{"id":269687,"date":"2026-01-29T06:53:06","date_gmt":"2026-01-29T06:53:06","guid":{"rendered":"https:\/\/www.newsbeep.com\/ie\/269687\/"},"modified":"2026-01-29T06:53:06","modified_gmt":"2026-01-29T06:53:06","slug":"servicenow-earnings-beat-forecasts-as-ceo-bill-mcdermott-tries-to-win-over-investors","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ie\/269687\/","title":{"rendered":"ServiceNow earnings beat forecasts as CEO Bill McDermott tries to win over investors"},"content":{"rendered":"

ServiceNow<\/a> CEO Bill McDermott has been on a mission to persuade investors to stop thinking of his enterprise software company as a standard SaaS (software-as-a-service) business.<\/p>\n

So far, McDermott has met with skepticism from the Street, which has been fixated on the lofty valuation of ServiceNow\u2019s shares. The stock trades at a trailing price-to-earnings ratio that is more than twice that of some competitors, such as Salesforce<\/a>. As a result, ServiceNow\u2019s stock has declined 40% over the past year despite consistently strong results.<\/p>\n

But on Wednesday, McDermott got yet more ammunition to wield against ServiceNow\u2019s doubters.<\/p>\n

The company reported fourth-quarter earnings that handily beat Wall Street\u2019s top-line and bottom-line growth forecasts for a ninth consecutive quarter. Subscription revenue for the three months ended Dec. 31 was $3.47 billion\u2014up 21% year over year\u2014and non-GAAP earnings per share were $0.92. Both figures topped consensus estimates of roughly $3.42 billion and $0.87, respectively.\u00a0<\/p>\n

The company also raised its full-year 2026 guidance for subscription revenue, forecasting it will make between $15.53 billion to $15.57 billion. This implies growth of roughly 20% to 21%\u2014well above the 18% to 18.5% that analysts had expected.<\/p>\n

The company reported that Now Assist, its AI product suite, more than doubled its net new annual contract value in Q4 compared with the prior year.<\/p>\n

ServiceNow\u2019s shares were down 4% in after-hours trading following the announcement.<\/p>\n

This may be evidence that McDermott\u2019s message\u2014don\u2019t lump us in with other SaaS companies\u2014is starting to land.<\/p>\n

\u201cWe don\u2019t live in the SaaS neighborhood,\u201d McDermott told Fortune in an interview ahead of the earnings release. \u201cFunctional SaaS and feature SaaS will be automated by ServiceNow and the language models that are meeting us in the middle of our workflow, where business happens.\u201d Functional SaaS companies are those that provide software to serve a broad work function, like Salesforce for sales and customer service, or Workday for human resources. Feature SaaS companies are those that take on narrow tasks, such as Zoom<\/a> for meetings, or DropBox for file transfers.<\/p>\n

McDermott said that ServiceNow is on its way to becoming the central hub through which customers access the data and the software tools that AI agents need to automate work. \u201cWe are the one that drives the hyperscalers, the language models, the data lakes, the systems of record, and now the security profile of companies,\u201d McDermott said. \u201cAll of this is happening on the ServiceNow platform.\u201d<\/p>\n

ServiceNow has been on an acquisition spree to bolster its AI and security capabilities so it can deliver on McDermott\u2019s vision. In December, it announced plans to acquire cybersecurity firm Armis for $7.75 billion\u2014its largest deal ever\u2014and identity security company Veza. In March, it announced a $2.85 billion deal for Moveworks, an AI-powered employee experience platform, which closed in December.<\/p>\n

Those acquisitions have caused some Wall Street analysts to wonder if ServiceNow was attempting to buy revenue growth. But McDermott pointed out that the latest quarterly results show that ServiceNow can grow at more than 20% year over year organically. He said that each of the acquisitions was about gaining specific product capabilities and talent around both AI and cybersecurity: Armis provides technology to monitor IT operations in real time; Veza manages identity for humans and machines; and Moveworks handles the employee experience.<\/p>\n

As evidence that ServiceNow is in a different league than its competitors, McDermott pointed to what he calls ServiceNow\u2019s \u201cRule of 55-plus\u201d performance. The \u201cRule of 40\u201d is a rule-of-thumb benchmark in SaaS software that says a healthy company\u2019s revenue growth rate plus its profit margin or free cash flow margin should total at least 40%. ServiceNow\u2019s combination of 21% revenue growth and 35% free cash flow margin puts it well above that threshold. \u201cThere is no company in the enterprise software industry that is operating at the Rule of 55\u2014that\u2019s only ServiceNow,\u201d he said. The company\u2019s Q1 guidance implies a score of 57.<\/p>\n

McDermott acknowledged the disconnect between ServiceNow\u2019s consistently strong results and the market\u2019s lack of enthusiasm for the stock. \u201cThere is a re-rating of SaaS companies on the multiples, so ServiceNow got filed with other SaaS companies, and the multiples got dropped for the SaaS industry,\u201d he said. \u201cYou can look at Adobe<\/a>, you can look at Salesforce, you can look at Workday.\u201d<\/p>\n

His pitch is that ServiceNow should no longer be valued alongside those peers. \u201cWe\u2019re consolidating the feature companies\u2014you know, they have a feature or a tool\u2014and we\u2019re consolidating the function companies onto ServiceNow,\u201d he said. \u201cI\u2019m talking by the hundreds of applications.\u201d<\/p>\n

Along with its earnings, ServiceNow announced an expanded partnership with AI company Anthropic. The partnership will see Anthropic\u2019s Claude AI model become the default model powering ServiceNow\u2019s Build Agent for enterprise app development. The partnership follows the announcement last week of a close collaboration with OpenAI that will also see that company\u2019s models integrated into ServiceNow\u2019s products.<\/p>\n

\u201cNext-gen AI models will work in harmony with the most important enterprise software,\u201d McDermott said. He said Anthropic CEO Dario Amodei sees \u201cthe meaningful difference between giving enterprises access to an AI model and building that model into workflows where real decisions are made by businesses all over the world.\u201d He also drew a distinction between large language models, which he characterized as \u201cindeterministic,\u201d and ServiceNow\u2019s ability to also use its own workflow automation tools to deliver \u201cdeterministic outcomes.\u201d \u201cEnterprises have to have deterministic outcomes for governance, for security, for auditability, and obviously for smooth operations that don\u2019t hallucinate,\u201d he said.<\/p>\n","protected":false},"excerpt":{"rendered":"ServiceNow CEO Bill McDermott has been on a mission to persuade investors to stop thinking of his enterprise…\n","protected":false},"author":2,"featured_media":269688,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[72,16693,222,61,60,2154,132074,132283],"class_list":{"0":"post-269687","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-business","9":"tag-business-software","10":"tag-earnings","11":"tag-ie","12":"tag-ireland","13":"tag-saas","14":"tag-servicenow","15":"tag-software-as-a-service"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/269687","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/comments?post=269687"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/269687\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media\/269688"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media?parent=269687"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/categories?post=269687"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/tags?post=269687"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}