise of AI, companies are looking to avoid previous governance challenges seen in public cloud adoption. ServiceNow has emerged as a trusted solution for managing AI integrations and expansions across enterprises. Their AI platform, Now Assist, has seen significant growth with substantial customer investments and is gaining momentum with their recent release, Xanadu. This release, the largest in their history, introduced numerous innovations and industry-specific AI-powered automation, further solidifying ServiceNow's leadership in orchestrating AI solutions across various sectors.

The paragraph discusses ServiceNow's deployment of autonomous AI agents designed to work with people by using its single architecture platform and cross-enterprise data for deeper contextual understanding. This innovation contributes to a predicted nearly $20 trillion global impact by 2030. IDC forecasts significant spending on AI, with businesses expected to invest more than $0.5 trillion by 2027. ServiceNow's growing brand awareness is highlighted through success stories with notable organizations like the Defense Logistics Agency, Banco do Brasil, the U.S. Department of Veterans Affairs, Lloyds Banking Group, and EY, which have transformed operations and improved efficiency using AI-powered solutions from ServiceNow.

The paragraph highlights ServiceNow's expanding collaborations and innovations in technology. ServiceNow is automating risk management with the American Red Cross and supporting business transformation at Mercedes Benz. They have a new collaboration with Siemens to enhance industrial cybersecurity and are integrating Generative AI into operations. Bill Canada acquired HGC Technologies to strengthen its presence in North America. ServiceNow has expanded its alliance with Zoom to integrate Gen AI technologies and announced new growth initiatives. A significant partnership with NVIDIA focuses on AI-driven innovations, including developing AI agent use cases and launching RaptorDB, a fast AI-first database. RaptorDB enhances processing speeds and is implemented by customers like Amadeus. Additionally, ServiceNow is launching a workflow data fabric to unify business and technology data.

The paragraph discusses the advancements and growth opportunities for ServiceNow through innovations like Workflow Data Fabric, partnerships with Databricks, Snowflake, and Rimini Street, and the launch of ServiceNow University aimed at skilling 3 million learners. It highlights the company's strong market position, increasing talent development, and recognition within the American Opportunity Index, ranking highly for career advancement and as a desirable workplace. The paragraph concludes by announcing Amit Zavery's appointment as President, Chief Product Officer, and COO, further strengthening its leadership team.

Amit, a former Google Cloud executive and Oracle veteran, has joined a leading enterprise software company, praised for transforming AI business strategies with his expertise in engineering, packaging, and pricing. ServiceNow, the company he joins, is recognized for leveraging AI effectively, experiencing significant event attendance growth, and positioning itself as a reliable partner for customers. The paragraph highlights the company's successful alignment with customer needs and its ambitious growth target of reaching $30 billion in revenue.

In the paragraph, the CEO of ServiceNow celebrates their fifth anniversary and highlights the company's strong financial performance in Q3. Gina Mastantuono, the CFO, reports significant growth in subscription revenues and RPO, driven by high demand for digital transformation and AI solutions. Key industries, including technology, media, telecom, retail, hospitality, healthcare, and manufacturing, showed strong performance, with notable growth in net new ACV. The U.S. Federal sector also demonstrated exceptional execution. The company secured major deals, maintained a high renewal rate, and increased the number of customers with over $1 million in ACV to 2020.

In the article's ninth paragraph, there's a strong growth in large customer deals for the company, with a nearly 40% increase in customers paying over $20 million. The company closed 96 deals over $1 million in net new ACV, including six new logos, and significant growth in larger deals exceeding $5 million and $10 million. Increased focus on platform sales and multi-product transactions is noted, with 18 of the top 20 deals including seven or more products. The company's GenAI capabilities are gaining traction, with 44 customers spending over $1 million, and real-world case studies demonstrate significant productivity improvements and cost savings, boosting customer confidence. The company sees rising demand for Now Assist, with examples attributing substantial efficiency gains to their products. GenAI deals are largely direct sales, but partner collaborations, such as with a GSI partner for a federal agency deal, are proving effective. Their industry SKUs, especially in Financial Services and TMC, have shown exceptional growth, tripling net new ACV year-over-year. Finally, the paragraph begins to transition towards discussing profitability.

In the third quarter, the company exceeded its non-GAAP operating margin guidance, achieved a free cash flow margin increase, and maintained a strong balance sheet with $9.1 billion in cash and investments. They repurchased 272,000 shares under their share buyback program, with $562 million left from the initial $1.5 billion authorization. Due to this outperformance, they revised their 2024 growth outlook upward, projecting significant increases in subscription revenues and setting targets for subscription gross margins, operating margins, and free cash flow margins. For Q4, they anticipate continued strong subscription revenue growth and stable operating margins. Overall, Q3 was successful, driven by strong demand and effective execution, with the company focused on delivering a comprehensive platform experience.

The paragraph discusses the release of Xanadu, which marks a significant advancement in AI innovations by ServiceNow. These innovations aim to help enterprises efficiently and responsibly utilize AI with the support of partners like NVIDIA, Microsoft, Snowflake, and Databricks. The speaker expresses excitement about the potential for these innovations to drive growth and solidify the company's standing as a leading enterprise software firm. They also acknowledge and thank employees for their hard work, crediting them for the company's success and positive workplace reputation. During a Q&A session, Alex Zukin from Wolfe Research questions the market demand environment and whether AI is influencing it. William McDermott responds that the macroeconomic environment remains value-focused, and the key is having genuine innovation and practical AI use cases that benefit customers.

The paragraph discusses the excitement and momentum in the AI market, highlighting strong customer engagement and successful events. It mentions a significant financial achievement with Now Assist ACV and introduces RaptorDB as a new data platform product that offers upsell opportunities across ServiceNow's customer base. The product, which enhances speed by 25%, is easy to implement and reflects the company's strong engineering capabilities. William McDermott emphasizes the evolution of their platform into an AI-driven solution for business transformation.

The paragraph discusses the excitement around data integration and automation, highlighting a partnership with Databricks and Snowflake. William McDermott emphasizes the benefits of controlling structured and unstructured data through automated workflows, likening the "data workflow fabric" to how workflows enhance applications. He mentions analysts' positive feedback, suggesting ServiceNow's success could double their total addressable market (TAM). Alex Zukin congratulates the team, and Brad Zelnick from Deutsche Bank asks about the increase in headcount and operating expenses. Gina Mastantuono explains the rise is mainly due to hiring sales and marketing staff, reflecting confidence in future opportunities.

The company plans to continue growing its headcount prudently, quarter by quarter, with a focus on leveraging opportunities like Now Assist, Agentic AI, and workflow data fabric. Both sales and marketing, as well as R&D teams, will see similar growth. Brad Zelnick questions William McDermott on their superior execution, asking about its sustainability and addressing skeptics' concerns about potential declines to average levels. McDermott credits their success to hiring great leaders and praises his leadership team, including a recent addition from Google, highlighting a positive relationship with Google Cloud Platform.

The paragraph highlights the collaborative and ambitious culture of the company as it strives to build a leading enterprise software company. It emphasizes the importance of teamwork, effective communication, and the collective desire to succeed among its 26,000 employees. Despite not yet reaching its peak, the company remains optimistic about future growth and innovation. The text underscores its open integration with AI models and systems, projecting their platform as crucial for improving business productivity and growth. It recognizes the necessity for constant innovation, planning, and communication, with a focus on customer service management leadership. Bill appreciates the partners who trust in their vision and sees continued mutual growth and success.

In the paragraph, Mark Murphy from JPMorgan praises William McDermott and mentions a significant increase in AI bookings for ServiceNow in Q3, along with media reports about ServiceNow and CoreWeave investing in AI data centers in the UK. Murphy speculates whether this indicates an AI-driven investment surge. McDermott appreciates the compliments and expresses optimism about future growth, referencing strong pipelines and widespread adoption among public and private sectors. He shares an anecdote about a Board meeting where Fred Luddy explained ServiceNow's capabilities, highlighting how Now Assist automates complex internal processes for employees, such as updating healthcare and compensation details.

The paragraph is an excerpt from a conversation during a business call, featuring William McDermott and Gina Mastantuono responding to Kash Rangan from Goldman Sachs. McDermott discusses the potential of AI in increasing demand for products and expresses optimism about their market position. Kash Rangan praises their achievements and inquires about ServiceNow's data platform and its revenue generation capabilities, as well as the strength in Remaining Performance Obligations (RPO). Gina Mastantuono explains that the strong RPO is due to strategic customer engagement, growing portfolios, larger deals, and extended contract terms. The conversation concludes with congratulations on a new hire, Amit.

The paragraph discusses the strong growth and strategic importance of the company's RPO, cRPO, and overall business health, emphasizing their impact on customer relationships. It highlights the value of their RaptorDB Pro version, which significantly improves transaction times, reporting, and analytics for ServiceNow customers by enhancing performance, speed, and scalability. The text also outlines how the company's Now AI platform unifies disparate data, driving productivity and efficient business transformation. The paragraph mentions the efficient migration process and describes an upsell opportunity for existing installations as a beneficial investment for customers.

The paragraph discusses the unique capability of a data platform, RaptorDB, that can access any data, structured or unstructured, and streamline work and automation. This gives the company a strong position for future growth, with plans to roll it out in Q4. Amadeus is mentioned as an adopter, with expectations of more companies joining. In the Q&A section, Keith Weiss from Morgan Stanley asks about a previous headwind and the impact of new agent solutions on the sales cycle. William McDermott responds that the new agent solutions integrate naturally into the existing innovation strategy.

The paragraph highlights ServiceNow's strategic positioning as a key platform for future enterprise solutions, emphasizing the integration and innovation capabilities of its unified platform with Now Assist for enhanced AI collaboration. It underscores partnerships with companies like NVIDIA to tackle enterprise security challenges with out-of-the-box solutions. Additionally, the paragraph discusses the seamless integration and faster innovation opportunities due to a single architecture, overcoming past digital transformation challenges. Gina Mastantuono comments on the consistent performance in cRPO (current remaining performance obligations) and notes anticipated fluctuations in quarterly results, particularly due to federal contracts, until the third quarter of next year.

The paragraph features a conversation between Brad Sills and Gina Mastantuono regarding the company's headcount strategy. Brad Sills observes that R&D headcount has been increasing faster than sales and marketing headcount, which is a reversal from historical trends. He asks if this shift indicates a focus on developing new products, particularly in AI and other emerging categories, rather than expanding the sales force to drive growth. Gina Mastantuono explains that while it may appear that sales and marketing headcount growth is slower, the company is still expanding its core sales team significantly. She emphasizes that R&D has consistently been a priority for the company, while indicating that there is efficient scaling in the marketing and sales operations divisions.

The paragraph discusses the ongoing investment in engineering R&D talent and sales efforts to address customer needs in the age of AI and innovation. It highlights the success in customer workflows, which accounted for 31% of net new ACV. William McDermott notes strong performance in customer workflows, particularly with a 50% growth in net new ACV. The company is recognized for its success in the front office domain, especially in sectors like financial services, technology, media, and the public sector, driven by their industry-specific solutions and the Pro Plus offering.

The paragraph discusses the significant growth and traction of ServiceNow's sales and order management product across various industries, emphasizing its value in enhancing sales productivity. Key benefits include reduced time to quote, larger deal sizes, and optimized customer lifetime value. William McDermott expresses confidence that this could become ServiceNow's biggest business. In response to Karl Keirstead’s query about concerns in the federal business, McDermott assures there were no issues impacting Q3 or any involvement with Carahsoft, affirming the strength of their federal sector performance.

The paragraph discusses ServiceNow's strong net new ACV growth, highlighting significant deals and the platform's status as a standard for U.S. federal agencies undergoing digital transformation. The company is focused on efficiency gains through its software, leveraging successful implementations and strong references. William McDermott expresses excitement about the traction of ServiceNow's Gen AI SKUs for the government Community Cloud, which recently became available and showed great success in a pilot with a federal agency, supported by Accenture. Additionally, Gregg Moskowitz mentions the impressive growth of Now Assist and Pro Plus, noting an increase in customers upgrading from Standard to Pro, which boosts ARPU and aids in Gen AI adoption.

In the paragraph, William McDermott, presumably a leader at ServiceNow, expresses optimism about the company's growth and product offerings. He anticipates a strong second wave of success, highlighting the Pro and Now Assist products, which are well-received by customers for their high returns. He also mentions the global rollout of RaptorDB, praised for its efficiency and engineering, which has generated significant interest. McDermott emphasizes the strong customer relationships and interest in ServiceNow's real, value-driven products, with CEOs frequently visiting their Santa Clara office. Finally, Derek Wood from TD Cowen asks about the technology behind the new AI-driven autonomous agents.

William McDermott discusses key advancements in unlocking new autonomous capabilities on the ServiceNow platform, highlighting three main areas: winning the Gen AI race with Now Assist on the unique Now Platform, integrating RaptorDB to build and enhance the workflow data platform which seamlessly connects to the workflow automation platform, and focusing on the front office for increased innovation and execution. He emphasizes that Now Assist and RaptorDB are already operational, with significant developments expected in Q4.

The paragraph discusses the current and future outlook of ServiceNow, highlighting its workflow data platform, successful front office operations, and potential for upselling and cross-selling as aspects that make the company feel like a scale company with a startup's energy. William McDermott mentions the anticipation for ServiceNow's quarterly event, ServiceNow Live. In response to a question from Raimo Lenschow of Barclays about AI and IT budgets, McDermott notes that IT budgets are growing, with Gartner projecting a 10.5% increase in global IT spending next year and 15% growth in software. He emphasizes that digital strategy is integral to business strategy, and cites GenAI and workflow automation as key C-suite priorities, positioning ServiceNow well for future opportunities.

The paragraph discusses the growth and increased market share of companies focused on digital transformation, particularly in customer service management and IT, with a strong emphasis on generative AI (Gen AI) as a key investment area. As IT budgets grow, funding is also expected to be reallocated from other departments to support Gen AI initiatives. Additionally, there is a trend towards consolidation of multiple point solutions into comprehensive platforms like ServiceNow, which is seeing expanding adoption and support from its partner ecosystem, suggesting positive growth prospects for the company.

In the final question of the interview, Samad Samana from Jefferies inquires about Amit's expertise in packaging and pricing, particularly in the context of the AI boom at ServiceNow. William McDermott praises Amit's unique skills, highlighting his ability to engage in scenario planning and his engineering prowess. He emphasizes Amit's potential to enhance ServiceNow's capabilities, citing his experience from previous roles at Oracle and Google Cloud. McDermott deliberately mentioned Amit's strengths, seeing his hiring as a strategic move to foster innovation and growth at ServiceNow.

The paragraph features William McDermott expressing respect for individuals like Amit, who bring value and positive relationships to a company. McDermott emphasizes a shared belief in doing good as a pathway to success. Samad Samana congratulates the team on their achievements, and the operator concludes the conference call, thanking participants and signaling its end.

This summary was generated with AI and may contain some inaccuracies.