Hey, everybody. I'm supposed to start out with that? Sure. No, you're in charge. Hey, everybody. Keith Weiss from Morgan Stanley. I run the U.S. Software Equity Research franchise, and super pleased to have from ServiceNow, Bill McDermott, Chairman and CEO. Thank you. Bill, thank you so much for joining. Thank you, Keith. I would say there is no better time than right now to be talking to Bill McDermott about what's going on in software, right? The investors in this room have a high level of uncertainty. Right. They don't have a clear view of what's gonna go on with software broadly. They have a lot of concerns about the viability of SaaS vendors over time. You are, I would say, the best software salesperson that I've ever met. Nobody better to talk to us about the positioning of ServiceNow, the positioning of you as a trusted vendor of your customers, and how AI is a opportunity for you versus a risk. Maybe we start out there, and, like, when you think about generative AI, you think about these innovations, what does it mean to ServiceNow in terms of your opportunity of what you could do for your end customer? Sure. Thank you very much, Keith, and I appreciate the very kind words. I know, for example, you had Jensen today. I'd like to congratulate, you know, Ted and the Morgan Stanley team for really the conference of the century in terms of who you've had and, of course, Satya as well. I really do think this Universal Agentic Network that ServiceNow has formed should come out in the conversation today 'cause that's an example of two great companies, two great partners, and we're doing amazing things. Seven years ago, we started building models with Jensen. We have done some great work to make ServiceNow the AI Control Tower for business reinvention. When you think about this Universal Agentic Network, consider this: ServiceNow is connected to every node in the Fortune 2000. Every hyperscaler seamlessly integrates with ServiceNow. Every language model has been integrated and adopted by ServiceNow for the right industries. We can turn it on and turn it off based on industry and all the systems of record. You say, "Well, what about the data?" All this stuff produces massive data, plus you have data companies that are also very good companies, like Snowflake and Databricks. They also all integrate. If you think about that control plane, in every major tech transformation, the money goes to the control plane. While AI thinks, workflow acts, and that's our unique competitive advantage that today, as we're having this conversation, we have 85 billion workflows in flight in the Fortune 2000 doing almost 7 trillion transactions, so deeply embedded, deeply durable, expanding platform with a deep, exciting moat that continues to grow and prosper for our shareholders. We can get into that today. Excellent. If I think about the ServiceNow story, over the past decade, ServiceNow has extended from being a IT solution to automating workflows on top of a lot of transactional systems. You guys have become the system of engagement where the work is actually getting done on top of the transactional systems. Now we're in an environment where people are worried about the AI labs, not from their models, but what they're doing on top of it. They look at Cloud Cowork, they see, an extension in terms of how much work it could do in the timeframe, and they worry, is that gonna become the new ServiceNow? Is that gonna be where the work gets done. Yeah And it's gonna push ServiceNow into the background? I'm sure you guys have a alternative view, right? Yeah. That you have probably even more of a right to play there, probably even more of a right to provide that workflow automation. What gives you that right? What gives you the better positioning to further automate those workflows versus an AI lab or a startup coming in fresh? Right. Well, if you think about, you know, Anthropic, you had Dario on stage, he talked about healthcare and life sciences as an example of major industries where AI breakthroughs would happen. We team up with Anthropic in those industries. If you think about a nurse, for example, on a floor today caring for a patient somewhere, the time that he or she has to spend on the medical record is equal to the time that the doctor is actually spending with the patient, which is why we took healthcare operations and the thinking that Claude can do, as an example, and put it into our healthcare operations solution where we directly integrate it into the medical record itself. Let's just assume on floor 8, aisle 2, there's an IoT device that's down. The nurse, instead of having to have somebody create a ticket and create a fiasco, can write in the medical record itself, remediate the issue, because we're directly integrated. We take advantage of the thinking power, but we're doing the action in the workflow automation. No paperwork, no forms, rock and roll right out of the medical record. That's a practical example. Another thing I could have said is, like, there's payroll issues all the time. There's mistakes made all the time in a company. Today, any language model can tell you what is wrong and what you're supposed to do about it, but none of them can actually do it. Why is that? Well, the same reason, Keith, that people have had a mess in the enterprise for six decades. Legacy systems, lack of integration, you have to take multiple trips across multiple systems and functions to actually fulfill a workflow. That is why we are the workflow company, and that is a unique competitive advantage because I'm not a feature and I'm not stuck in one function. I'm going end to end across the enterprise to get work done. We freely embrace, incidentally. Anthropic is doing a fantastic job on coding. We actually use it. We are their customer, and it makes our developers more productive. OpenAI also does very important things with multimodal and natural language, especially voice, and we have fully adopted that into the ServiceNow platform. We're not running, we're not hiding, and we're not assuming that they're going to do what we can do because it's really hard to do what we can do, but we're embracing it. Just like if you remember not too long ago, oh, the hyperscalers, look out, you know, they're gonna take over the enterprise. Today they have multi-billion businesses built on the ServiceNow practice. You know, one of the things that never gets talked about, you know, we all know about the fratricidal relations between countries and things like data sovereignty and stuff like that. Just as an example, think about ServiceNow's unique advantage in single tenancy, where I can run ServiceNow in any hyperscaler cloud, in any sovereign cloud, in anyone's data center. There are no limitations on ServiceNow that exist in some of the multi-tenant SaaS companies that are operating here in Silicon Valley, which is why I keep saying stop branding things SaaS 'cause we don't live in a SaaS neighborhood. We're a very unique enterprise company. Got it. The model providers, you have partnerships with Anthropic- Sure. You have partnerships with OpenAI. It becomes a. Right. That helps to power the broader platform of ServiceNow. It's a competition. They're gonna try to get into your lanes, but you have some deep moats. Right. You have these deep customer relationships. You have the data. You understand the customer problems, and you've already brought solutions to the market. Let's switch gears and talk a little bit of that Now Assist. Sure. I believe that went generally available November 2024, a little bit past a year down the road with this product cycle. What are you hearing back from customers? What are they liking the solution? What's getting taken up? What are the initial use cases that are really starting to gain traction out of this? With Now Assist? Yeah. Yeah. What's fascinating about Now Assist, obviously it's grown sensationally, nearly 3,000 customers now. The big idea is to radically simplify the way work is done. If you think about agents, we have created the control tower for business reinvention. What they like about it is this, not only can they solve big problems, but they can adopt these agents. The workforce of the future is going to be a combination of human and agents and thinking machines. With ServiceNow, you don't have to worry about the seat-based pricing model concerns. I covered that in the earnings call. Our seats are up 25% year-over-year in terms of active users. Let's say that changes over time, and I expect that it will. The good news is the hybrid pricing model is already kicked in because our customers are telling us, "We want you to manage your agents. We want you to manage the thinking machines, and we want you to manage the agents of other people's solutions, so I can have one control plane for all the agents." The human, the non-human identities, and the machines all managed in this control plane. Huge. Another thing that they really, really like is what we did with Moveworks, 'cause now you have an agentic front door to the whole autonomous platform. If you think about the workforce of the future, it's like you go into one agentic front door, you don't have to swivel chair in and out of on average 33 different applications a day. Now all of the work can be tripped into all these systems that exist in the enterprise completely autonomously. We've actually created new roles on a product that we announced on February 26th, Autonomous Workforce, where you have AI specialists. Now I have an IT specialist. I have a systems administrator. I have a security operations agent. These agents are complementing the humans in the flow of this work and running their business processes. If you look at Honeywell as an example, you know, they have IoT devices, hard infrastructure, manufacturing controllers. Now, they can manage their IT estate, but they're also very concerned about their OT estate. Think about IoT, think about manufacturing, think about controls, think about everything going through one control tower that kicks off all of these autonomous flows in the way work is done and executes it to completion. We all watched the Super Bowl, or maybe most of us did. There's a company that's pretty good at the betting process and anybody that wants to do an individual bet on almost anything. Just think about having a solution that's mass customized based on the type of bettor that you have. All this is done on ServiceNow. All this is done with agents. Already these companies not only subscribe to the ServiceNow service, but they've reloaded the Now Assists. In some cases, they're on their eighth pack of reloads. You're seeing the hybrid pricing model kick in because the business cases associated with these workflows and meeting the customer where they're at are so profitable. Those are among the use cases. I could give you countless names of customers, but I'll give you one since you had Jensen here. We have a $2 billion pipeline right now in CRM. One of the big things that we did last year is focused on CPQ, configure, price, and quote. Because customers today, they want to be able to sell something, fulfill on the order they sold, and then service the account to have the net present value of loyalty kick in for life. On our platform, they're able to do that on one single platform. I believe that customer relationship management has moved to customer resolution management. Everybody can say, "Hi, buy what I've got." The question becomes, how do you give them what they bargained for and service them, upsell them, cross-sell them, keep them loyal for life? I think that's why we have $2 billion now in pipe. Outstanding. One of my theories, right, when I'm thinking about ServiceNow is there's a expanded capability. There's great new things that we can do with these large language models, but it's an evolution of a theme. Like you guys have always been about automating those processes and bringing more productivity to your customers. It wasn't too long ago that you announced the Pro SKU. The Pro SKU was an IT-led SKU, right? It was about improving automation. It was improving productivity. Is that a good analog? Like if we think about it in terms of value proposition, but also timeframe of adoption, right? We saw the Pro SKU get adopted really quickly within the user base. Should we expect something similar with Now Assist? Because it is a evolution of that same theme. It is. Keith, you're absolutely right. I think it's important that we acknowledge that we continue to have the necessary pricing power to create shareholder value on the Pro SKU of Now Assist. That's a 30% uplift. We've held that price line and it continues to grow. There's plenty of room for that to grow. We have also this hybrid pricing model where we give you a very healthy dose of assists because we want you to be happy. We want you to adopt it. We want you to use it and derive the value from it. That's the whole point. Once you have exhausted the initial SKU from Pro Plus that includes a very generous portion of these assists, then we reload them in Now Assist packs. Since May of last year, that is up 55x and we're only getting started. We're managing this very, very carefully, very, very closely because it's really now moving to an adoption game because the quicker the customer adopts, the more assists they use, the more value they derive, and obviously the more profit we generate for shareholders. There's other things too that people are not catching on to. You have your seat, but there'll never be as many humans as there are agents. Now you have your seats, however that evolves is fine, but now the agents step in. Now there's agent specialists where we allocate them based on highly specific domain within the workflow and other people's agents too. If Salesforce agents or Workday agents or SAP agents or Oracle agents are in the loop, we can put them and integrate them into the flow of work of that business process. Think about the foundational elements of governance, compliance, auditability, being able to roll something back and look at the full form of the transaction. Every company needs that. That model is going great, but we also have assets. We can price by asset. We also have devices. We can price into the devices. We also now, especially as we complete the M&A cycle with Armis, are stepping into operating technology. This is also going to deal with shadow IT, IoT, networks and devices, infrastructure, managing things like SLAs and being able to bring that into the licensing models. There are so many new developments. May I, Keith, just comment on something that I think you might notice. Last year, we made the move to acquire Moveworks. It took nine months. It was like within 72 hours, we had Veza and Armis announced at the same time. I figured the shareholders must be like, "Hey, what's going on over at ServiceNow? I know they were growing organically. Did something change?" I said in the earnings call, "No, obviously, because we didn't have them in the number and we still grew and gave a great guide." The best part of it all is we didn't buy things that were yesterday's news to chunk in a growth number. We bought the future of agentic business and combining that with the ServiceNow platform has not even shown up in the numbers yet. We closed Veza two days ago. We have Moveworks now. It's doing phenomenal. We obviously have a great company in Armis in front of us, which I think obviously could be the Instagram of ServiceNow. We did it for agentic business. We did it to make sure we remained a growth company for the next decade, not for the next quarter. I think that is something for the shareholders to get excited about. I'll tell you, not only should you know that we're going for the growth and the acceleration, the continued acceleration of the growth, but also the free cash flow margin and the expansion of that. Because we use our own agents and we use our own platform with Now on Now, we are taking huge headcount costs out of the company and driving that through the productivity of agents ourselves. I'm tough on this because I tell the company, you have to drink your champagne if you want to sell more of it in the marketplace. That is a highly accepted principle in ServiceNow. That is going to deliver more and more shareholder value goodness for everyone in this room. Got it. One of the most surprising things on the most recent conference call was that comment about seat growth. You guys talked about 25% seat growth when investors are really deathly afraid about seat growth. Can you talk to us about where that comes from? Is that an expansion of the types of customers and the type of employees that ServiceNow is covering and the workflows that you're automating? Where does it come from? I think it's really important. You know, one thing I want to say in a complementary nature to other companies that have a system of record, I actually think in many ways, if you have a great system of record, it actually, AI is actually making your intrinsic value higher because it's very important. The data that's in those systems is very important. Those companies are not unimportant companies. What is quite unique about us is we've been the system of record for IT for 20 years. What's super cool about that is if you think about the people, the places, and the things of every corporation in the Fortune 2000, we are quote unquote the ERP of IT. In an AI world, that's actually even more important because now you springboard that into the employee experience, into the customer experience, into the innovator experience. You're doing that on one end-to-end platform. Now we've moved the control plane end-to-end across multiple industries, multiple geographies, multiple sub-industry verticals, and an expanded ecosystem that's buying into this idea of the Universal Agentic Network. We're doing more things for more functions in more places than ever before. That's where you're seeing the active user growth of 25%. Frankly, I think we've only just gotten started. That's not even including some of the business model innovations that I can bring into the pricing aspects that we talked about earlier. If I had to take one worry off the shoulders of the shareholders of ServiceNow, it would be, don't worry about the seat counts. There's going to be many millions more of agents than there are human beings. We're the control plane, the AI Control Tower for business reinvention. This is the plane that they're going to come through to run agentic business. We're going to make it happen. That's what you should be thinking. Maybe just to dig into that a little bit further, because it is a big concern for shareholders. When you're sitting down with the CIO and you're talking about what ServiceNow is going to do for the organization, how important is that seat count metric versus talking about the broader value? If it's not going to be seats, are there other ways for ServiceNow to get paid? Fundamentally, is the customer going to pay you for the productivity gains? Are they going to pay you for the value that you add, regardless of whether it's adding or detracting? It's a great question. First of all, the seat thing is a sideshow. That's just something that people somehow got worried about. I'm sure somebody put the FUD in somebody's mind and they wrote articles about it. It's a sideshow. What you have to do in enterprise software to be successful is you have to know the customer and you have to understand what they're trying to accomplish. Everything is tied to a business case. What I'm explaining to you is you have seats, you have hybrid pricing based on the Assist packages, which is a hybrid pricing model. It's already in the market. They're already renewing the Assist packs. That's a completely new way of generating net new revenue. I gave you other things also like assets, like devices, like infrastructure. These are all components of net new ACV opportunities in the pricing model of ServiceNow. It is happening. The other thing that's quite interesting, I ran across this in December of last year, I met the CEO and chair of one of the biggest SI firms in the world. We were working together on a common customer. It happened to be a CRM related matter. The business case was $682 million. Our take on that was de minimis compared to the $682. I basically say, to the customer and to the SI, I tell you what, the heck with the licensing model, just give me a piece of the action. What do you want to give me? Want to give me half? No, I don't want to give you half. Give me 20%. Probably that's a lot. In other words, they talked themselves into, no, no, I want the seats because that's predictable and I know where I stand. I'm good with the assists. The SI said the business case is so good, we're underwriting it. What I think is a net new possibility that's not even commercialized yet, but I believe we're going to do it, is literally saying to the biggest, most important companies in the world, we are the AI platform for business transformation. We will take care of you. We will put business cases together with AI that generate unique economic value. Give me a piece of the action, and I'll even underwrite it and guarantee it for you. That is something with big companies that hasn't even hit the street yet. For your imagination, if that doesn't burn you with some cool ideas that get rid of the silly seat conversation, then probably nothing will. This is what's happening in the real world. Hybrid pricing is where it's at. The agents are going to be priced in. There'll be agent specialists, networks, devices, infrastructure, assets. It's all going to be part of the agentic revolution, and the upside for a company like ours that touches every function of a corporation and every buying center of a corporation, it has not even been scratching the surface yet. That's how much is in front of us. I tell people all the time, and we just had that conversation with someone backstage, "Look, $200 billion is where it should be now. We're going for $1 trillion, and we're building business models to do that. I warmly welcome language models, hyperscalers, systems of record. Anybody that wants to be part of this Universal Agentic Network, come to the party because we're going. Got it. I'm going to feed that to my associate. $200 billion market cap is the base case. Bull case, $1 trillion. The trillion is the number to focus on. Okay. You know, that's why, that's why I signed up to 2030. That's steady. By the way, I bet the whole comp plan on the stock, so. Bought some, too. I'm shoulder to shoulder with you, and it's all gonna come true. Don't worry about it. That's steady. The other side of the hybrid side of the equation is the consumption ramp. Mm-hmm. You talked about on the most recent earnings call, a hockey stick of consumption into the second half of this year. Two questions on that. Like, one, what are you seeing in usage patterns? 'Cause there's got to be usage that's gonna drive that hockey stick. From the investor's perspective, like, how should we sort of set our expectations in terms of the ability to really start moving the needle for subscription revenues, or revenues overall for ServiceNow as that consumption starts ramping up? Yeah, for sure. I think it's a real good question because the assist packs just started kicking in now, Q4 and now. Since May, they're up 55x in terms of the consumption. That is progressive through this year. May was when things started to really take off. I think in the second half of the year, you're gonna have a real hockey stick in terms of the assist packs kicking in at scale. We're managing the process beautifully. You'd be very proud if you saw behind the scenes how the company is doing it. There's a tremendous obsession with customers at ServiceNow. You'd expect that from me, I get it. I'm not 29,000 people. I got 29,000 people that are obsessed with that too, tremendous adoption skills in the company, forward-deployed engineers in the company, and they're all about getting the customer to adopt, use, and derive value from. The software sale is the easy part. That's the part where companies really have to get with us shoulder to shoulder to win the game. I think in the back end of the year, you'll see a lot of the assists really kick into that hockey stick formation. The other thing I think you're gonna see is, we're just now beginning with Moveworks, Veza, and soon Armis. Moveworks is with us now. Veza closed two days ago. This is the identity management platform of this generation. There's nothing as good as it. Otherwise, we wouldn't have done the deal. Yeah. We only buy the best. Armis, I believe, is Instagram. You're already penetrated in the Fortune 100, 40% penetrated without a sales force. We have one of those, and we know what to do with them. All of these things, I think, will form hockey sticks on top of an already fast-growing ServiceNow. Other thing that's happening, Keith, is customers. You know, I first came here, I don't know if you remember this, but I said, "We're the platform of platforms. Nobody has to lose for us to win." I stand by that still. I mean, I have no quarrel with any of these companies, including the systems of record, because their win rates would go up if they adopted ServiceNow. It would be good for them. They won't because they feel very threatened by us. They shouldn't because it would help them if they really teamed up because that's what the customer wants. The customer's gonna get what they want either way. Where I was going with this conversation is we're at a very unique inflection point now where we're one company that's coming at the customer with one highly integrated platform that's going to be able to seamlessly manage all of your agents, connect all of your data in one real-time fabric where the work is happening inside of the workflow, the transactions are real time, whether you move it into ServiceNow or at zero copy. Now you're going to be able to combine your IT and OT landscape seamlessly on one platform. That doesn't mean that the security companies that are out there today aren't good companies. They are. We integrate with all of them. Today, our security business is heading for a billion and a half. We haven't even worked at it. What they want is they want 1 vision of their security estate. We're not only giving them that, but we're actually giving them the control plane of the operating technology and the information technology that connects with all of their security. You know why that's really big, and I think this is gonna be the big deal? Because today, if you look at the world economy, U.S. is number 1, China's number 2, and the security fraud is number 3. It's a trillion-dollar market a month. If you think that that's a problem, you're right. In the enterprise, we're gonna be able to control that plane and give that visibility and the real-time workflow action necessary to do what you have to do to stomp out that problem. Companies that work with us already know we're good at it. You add IT and OT, and you're gonna be of something extremely special. All the licensing models advance with these new business interests in the agentic world, which are far bigger than the enterprise. If you say, "Well, everyone's gonna tell me to buy their agents." They're gonna tell you to buy their agents either as a feature 'cause, "Oh, we can do one feature that ServiceNow does, maybe you should buy my agents," or a function where someone says, "Yeah, but I'm the specialist in HR or CRM." All that might be true, there's only one company that traverses across all of those interests on one common platform. Right. That is what makes everything simple. You know, for my money, the ultimate art form of leading a company is making it simple, and simple is really hard. Okay. One last topic I wanted to double click on is the M&A strategy, right? Sure. I remember when you came on board as CEO at ServiceNow, you understood the investor angst around M&A. You said, "Listen, we don't need to do M&A to grow this company. Right. There's a lot of organic opportunity. True. What changed? Like, was it the assets that you saw? Is it the level of maturity of ServiceNow? What changed that M&A has become a bigger part of the strategy over the last 18 months versus, like, the first four years? We wanna be the best. We wanna be the fastest-growing and best enterprise software company in the world. AI moved the goalpost, AI is changing the world. Agentic enterprises are the ones that'll survive. The other ones won't. Our ambition is to be that agentic market leader. The assets that we bought, we could have built it, but it would have taken us too much time. AI is moving too fast. To have the agentic front door to our autonomous platform was necessary. To have identity management at a human, non-human, and thinking machine level was necessary. We bought the agentic market leader. With Armis, we absolutely bought the OT market leader in the world and such potential. We bought into a TAM idea that is now a $600 billion TAM. The TAM idea that I walked into in 2019 was still a great TAM. It was $90 billion. $600 billion is better than $90 billion if you want to build a trillion-dollar company. It's as simple as that. Everything we did is about innovation and progressing the customer's agenda, so ultimately, our shareholders can look at this Now symbol and say, "I'm proud to own that. That guy cares about my money. That man understands what's going on in the enterprise, and he wants to win." I got 29,000 people around me that feel the same way. That's where it's at. You're not gonna get surprised by us. We don't need to buy the losers. There'll be plenty of them. We're just going for growth. Outstanding. Super exciting story at ServiceNow right now. Thank you for coming in. Thank you for having me, Keith. Appreciate you. Thanks, everybody. Thank you very much.