Q3 2024 ServiceNow Inc Earnings Call

Unknown Executive: Good afternoon and welcome to the ServiceNow third quarter 2024 earnings conference call. Please note that this call is being recorded. At this time, all participants are in a listen-only mode.

Good afternoon, and welcome to the service now third quarter 'twenty 'twenty four earnings conference call. Please.

Please note that this call is being recorded at.

Speaker Change: At this time all participants are in a listen only mode.

Unknown Executive: After this begins remarks, there will be a question-and-answer session. If you would like to ask a question, please press star followed by the number one on your telephone keypad. To withdraw your question, press star one a second time.

Speaker Change: After the Speakers' remarks, there will be a question and answer session.

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Darren Yip: I will now turn the call over to Darren Yip, Group Vice President and Investor Relations. Please go ahead.

Speaker Change: I will now turn the call over to Darren Yet group Vice President Investor Relations. Please go ahead Sir.

Darren Yip: Good afternoon, and thank you for joining ServiceNow's third quarter 2024 earnings conference call. Joining me are Bill McDermott, our Chairman and Chief Executive Officer, and Gina Massintuno, our Chief Financial Officer. Today's call, we will review our third quarter 2024 results and discuss our guidance for the fourth quarter and full year 2024.

Speaker Change: Good afternoon.

Darren Yet: Noon and thank you for joining service now third quarter of 2024 earnings Conference call. Joining me are Bill Mcdermott, our chairman and Chief Executive Officer, and Gina masking to know our Chief Financial Officer.

Darren Yet: During today's call, we will review, our third quarter 2024 results and discuss our guidance for the fourth quarter and full year of 2024.

Darren Yip: Before we get started, we want to emphasize that information discussed on this call, including our guidance, is based on information as of today and contains four looking statements that involve risks, uncertainties, and assumptions. We undertake no duty or obligation to update such statements as a result of new information or future events.

Darren Yet: Before we get started we want to emphasize that the information discussed on this call, including our guidance is based on information as of today and contains forward looking statements that involve risks uncertainties and assumptions.

Darren Yet: We undertake no duty or obligation to update such statements as a result of new information or future events.

Darren Yip: Please refer to today's earnings press release and our SEC filings, including our most recent 10-Q and 2023 10-K, for factors that may cause actual results to differ materially from our forward-looking statements. We'd also like to point out that we present non-GAAP measures in addition to, and not as a substitute. Financial measures calculated in accordance with GAAP. Unless otherwise noted, all financial measures and related growth rates we discussed today are non-GAAP, except for revenues, remaining performance obligations, our RPO, current RPO, and cash and investments.

Darren Yet: Please refer to today's earnings press release, and our SEC filings, including our most recent 10-Q and 2023 10-K were factors that may cause actual results to differ materially from our forward looking statements.

Darren Yet: We'd also like to point out that we present non-GAAP measures in addition to and not as a substitute for financial measures calculated in accordance with GAAP.

Darren Yet: Unless otherwise noted all financial measures and related growth rates. We discussed today are non-GAAP, except for revenues remaining performance obligations or RPE.

Darren Yet: Craig IPO and cash and investments.

Darren Yip: To see the reconciliation between these non-GAAP and GAAP measures, please refer to today's earnings press release and investor presentation, which are both posted on our website at investors.servicenow.com.

Darren Yet: I see the reconciliation between these non-GAAP and GAAP measures. Please refer to today's earnings press release, and Investor presentation, which are both posted on our website at investors got service now Dot com.

Darren Yip: A replay of today's call will also be posted on our website.

Darren Yet: A replay of today's call will also be posted on our website.

Bill Mcdermott: With that, I'll turn the call over to Bill. Thank you very much, Darren. Good afternoon, everyone. I really appreciate you joining today.

Darren Yet: With that I'll turn the call over to Bill. Thank you very much Darren good afternoon, everyone. I really appreciate you joining today, there's a lot to cover in this latest beat and raise report I'll focus on five powerful tailwind that underscore our strong confidence in service now is growth trajectory.

Bill Mcdermott: There's a lot to cover in this latest beat and raise report. I'll focus on five powerful tailwinds that underscore our strong confidence and ServiceNow's growth trajectory. The first is elite level execution. With our Q3 results, we have demonstrated once again ServiceNow's strong execution. We outperform all top line and profitability metrics. Subscription revenue growth was 22.5% at constant currency, 200 basis points above the high end of our guidance. We had 96 deals greater than a million in net new ACV. We landed our second largest new logo deal ever, and our second customer crossed the hundred million mark in total ACV.

Darren Yet: The first is elite level execution with our Q3 results we have demonstrated once again.

Darren Yet: Service Now's strong execution.

We outperformed all top line and profitability metrics subscription revenue growth was 22, 5% at constant currency 200 basis points above the high end of our guidance.

Darren Yet: Our P. O was 23, 5% at constant currency of 150 basis points above our guidance operating margin was over 31% more than a 150 basis points above our guidance, we had 96 deals greater than 1 million and net new H D D.

Darren Yet: We landed our second largest new logo deal ever.

Darren Yet: And our second customer crossed the 100 million Mark in total HCV.

Bill Mcdermott: Customer adoption of ServiceNow's platform continues to move across the enterprise and to end. For CIOs and their tech teams, ITSM and ITOM were each in at least 15 of our top 20 deals with double-digit deals over a million. It's also worth noting that IT asset management was in all of our top 20 deals. And Q3 was another strong performance for security and risk as they combined for 14 of the top 20 deals, with 11 deals that were over a million dollars. As we see more opportunity to disrupt the front office, customer workflows had a great Q3 with 15 of the top 20 deals and 17 deals over a million.

Darren Yet: Customer adoption of service now as platform continues to move across the enterprise end to end.

Darren Yet: And their tech teams at TSM, and I, Tom where each and at least 15 of our top 20 deals with double digit deals over $1 million.

Darren Yet: Also worth noting that it asset management was in all of our top 20 deals and Q3 was another strong performance for security and risk as they combined for 14 at the top 20 deals with 11 deals that were over $1 million.

Darren Yet: As we see more opportunity to disrupt the front office customer workflows had a great Q3 with 15 of the top 20 deals and 17 deals over $1 million.

Bill Mcdermott: Employee workflows were in 13 of the top 20, with 9 deals over a million, and create a workflow with strong again and 17 of the top 20, with 13 deals over a million.

Darren Yet: Employee workflows, we're in 13 of the top 20 with nine deals over $1 million and create a workflow was strong again and 17 of the top 20 with 13 deals over $1 million here's the headline many companies have struggled to execute and what has been a complex macro environment.

Bill Mcdermott: Here's the headline. Many companies have struggled with this. They're able to execute in what has been a complex macro environment. ServiceNow has delivered consistently beyond the rule of 50. We are the benchmark for elite level execution.

Darren Yet: Service now has delivered consistently beyond the rule of 50 <unk>.

Darren Yet: We are the benchmark for elite level execution.

Bill Mcdermott: The second tailwind behind ServiceNow success is our growing strategic relevance. For years we've been talking about the mess of the 20th century enterprise systems. Organizations around the world needed a platform to help them clean up that mess so they can modernize for the AI world. ServiceNow is that chosen strategic platform. And we integrate with all those other systems, orchestrate the silos into modern workflows, and create a consistent, consumer-grade user experience. It's important to understand the history here. When public cloud solutions came online as the last secular shift in the enterprise, they created sprawling governance challenges.

Darren Yet: The second tailwind behind service now success is our growing strategic relevance for years, we've been talking about the mess of the 20th century enterprise systems organizations around the world needed a platform to help them clean up that mess. So they can modernize for the AI world surf.

Darren Yet: Now is that chosen strategic platform.

Darren Yet: We integrate with all those other systems orchestrate the silos into modern workflows and create a consistent consumer grade user experience, it's important to understand the history here.

Darren Yet: When public cloud solutions came online as the last secular shift in the enterprise they created <unk>.

And governance challenges CIO that the direction of their Ceos were asked to get things under control our cost security and integration.

Bill Mcdermott: CIOs, at the direction of the CEOs, were asked to get things under control for cost, security, and integration. And ServiceNow played that role. Now the C-suite is looking to ServiceNow to prevent another mess with AI. Leaders see the risk that every vendor's box and agents will scatter like hornets fleeing the nest. And they trust ServiceNow as the governance control tower, which is a privileged position for our platform.

Darren Yet: Service now played that role.

Darren Yet: Now the C suite is looking to service now to prevent another mess with AI.

Darren Yet: Leaders see the risk that every vendor's box and agents will scatter like Hornets fleeing the nest and they trust service now as the governance control tower, which is a privileged position for our platform.

Bill Mcdermott: This brings me to the third momentum driver. ServiceNow has emerged as the AI platform for business transformation. The secular shift to AI is validated and is unfolding in real time. With now assist, we have 44 customers spending more than a million in ACV, including 6 over 5 million and 2 over 10 million. And this continues to be our fastest growing product ever and an accelerant to our cross-enterprise expansion. In Q3, we announced our biggest GNI release to date, Xanadu. This included over 350 net new innovations delivered through 5 million plus engineering hours. Xanadu had supercharged now assist with analytics generation, custom skills development, Microsoft Co-Pilot integration, and more.

Darren Yet: This brings me to the third momentum driver service now has emerged as the AI platform for business transformation.

Darren Yet: The secular shift to AI is validated and is unfolding in real time.

Darren Yet: With now assist we have 44 customers spending more than $1 million in HCV, including six over $5 million and to over $10 million.

Darren Yet: And this continues to be our fastest growing product ever and an accelerant to our cross enterprise expansion.

In Q3, we announced our biggest Gen AI released to date Xanadu.

Darren Yet: This included over 350, net new innovations delivered through 5 million plus engineering hours Xanadu had supercharged now assist with analytics generation custom skills development, Microsoft co pilot integration and more <unk>.

Bill Mcdermott: Xanadu expanded industry vertical, AI powered automation, Patelco, tech, public sector, banking, insurance, and manufacturing. We released now assist for security, procurement, and an integrated development solution for software engineers. Xanadu showcased ServiceNow's leadership with a gender AI. And until now, gender to AI in the enterprise requires human prompts to initiate action. Action. We're now deploying autonomous AI agents that work with people, not just for them. Using ServiceNow Single Architecture Platform and Cross Enterprise Data, ServiceNow AI agents can uniquely advance beyond prompt-based activity to deep contextual comprehension. This is like hiring an additional workforce to support people by doing the jobs they've never wanted to do in the first place.

Darren Yet: <unk> expanded industry vertical AI powered automation to telco tech public sector banking insurance and manufacturing.

Darren Yet: We released now assess the security procurement and an integrated development solution for software engineers.

Darren Yet: <unk> showcased service now has the leadership with a gentex AI and until now generative AI on the enterprise required human prompts to initiate action.

Darren Yet: We're now deploying autonomous AI agents that work with people not just for them.

Darren Yet: Using service now single architecture platform and cross Enterprise data service now AI agents can uniquely advanced beyond prompt based activity to deep contextual comprehension. This.

Darren Yet: This is like hiring an additional workforce to support people by doing the jobs they've never wanted to do in the first place.

Bill Mcdermott: We intend to be the control point that governs the deployment of agentic AI across the enterprise. As this AI innovation on ServiceNow contributes to what IDC says will be a nearly $20 trillion global impact by 2030. That means every $1 spent on AI solutions and services will generate nearly $5 in value to the global economy. This is why IDC also forecasts businesses will spend more than half a trillion dollars on AI in 2027 alone.

Darren Yet: We intend to be the control point that governs the deployment of a gentex AI across the enterprise.

This AI innovation on service now contributes to what IDC says will be nearly 20 trillion dollar global impact by 2030.

Darren Yet: That means every $1 spent on AI solutions and services will generate nearly $5 in value to the global economy.

Darren Yet: This is why IDC also forecast businesses will spend more than half a trillion dollars on AI in 2027 alone.

Bill Mcdermott: So when you combine a massive, once-in-a-generation technological shift with a platform that is engineered to lead the transmission, ServiceNow's momentum is the result.

Darren Yet: So when you combine a massive once in a generation technological shift with a plan that is engineered to lead. This transformation service now as momentum is the result.

Bill Mcdermott: The fourth factor is our growing brand awareness and addressable market. When you consider the countless success stories, the world works with ServiceNow was a prescient identity for our brand. The Defense Logistics Agency works with ServiceNow Assist to digitally transform. Following a highly successful citizen development project, Banco de Brazil works with ServiceNow to increase visibility and automation. The Veteran Affairs IT office works with ServiceNow to ensure their mission critical systems perform with minimal disruptions to the veterans, their families, and the employees who serve them. Lloyd's Banking Group works with ServiceNow to transform its people operations with AI-powered solutions to improve its colleague experience.

Darren Yet: The fourth factor is our growing brand awareness and addressable market when.

Darren Yet: When you consider the countless success stories the World works with service now was a prescient identity for our brand.

Fence Logistics agency works with service now assist to digitally transform.

Darren Yet: Following a highly successful citizen development project Banco de Brasil works with service now to increase visibility and automation.

Darren Yet: Churn Affairs office works with service now to ensure their mission critical systems perform with minimal disruptions to the veterans and their families and the employees who serve them.

Darren Yet: Lloyds banking group works with service now to transform its people operations with AI powered solutions to improve its colleague experience.

Bill Mcdermott: After rolling out Now Assist globally, EY works with ServiceNow to automate a wide range of tasks to deliver faster resolutions or enhanced client service. The American Red Cross works with ServiceNow to automate risk management so they can concentrate on their life-saving mission. Mercedes-Benz works with ServiceNow to support their business transformation. It's no surprise our partnerships are expanding as well. Zemenz and ServiceNow announced a new collaboration aimed at enhancing industrial cybersecurity, driving the integration of Gen.A.I. into shop floor operations. Bell Canada recently announced the acquisition of HGC Technologies, a ServiceNow partner, to increase their leadership in the North American marketplace.

Darren Yet: After rolling out now assist globally T Y works with service now to automate a wide range of tasks to deliver faster resolutions or enhanced client service.

The American Red Cross works with service now to automate risk management. So they can concentrate on their life saving mission.

Darren Yet: Mercedes Benz works with service now to support their business transformation.

Darren Yet: No surprise, our partnerships are expanding as well Siemens and service now announced a new collaboration aimed at enhancing industrial cyber security driving the integration of Gen III and to shop floor operations Bell, Canada recently announced the acquisition.

Darren Yet: Of <unk> technologies, a service now partner to increase their leadership in the North American marketplace, We announced an expanded strategic alliance with zoom to integrate our Gen. AI technologies and we're just getting started in fact today we are.

Bill Mcdermott: We announced an expanded strategic alliance with Zem to integrate our Gen.A.I. technologies, and we're just getting started.

Bill Mcdermott: In fact, today we unveiled a series of powerful new growth initiatives. Our partnership with NVIDIA has been a game-changer for enterprises embracing AI. We're taking that to the next level by co-creating a shared vision on agent AI. Together, NVIDIA and ServiceNow are developing out-of-the-box use cases for AI agents on the Now platform using NVIDIA NIM Agent Blueprint. Service. Customers simply turn on these capabilities and start reinventing workflows across the enterprise, with small, single-issue resolutions all the way to entire incident response workflows.

Darren Yet: Unveiled a series a powerful new growth initiatives, our partnership with Nvidia has been a game changer for enterprises embracing AI, we're taking that to the next level by co creating a shared vision on a gentle AI together and video and service now or develop.

Darren Yet: Out of the box use cases for AI agents on the now platform using Nvidia NIM agent blueprints customers simply turn on these capabilities and start reinventing workflows across the enterprise with small single issue resolutions all the <unk>.

Darren Yet: Way to entire incident response workflows.

Bill Mcdermott: You heard it knowledge that ServiceNow launched RAPTA DB. Our new ultra-fast database built for AI first enterprises, which processes transactions 12, 12 times faster, analytics 27 times faster. Customers, including Amadea, are already in the process of implementing RAPTA DB to supercharge processing speeds across their global systems. Our data ambition doesn't end there. We are expanding deeper with our new workflow data fabric, which will unify business and technology data. So it flows seamlessly across the enterprise. Companies have always trusted us to bring order to the chaos of 20th century enterprise architectures. Now we can do the same with their data by powering automation and AI with real-time, secure access to data from any source.

Speaker Change: You heard it knowledge that service now launched wrapped a DB.

Speaker Change: Our new Ultra SaaS database Bill for AI, first enterprises, which processes transactions 12.

12 times faster analytics, 27 times faster customers, including Amadeus are already in the process of implementing wrap the DB to supercharge processing speeds across their global systems are.

Speaker Change: Our data ambition doesn't end there.

Speaker Change: We are expanding.

Speaker Change: Deeper with our new workflow data fabric, which will unify business and technology data. So it flows seamlessly across the enterprise.

Speaker Change: Companies have always trusted us to bring order to the chaos of 20th century enterprise architectures now we could do the same with their data by powering automation and AI with real time secure access to data from any source.

Bill Mcdermott: Workflow data fabric also includes zero copy partnerships with established leaders like DataBricks and Snowflake, so customers can turn data into instant AI-powered action all on the ServiceNow platform. One of the world's leading professional services companies, Cognizant, became the first systems integrator taking workflow data fabric to market.

Speaker Change: Workflow data fabric also includes zero copy partnerships.

Speaker Change: With established leaders like data bricks and snowflake, so customers can turn data into instant AI powered action.

Speaker Change: All on this service now platform.

Speaker Change: One of the world's leading professional services companies cognizant became the first systems integrator, taking workflow data fabric to market. These.

Bill Mcdermott: These innovations opened the door to massive market opportunity for ServiceNow, nearly doubling our tam to a half a trillion dollars. We also announced a partnership with Rimini Street to unlock value in the existing ERP system market for net new innovation, digital growth, and scale. All this momentum is creating an even bigger flywheel for our business.

Speaker Change: <unk> innovations open the door to massive market opportunity to service now nearly doubling our tam to a half a trillion dollars we.

Speaker Change: We also announced a partnership with Rimini Street to unlock value in the existing ERP system market for net new innovation digital growth and scale.

Speaker Change: All of this momentum is creating an even bigger flywheel for our business. This is why we created service now University encompassing all service now learning experiences service now University represents a strategic investment in the global workforce with the goal to skill another three mill.

Bill Mcdermott: This is why we created ServiceNow University and composing all ServiceNow learning experiences. ServiceNow University represents a strategic investment in the global workforce with the goal to skill another 3 million learners in the next few years.

Speaker Change: Learners in the next few years.

Bill Mcdermott: With all this momentum, it's no surprise that our recognition is also growing. The American Opportunity Index assesses how well employers develop their talent. We have learned that ServiceNow will be the highest ranking technology company again this year, ranking 5th overall among 400 brands. Even more importantly, when it comes to internal advancement as measured by the index, how well we promote and build the careers of our people. ServiceNow is the top company overall with the best score among all firms across all sectors. We also rank on list for best places to work in technology in Europe and Singapore for women and for parents, which is why we have already more than one and a half million candidates for our open roles this year.

Speaker Change: With all this momentum it's no surprise that our recognition it's also growing the.

Speaker Change: The American opportunity index assesses, how well employers develop their talent.

Speaker Change: We have learned that service now will be the highest ranking technology company again this year ranking fifth overall, among 400 brands, even more importantly, when it comes to internal advancement as measured by the index, how well, we promote and build the careers of our people.

Speaker Change: <unk> service now as the top company overall with the best score among all firms across all sectors.

Speaker Change: We also ranked unless for best places to work in technology in Europe, and Singapore for women and for parents, which is why we have already more than one 5 million candidates for open roles. This year.

Bill Mcdermott: This brings me to the final tailwind. The best people want to be at ServiceNow.

Speaker Change: That brings me to the final tailwind.

Speaker Change: Best people want to be at service now I'm very proud to announce that amidst savory will join service now as our President Chief product Officer and C. O L. G.

Bill Mcdermott: I'm very proud to announce that Amit Savry will join ServiceNow as our President, Chief Product Officer, and COO. Amit joins from Alphabet, where he was General Manager of the Google Cloud Platform. During his tenure, he helped build Google Cloud into the fourth largest enterprise software company by increasing annualized revenue from $7 billion to over $41 billion. Before joining Google Cloud, Amit had a distinguished career at Oracle, where he presided over their growth and Platform as a Service and Data Analytics. with Sterling Educational and Career Credentials amidst the world-class engineer and engineering leader. From a commercialization perspective, he's also an expert in packaging and pricing.

Speaker Change: Joins from alphabet, where he was general manager of the Google Cloud platform. During his tenure he helped build Google cloud and to the fourth largest enterprise software company by increasing annualized revenue from 7 billion to over 41 billion before joining Google cloud amid had a distinguished.

Speaker Change: Career at Oracle, where he presided over their growth and platform as a service and data analytics.

Speaker Change: With Sterling educational.

Speaker Change: Career credentials amid as a world class engineer and engineering leader.

Speaker Change: From a commercialization perspective, he is also an expert and packaging and pricing.

Bill Mcdermott: With a compelling vision for AI business transformation, he is hungry and humbled to his core. He joins an exemplar engineering leadership team that is full of highly accomplished innovators.

With a compelling vision for AI business transformation. He is hungry and humble to his core he joins an exemplar engineering leadership team that is full of highly accomplished innovators.

Bill Mcdermott: I'd like to warmly welcome Amit and all our new hires who have joined the Defining Enterprise Software Company of the 21st Century. And I'd also like to give a special shout-out to Mr. Chris Beatty, our Chief Crust Customer Officer, who did a great job in filling in in Q3 and aligning our whole company with our partners and customers to ensure that we as a company also did a great job in closing.

Speaker Change: To warmly welcome Amit and all our new hires who have joined the defining enterprise software company of the 20 <unk> century, and I'd also like to give a special shout out to Mr. Chris <unk>, Our Chief Cross customer officer, who did a great job and filling in in Q3 and aligning.

Speaker Change: Our whole company with our partners and customers to ensure that we as a company also did a great job in closing.

Bill Mcdermott: I could have focused on any number of factors that make ServiceNow the stand-out growth company it is today. There's a lot of speculation out there about which companies will be the winners in AI. We shouldn't look past the companies that are already winning. ServiceNow is putting AI to work for people.

Speaker Change: I could've focused on any number of factors that make service now the standout growth company. It is today, there's a lot of speculation out there about which companies will be the winners in AI, we shouldn't look past the companies that are already winning.

Speaker Change: Service now is putting AI to work for people our World Forum events are oversubscribed, and some cases more than double the attendance year over year by definition, a safe Haven as a place of refuge or security.

Bill Mcdermott: Our world forum events are oversubscribed; in some cases, more than double the attendance year over year.

Bill Mcdermott: By definition, a safe haven is a place of refuge or security. By virtue of our team, our technology, and our strategic choices, no company is more closely aligned to where our customers need to go. That not only makes us a safe haven for customers, it also fuels our rocket ship to hit new milestones as we grow to 30 billion and beyond. I couldn't be more proud to celebrate my fifth year anniversary at CEO and to redouble my commitment to serving Fred Lutty's dream for the full potential of ServiceNow. Thank you all very much for your time.

Speaker Change: By virtue of our team our technology and our strategic choices No company is more closely aligned to where our customers need to go that not only makes us a safe haven for customers. It also fuels our rocket ship to hit new milestones as we grow to $30 billion.

Speaker Change: And beyond.

I couldnt be more proud to celebrate my fifth year anniversary as CEO and to redouble my commitment to serving Fred Luddy. His dream for the full potential of service now. Thank you all very much for your time, I hand things over to Jean <unk>, Our Chief Financial Officer.

Gina Mastantuono: I hand things over to Gina Mastintuno, our Chief Financial Officer. Thank you, Bill. Q3 was another stellar quarter for ServiceNow with substantial outperformances across all of our growth and profitability metrics. As digital transformation and GNI remained top priorities for C-suite, the Now Platform and Now Assist continue to see robust demand. ServiceNow stands out as the strategic partner to deliver intelligent solutions driving incredible business outcomes in every corner of the enterprise. Q3 subscription revenues are 2.715 billion, going 22.5% year over year in constant currency, exceeding the high end of our guidance range by 200 basis points.

Jean: Thank you Bill Q3 was another stellar quarter for service now a substantial outperformance is across all of our growth and profitability metrics.

Jean: As digital transformation and G&A I remain top priorities proceed suites, the now platform and now assist continue to see robust demand.

Jean: Service now stands out as the strategic partner to deliver intelligent solutions driving incredible business outcomes in every corner of the enterprise.

Jean: Q3 subscription revenues of $2 75 billion growing 22, 5% year over year in constant currency exceeding the high end of our guidance range by 200 basis points.

Gina Mastantuono: RPO ended the quarter at approximately 19.5 billion, representing 33% year-over-year constant currency growth, accelerating both quarter-over-quarter and year-over-year. Current RPO with 9.36 billion, representing 23.5% year-over-year constant currency growth, a 150 basis point beat versus our guidance, and a 100 basis point acceleration from Q2.

Jean: <unk> ended the quarter at approximately $19 5 billion, representing 33% year over year constant currency growth accelerating both quarter over quarter and year over year.

Jean: Current RPI at 936 billion, representing 23, 5% year over year constant currency growth of 150 basis point beat versus our guidance and a 100 basis point acceleration from Q2.

Gina Mastantuono: Thank you. From an industry perspective, technology, media, and telecom was very strong, going net new ACV over 100% year-over-year. Retail and hospitality also had a fantastic quarter, growing over 80% year-over-year. Health care and life sciences and manufacturing also saw strength. You-to-date US Federal has demonstrated outstanding execution, further growing net new ACV on top of a phenomenal 2023. In Q3, we landed five deals over $5 million and $2 over $20 million. Overall, we once again achieved a robust renewal rate in the quarter, reflecting the value ServiceNow consistently provides to customers. The importance of the now-platform has driven the number of customers paying us over 1 million in ACV to 2020.

Jean: From an industry perspective technology media and telecom with very strong net new HCV over 100% year over year retail and hospitality also had a fantastic quarter growing over 80% year over year.

Jean: Health care life Sciences, and manufacturing also SUS jet.

Year to date U S. Federal has demonstrated outstanding execution further growing net new ACB on top of a phenomenal 2023 in Q3, we landed five deals over $5 million and two of the $20 million.

Jean: Overall, we once again achieved a robust renewal rate in the quarter, reflecting the value service now consistently provides to customers.

The importance of the now platform has driven the number of customers paying us over $1 million in ACD to 2020, what's more the number of customers paying us 20 million or more grew nearly 40% year over year powered by large deal momentum.

Gina Mastantuono: What's more, the number of customers paying us 20 million or more grew nearly 40% year-over-year, powered by large deal momentum. We closed 96 deals greater than a million in net new ACV in the quarter, including six with new logos. Among them, 15 deals are over 5 million, and six deals were over 10 million. The proliferation of large deal reflects the greater emphasis on selling the platform and, with it, more products per transaction. In Q3, 18 of our top 20 deals included seven or more products. Our GNI capabilities also continue to gain commercial traction in the quarter.

Jean: Closed 96 deals greater than $1 million and net new ACD in the quarter, including six with new logos.

Jean: Among them 15 deals over 5 million and six deals were over $10 million. The proliferation of large deal reflects a greater emphasis on selling the platform and with it more products per transaction.

Jean: In Q3 18 of our top 20 deals included seven on more products.

Speaker Change: Our Gen AI capabilities also continued to gain commercial traction in the quarter as Bill mentioned, we now have 44 customers spending more than $1 million and now assist.

Gina Mastantuono: As Bill mentioned, we now have 44 customers spending more than 1 million and now assists, including six over 5 million and two over 10 million. Pricing has also remained healthy as our Plus use continued to see a greater than 30% price uplift over Pro in Q3. With more proof points from real world case studies, we're seeing rising demand from customers, increasing confidence, and now assists ability to deliver significant productivity improvements and savings. For instance, a multinational conglomerate has seen a 75% improvement in case deflection rates with ITSM and HRSD Enterprise Plus, pushing towards its goal of automating 60% of transactional work.

Speaker Change: <unk> six over $5 million and to over $10 million.

Speaker Change: Pricing has also remained healthy as our plus Skus continued to see a greater than 30% price uplift of a pro in Q3.

With more proof points from real World case studies, we're seeing rising demand from customers, increasing confidence and now is its ability to deliver significant productivity improvements and savings.

Speaker Change: For instance, a multinational conglomerate has seen a 75% improvement in case deflection rates with <unk> and HRS, the enterprise plus pushing towards its goal of automating 60% of transactional work.

Gina Mastantuono: Another large tech company adopted ITSM Enterprise Plus to increase self-service by 30% while enhancing employee satisfaction. The majority of GNI ideals were sold direct that were starting to see our partner enablement produce results. For example, in Q3, with the help of one of our largest GSI partners, we close an HRSD Enterprise Plus deal with a federal agency. In fewer than 60 days, they were fully configured and production ready. Our industry SKUs also had a phenomenal quarter, tripling net new ACB year of a year, led by financial services and TMC, which both quadrupled. Turning to profitability, non-GAAP operating margin was over 31%, more than 150 basis points above our guidance, driven by the timing of spend, our top-light outperformance, and op-x efficiency.

Speaker Change: Another large tech company adopted <unk> enterprise plus to increase self service by 30%, while enhancing employee satisfaction.

Speaker Change: The majority of Janney ideal for sell direct the we're starting to see our partner enablement produce results.

Speaker Change: Sample in Q3 with the help of one of our largest GSI partners. We closed an HR SD enterprise plus <unk> with a federal agency and fewer than 60 days, they were fully configured and production ready.

Speaker Change: By industry Skus also had a phenomenal quarter tripling net new ACB year over year led by financial services, and CMT, which both quadrupled.

Speaker Change: Turning to profitability non-GAAP operating margin was over 31% more than 150 basis points above our guidance driven by the timing of spend our top line outperformance and opex efficiencies.

Gina Mastantuono: Concentries. Our free cash on margin was 17% up, over 800 basis points year-over-year. We ended the quarter with a robust balance sheet, including 9.1 billion in cash and investment. In Q3, we bought back approximately 272,000 shares as part of our share repurchase program with the primary objective of managing the impact of dilution. As of the end of the quarter, we have approximately 562 million remaining of the original 1.5 billion authorization.

Our free cash flow margin was 17% up over 800 basis points year over year.

We ended the quarter with a robust balance sheet, including $9 1 billion in cash and investments.

Speaker Change: In Q3, we bought back approximately 272000 shares as part of our share repurchase program with the primary objective of managing the impact of dilution.

Speaker Change: As of the end of the quarter, we have approximately $562 million remaining of the original one 5 billion authorization.

Gina Mastantuono: Together, these results continue to demonstrate our ability to drive a strong balance of world-class growth, profitability, and shareholder value.

Speaker Change: Together. These results continue to demonstrate our ability to drive a strong balance at world class growth.

Speaker Change: <unk> ability and shareholder value.

Gina Mastantuono: Moving to our guidance. Given the Q3 outperformance, we are further raising our 2024 growth outlook. For 2024, we're raising our subscription revenues by 78 million at the midpoint, to a range of 10.655 billion to 10.66 billion, representing 23% year-over-year growth, or 22.5% on a constant currency basis. We continue to expect subscription growth margin of 84.5%, operating margin of 29.5%, free cash on margin of 31%. And gap-deluded weighted average outstanding shares of 208 million. For Q4, we expect subscription revenues between 2.875 billion and 2.88 billion, representing 21.5% to 22% year-over-year growth, or 20.5% on a constant currency basis.

Speaker Change: Moving to our guidance.

Speaker Change: Given the Q3 outperformance we are further raising our 2024 growth outlook for.

Speaker Change: 2024, we're raising our subscription revenues by $78 million at the midpoint to a range of $10 $6 5 billion to $10 six 6 billion, representing 23% year over year growth or 22, 5% on a constant currency basis.

Speaker Change: Continue to expect subscription gross margin of 84, 5% operating margin of 29, 5% free cash flow margin of 31% and GAAP diluted weighted average outstanding shares of $208 million.

Speaker Change: For Q4, we expect subscription revenues between $2 85 billion and $2 88 billion, representing 21, 5% to 22% year over year growth or 25% on a constant currency basis.

Gina Mastantuono: We expect CRPO growth of 21.5% on both the reported and constant currency basis. We expect an operating margin of 29%. Finally, we expect 209 million gap-deluded weighted average outstanding shares for the quarter.

Speaker Change: We expect CRP or growth of 21, 5% on both a reported and constant currency basis, we expect an operating margin of 29%.

Speaker Change: Finally, we expect $209 million GAAP diluted weighted average outstanding shares for the quarter.

Gina Mastantuono: In summary, Q3 was another spectacular quarter, driven by strong demand for the now-platform, an exceptional team execution. ServiceNow continues to be laser-focused on delivering a complete end-to-end platform experience, with a Zenith release marking almost comprehensive set of new AI innovations yet, where empowering enterprises to quickly, seamlessly, and responsibly harness the power of intelligence. And we're a great company with strong partners like Nvidia, Microsoft, Snowflake, and Databricks. I'm excited about the opportunities created by our latest innovations, as they fuel our durable top-line growth and margin expansion on our journey to becoming the defining enterprise software company of the 21st century.

Speaker Change: In summary, Q3 was another spectacular quarter driven by strong demand for the now platform and exceptional team execution.

Speaker Change: Service now continues to be laser focused on delivering a complete end to end platform experience with the xanadu release, marking our most comprehensive set of new AI innovations, yet, we're empowering enterprises to quickly seamlessly and responsibly harness the power of intelligence.

Speaker Change: And were in Great company with strong partners like Nvidia, Microsoft Snowflake and data backs.

Speaker Change: I'm excited about the opportunities created by our latest innovations as they fuel our durable top line growth and margin expansion on our journey to becoming the defining enterprise software company of the 21st century.

Gina Mastantuono: Bill and I would like to extend a heartfelt thank you to our employees worldwide for the continued hard work and dedication. Our people are our greatest strength. Their commitment to elite level execution has positioned ServiceNow among the best places to work globally.

Speaker Change: Bill and I would like to extend a heartfelt. Thank you to employees worldwide for their continued hard work and dedication.

Speaker Change: Our people are our greatest strength their commitment to elite level execution has positioned service now among the best places to work globally.

Unknown Executive: With that, I'll open it up for Q&A. Thank you. We will now open the line for questions. If you have dialed in and would like to ask a question, please press star followed by the number one on your telephone keypad to raise your hand and join the Q. To withdraw your question, please press star one a second time. If you have dialed in and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.

Speaker Change: With that ill.

Speaker Change: Open it up for Q&A.

Speaker Change: Thank you we will now open the line for questions if.

Speaker Change: If you have dialed in and we'd like to ask a question. Please press star followed by the number one on your telephone keypad to raise your hand and joined the Q.

Speaker Change: To withdraw your question. Please press star one a second time.

Speaker Change: If you have dialed in and or listening via loud speaker on your device. Please pickup your handset and ensure that your phone is not on mute when asking your question.

Unknown Executive: We kindly ask that you please limit yourself to one question.

Speaker Change: We kindly ask that you please limit yourself to one question.

Aleksandr Zukin: Our first question comes from the line of Aleksandr Zukin with Wolf Research. Please go ahead.

Speaker Change: Our first question comes from the line of Alex Zukin with Wolfe Research. Please go ahead.

Aleksandr Zukin: Hey guys, thanks for taking a question. I want to maybe ask just a market environment demand question first and then a quick follow-up on some product. I mean, Regina, you called out some unbelievable growth rates from the TMT vertical, from the retail vertical. I appreciate that this is a much better year seemingly in those areas versus last year.

Alex Zukin: Hey, guys. Thanks for taking the question I wanted to maybe ask.

Speaker Change: Just the market environment demand.

Alex Zukin: Question first and then a quick follow up on product.

Speaker Change: I mean.

Speaker Change: You called out some unbelievable growth rates from the TMT vertical from the retail vertical I. Appreciate that this is a much better year. It seemingly in those areas versus last year, but maybe are we back to kind of some sort of a steady.

Gina Mastantuono: But maybe are we back to kind of some sort of a steady medium? How do you think about it for the next 12 months, given all the tailwinds that you're seeing? Just maybe a quick tangent on how you're viewing the buying and demand environment. If AI is helping you in that.

Speaker Change: How do you think about it for the next 12 months given all the tailwind that you are seeing just maybe a quick tien tsin on how you're viewing the buying and demand environment. If AI is helping you in that or not.

Gina Mastantuono: Well, Alex, thank you very much for the question. I think the overall macro is not dissimilar. It's still a value-based market out there, but it's been a value-based market for some time. And so the question then becomes who's really got the innovation, who's really got the platform and who's really got real gen AI to tell a real use case story that delivers for the customer. And obviously, I think we answered that definitively with yet another beaten race. So I feel like the market is really excited about AI is going from experimentation to actually choosing the platforms that matter, and companies, especially at the C suite, are building their future plans with real partnerships.

Well, Alex Thank you very much for the question.

Speaker Change: I think the overall macro is not dissimilar, it's still a value based market out there, but it's been a value based market for some time and so the question then becomes who has really got the innovation, who has really got the platform and who has really got real Gen. AI to tell a real use case story delivers for the customer.

Speaker Change: And obviously I think we answered that definitively with yet another beat and raise so I feel like.

Speaker Change: The market is really excited about AI.

Speaker Change: Going from experimentation to actually choosing the platforms that matter and companies, especially at the C. Suite are building their future plans with real partnership so I'm Super excited.

Gina Mastantuono: So I'm super excited. Our pipelines are great. The global events that we're holding are double subscribed compared to last year. Our team is fired up and we're really ready to win, and we want we work for the customer and the customer feels it.

Speaker Change: Our pipelines are great.

Speaker Change: The global events that were holding our double subscribe compared to last year. Our team is fired up and we're really ready to win and we want we work for the customer and the customer feels it and I think culture is something that gets under reported in earnings calls and ours is on fire.

Gina Mastantuono: And I think culture is something that gets under reported and earnings calls, and ours is on fire. Well, just by our calculations, just under 90 million and now assist ACV, definitely, definitely has a real number. So congratulations on that.

Speaker Change: Well Joseph by our calculations, just under $90 million in Peru, and now assist HCV definitely definitely is a real numbers. So congratulations on that maybe maybe just a follow up.

Gina Mastantuono: Maybe, maybe just the follow-up, you know, again, we haven't heard you talk about a product that doubles your time in quite a long time. So maybe just help us understand what the incremental opportunity is within your existing customers with this new data platform product.

Speaker Change: We haven't heard you talk about a product that doubles your Tam.

Speaker Change: In quite a long time, so maybe just help us understand what the incremental opportunity is within your existing customers with this new data platform product and how you expect how long do you expect it to take to kind of start seeing some meaningful traction there.

Bill Mcdermott: And how you expect how long you expected to take to kind of start seeing some meaningful traction there in and in the VNL. Well, I think first and foremost, just dealing with Raptor DB alone, rolling that out to the customer base with the Raptor DB Pro version is an upsell opportunity across the entire install base of ServiceNow. So it's kind of a simple sale. It's like you want to go 25% faster; put Raptor DB in. And by the way, with the greatest engineers in the industry, it's a seamless process, and it happens in hours. So it's pretty fascinating to see the execution excellence of this engineering leadership team.

Speaker Change: And then the P&L.

Speaker Change: Well I think first and foremost just dealing with rapid DP alone.

Speaker Change: Rolling that out to the customer base with the Raptor DB Pro version is an upsell opportunity across the entire installed base of service now.

Speaker Change: It's kind of a simple sale.

Speaker Change: You want to go 25% faster, but raptor deep in and by the way with the greatest engineers in the industry. It's a seamless process and it happens in hours. So it's pretty fascinating to see the execution excellence of this engineering leadership team, they know I love and admire them.

Bill Mcdermott: They know I love and admire them.

Bill Mcdermott: But as I see the world, Alex, you know, we have this idea of the workflow automation platform that's evolved into the AI platform for business transformation, but the data part of this is super exciting because we can now access data from any source. and then align that perfectly with the workflow that we are automating, and by doing that and making everything go faster, the customer is getting all of that structured and unstructured data under control in an automated workflow or an automated process. And this has magnificent benefits, you know. You saw the announcement that we made with Databricks and Snowflake, but we're not sure if it's going to work.

Speaker Change: But as I see the world Alex.

Speaker Change: We have this idea of the workflow automation platform that's evolved into the AI platform for business transformation, but the data part of this is super exciting because we can now access data from any source.

Speaker Change: And then align that perfectly with the workflow that we are automating.

Speaker Change: And by doing that and making everything go faster the customer is getting all of that structured and unstructured data under control and an automated workflow or an automated process.

Speaker Change: And this has magnificent benefits you saw the announcement that we made with data bricks and snowflake, but clearly we've always been able to access to data and all the systems of record and we've been doing this for some time now so I think the data fabric element should be thought of a lot.

Bill Mcdermott: Clearly, we've always been able to access the data and all the systems of record, and we've been doing this for some time now.

Bill Mcdermott: So I think the data fabric element should be thought of a lot like workflow was to applications, the data workflow fabric is to data. And so if you talk to the analysts that I've been talking to with independent research funds, they said, you know, Bill, ServiceNow pulls us off; you just doubled your time. So that's exactly where the numbers come from, two independent sources that are really psyched up by what we're building here, and I am too.

Speaker Change: Workflow was two applications data workflow fabric is to data and so if you talk to the analysts that I have been talking to with independent research firms. They said Bill service now pulls this off you just doubled your Tam.

Speaker Change: So that's exactly where the numbers come from two independent sources that are really psyched up by what we're building here and I am too.

Unknown Executive: Excellent, congratulations, guys. Thanks a lot, Alex.

Speaker Change: Excellent congratulations guys.

Speaker Change: Thanks, a lot Alex.

Brad Selnick: Our next question comes from the line of Brad Selnick with Deutsche Bank. Please go ahead.

Speaker Change: Our next question comes from the line of Brad Zelnick with Deutsche Bank. Please go ahead.

Brad Selnick: Great, thank you so much for taking the question. I wanted to ask about the meaningful uptick in headcount additions and opx growth in the back half of the year. How much of this should we think of as catch up for would it have been more modest sub 20% growth in opx over the past year versus a reflection of the opportunity you see ahead.

Great. Thank you so much for taking the question I wanted to ask about the meaningful uptick in the head count additions and Opex growth in the back half of the year how much of this should we think of as catch up for what had been more modest sub 20% growth in opex over the past year versus a reflection of the opportunity you see ahead and anything else you can share.

Brad Selnick: And anything else you can share on the expected pace of investment beyond Q4 would be really helpful. Thank you.

Speaker Change: And your expected pace of investment beyond Q4 would be really helpful. Thank you.

Gina Mastantuono: Great question, Brad, Brad. So, you know, we've told you in the past that we were going to up tick our headcount growth in the back half, right? The vast majority of the sales and marketing hiring is court abaring reps, and so absolutely you can think about that as our confidence in the opportunity that we see in front of us.

Speaker Change: Great question, Brad Brad So.

Speaker Change: We've told you in the past that we were going to uptick our head count growth in the back half right. The vast majority of the sales and marketing hiring as quota bearing reps and so absolutely you can think about that as our confidence in the opportunity that we see in front of us.

Gina Mastantuono: We're planning to continue to accelerate our headcount growth, but remember, we do it prudently. We do it a quarter at a time so that we're able to pivot if we see something different. And so you can expect similar levels of headcount growth in the next few quarters. As we lean into the opportunity, we see in front of us with everything with now assist with the agenda AI, with the workflow data fabric, all the innovation that the team is driving. Not only is sales and marketing headcount up, but our R&D headcount has been consistently up and will continue to be at a similar pace.

Speaker Change: We are planning to continue to accelerate our head count growth, but remember we do it prudently and we do it a quarter at a time, so that we're able to pivot if we see something different and so you could expect similar levels of head count growth in the next few quarters as we lean into the opportunity we see in front of us.

Speaker Change: With everything with now assist with the intense like AI with the workflow.

Speaker Change: Data fabric all the innovation that the team is driving not only a sales and marketing head count up but our R&D head count has been consistently up and will continue to be at similar pace.

Speaker Change: Pace.

Gina Mastantuono: Thanks for that, Gina.

Speaker Change: Thanks for that Jean if I could just slip in one more for bill because I'm dying to ask them built Bill you've mentioned multiple times now something that I think for some go in one ear and out the other but that's elite level execution.

Brad Selnick: If I could just slip in one more for Bill, because I'm dying to ask him: Bill, you've mentioned multiple times now something that I think, you know, for some, goes in one year and out the other, but that's elite level execution. You're clearly out executing others. Can you shed light on how you do it, how durable it is, and what you might say to skeptics concerned that, you know, we're going to begin to lap the strong execution or that there may be some pay-the-paper moment where you risk reverting to the mean of the more average execution levels.

Speaker Change: Clearly out executing others can you shed light on how you do it.

Speaker Change: Durable it is and what you might say the skeptics concerns that we're going to begin to lap the strong execution or is it there may be some pay the piper moment, where your risk reverting to the mean of the more average execution levels of so many other companies. Thank you so much and congrats.

Bill Mcdermott: If so many other companies, thank you so much and congrats. Well, thank you very much, Brad. Well, you know, the first thing you've got to do in business is make sure you hire great people and great leaders. And I have the best leadership team in the industry; hard stop. And we just made that even stronger with the myth. And I do want to give a shout out back to Google and Sundar and Thomas; they were total class. And this was done in a highly transparent, wonderful way. And that would only strengthen the relationship between Google Cloud Platform and ServiceNow Inc.

Speaker Change: Well. Thank you very much Brad well you know the first thing you got to do in business is make sure you hire great people and great leaders and I have the best leadership team in the industry hard stop and we just made that even stronger.

Speaker Change: With the MIT and I do want to give a shout out back to Google and Sundar and Thomas They would total class and this was done in a highly transparent wonderful way.

Speaker Change: That would only strengthen the relationship between Google Cloud platform and service now I feel like that's a necessary thing and I just want to virtually shake hands on are really class set of people there at Google really wonderful people.

Bill Mcdermott: I feel like that's a necessary thing. And I just want to, you know, virtually shake hands on a really class set of people there at Google, really wonderful people. And, you know, if enough people care, you know, we have a very clear plan here. It's highly thought of by people, you know. We actually participate in building our plans together. And then we over communicate everything. And then ultimately, the execution really comes down to wanting it. And if you get 26,000 people that want to win more than anything in their professional careers, you can build at the finding enterprise software company in the 21st century.

Speaker Change: And if enough people care, we have a very clear plan here.

Speaker Change: Haile.

Speaker Change: Sort of by people, we actually participate in building our plans together and then we over communicate everything and then ultimately the execution really comes down to wanting it more.

Speaker Change: And if you get 26000 people that want to win more than anything and their professional careers. You can build the defining enterprise software company of the 20 <unk> century, now we're not even close to hitting our peak, we're not even near it.

Bill Mcdermott: Now, we're not even close to hitting our peak. We're not even near it. So, as you think about laughing, you know, ourselves and getting caught up in the hype of our own elite level execution. There's plenty of things we can do better. There's plenty of people that still have to get on the board and get more results. But all those things are in flight. And that gives me such optimism about what we've yet to do as we look into the future. And now to build this unbelievable platform with this net new innovation on top, it's just going to unleash the will of this company in a way that is just super stunning to watch.

Speaker Change: So as you think about lapping.

Speaker Change: Ourselves and getting caught up in the hype of our own elite level execution. There's plenty of things. We can do better there is plenty of people that still have to get on the board and get more results, but all those things are in flight and that gives me such optimism about what we've yet to do as we look into the future and new.

Speaker Change: Now to build this unbelievable platform with this net new innovation on top it's just going to unleash the will of this company in a way that is just super stunning to watch and I do want to thank my partners out there they know where it is good and they want to be part of service now and I think Jensen says it best.

Bill Mcdermott: And I do want to thank my partners out there. They know all word is good, and they want to be part of ServiceNow. And I think Jensen says the best. He says we're the AI operating system for the enterprise. And by being that, we integrate with everybody. We're open to all the LLMs that are out there. You can even bring your own model. And at the same time, we've integrated with all the systems of record. And it's an opportunity for customers to think about using AI across a magic platform that does amazing things to improve business results, not just on productivity, take cost out, but also on a growth level.

Speaker Change: He says we're the AI operating system for the enterprise and by being that we integrate with everybody. We're open to all of the <unk> that are out there you can even bring your own model and at the same time, we've integrated with all the systems of record and it's an opportunity for customers to think about using AI across.

Speaker Change: Our magic platform that does amazing things to improve business results not just on our productivity to take cost out, but also on a growth level and I think when I look at our great customer service management leadership, and how we're going to help companies grow again.

Bill Mcdermott: And I think when I look at our great customer service management leadership and how we're going to help companies grow again, it gets people internally excited because they know the world needs to grow again. And with our CSL leadership and solutions, we're going to keep going. So it's constant innovation, constant planning, over-communicating, and getting everybody involved in the pitch.

Speaker Change: It gets people internally excited because they know the world needs to grow again, and with our CSM leadership and solutions, we're going to keep going so its constant innovation constant planning over communicating and getting everybody involved in the pitch.

Bill Mcdermott: Awesome, Bill. Thank you so much. Thank you very much, Brad.

Speaker Change: Awesome Bill Thank you so much.

Bill Mcdermott: Thank you very much Brett.

Mark Murphy: Again, we kindly ask that you limit yourself to one question. Our next question comes from the line of Mark Murphy with JP Morgan.

Speaker Change: Again, we kindly ask that you limit yourself to one question.

Speaker Change: Our next question comes from the line of Mark Murphy with Jpmorgan. Please go ahead.

Mark Murphy: Please go ahead. Oh, thank you very much.

Mark Murphy: I'll give you just one long question. Bill, congrats on everything. Our fieldwork was showing a big ramp up in your AI bookings in Q3. There were some comments that it could explode heading into next year. And by the way, I can't believe the now assist numbers that you gave. They're just so big.

Mark Murphy: Thank you very much I'll give you just one long question.

Mark Murphy: Bill Congrats on everything our field work, we're showing a big ramp up in your AI bookings in Q3, there were some comments that it could explode heading into next year and by the way I can't believe that.

Mark Murphy: Now assist numbers that you gave there just so big and I happened to see mentioned in the media about service now in core we've investing billions into the UK and it included for AI data Center. So.

Mark Murphy: And I happen to see a mention in the media about ServiceNow and CoreWeave investing billions into the UK. And it included for AI data center. So I'm curious if we should connect the dots to think that this AI inflection point is just getting so material that it's going to drive that kind of investment in specific countries or maybe leads you to work with the GPU as a service provider. It's just to be able to power all your AI agents. Yeah.

Mark Murphy: I'm curious if we should connect the dots.

Mark Murphy: This AI inflection point is just getting so material that it's going to drive that kind of investment in specific countries or maybe leads you to work with that.

Mark Murphy: The GPU as a service providers just to be able to power all your AI agents.

Mark Murphy: Yes.

Bill Mcdermott: Yeah, well first of all thank you so much for your kind words, Mark I really appreciate it and then it means a lot to everybody hearing you represent such a great firms speaking well of our company. Thank you very much I do believe that the best days of growth are far in front of us.

Bill Mcdermott: Well, first of all, you know, thank you so much for your kind words. Mark, I really appreciate it. And then it means a lot to everybody, hearing you, representing such a great firm, speaking well of our company. Thank you very much. I do believe that the best days of growth are far in front of us. I see that in the pipelines. I see that at the sea suite, both in the public and the private sector. And now, once we have so many referenceable customers that are doing real things. You know, it's great.

Bill Mcdermott: I see that in the pipelines I see that at the C suite, both in the public and the private sector and now once we have so many references are all customers that are doing real things and it was great. Mark you would get a kick out as we just had a board meeting and Fred Luddy was that the Labor Cup, which we sponsored and he said there were a few people.

Bill Mcdermott: Mark, you get a kick at us. We just did a board meeting. And Fred Lutty was at the Labor Cup, which we sponsored. And he said, there were a few people that I didn't know what we do. And he said to him, "Well, let's just assume, you know, somebody's going out on maternity leave." And having to fill out all those crazy forms and go through all these internal processes and corporations that soul crush people, just know that now Assist is automatically updating your health care, your compensation, and all the benefits that you rely on most.

Bill Mcdermott: Didn't know what we do.

Bill Mcdermott: And he said well, let's just assume.

Bill Mcdermott: Somebody is going out on maternity leave.

Bill Mcdermott: And having to fill out all those crazy forms and go through all these internal processes incorporations. Its sole crush people just know that now assist is automatically updating your healthcare your compensation and all the benefits that you rely on most and you didn't have to touch a single thing you just can have a nice experience.

Bill Mcdermott: And you didn't have to touch a single thing. You just can have a nice experience as a worker and any company. And everybody there said, "Oh man, you guys do that." It's like whatever you can imagine, that's wearing people out; we can fix it. And, you know, that's the beauty of this. So I think that what you're looking for is also what we're looking for, which is that inflection point where the AI gear kicks in to hire demand for everything. And I certainly believe we're well positioned for that. Thank you so much. Thank you.

Bill Mcdermott: <unk> as a worker in any company and everybody. They have said Oh man you guys do that.

Bill Mcdermott: Whatever you can imagine that's wherein people out we can fix it and that's the beauty of this so I think that what Youre looking for is also what we're looking for which is that inflection point, where the AI gear kicks into higher demand for everything and I certainly believe we are well positioned.

Bill Mcdermott: <unk> for that.

Speaker Change: Thank you so much.

Speaker Change: Thank you thanks Mark.

Bill Mcdermott: Thanks, Mark.

Cash Rangan: Our next question comes from the line of Cash Rangan with Goldman Sachs. Please go ahead. Okay, a couple of asked if we lose you. Oh, can you hear me? Okay. There you are. We've missed you, but now we can hear you. Okay. Great. Thank you so much.

Speaker Change: Our next question comes from the line of Kash Rangan with Goldman Sachs. Please go ahead.

Kash Rangan: Okay, a couple of them.

Speaker Change: Yes, do we lose you.

Kash Rangan: Hello can you hear me okay.

Oh, there you are we've missed it but now we can hear you.

Speaker Change: Okay, great. Thank you so much.

Cash Rangan: I'll far off two questions. Very quickly. The one congrats, Bill. First of all, secondly, that was not a question.

I'll follow up two questions very quickly the one congrats bill first of all secondly that.

Speaker Change: That was another question.

Gina Mastantuono: Secondly, the data platform, what does that allow service know to do for its customers that you could make money and generate revenue that you could not do previously. Gina, the strength and RPO 35%. Besides long-term contracts, what's driving that?

Speaker Change: The data platform, what does that allow service noted due for its customers that you could make money and generate revenue that you could not do a previously Gina.

Speaker Change: <unk> <unk>, 35%, besides long term contracts or whats driving that and finally, congratulations on hiring Amit I think it's going to be great.

Gina Mastantuono: And finally, congratulations on hiring Amit. I think it's going to be great. So, Cass, I'll start first on the strength of RPO. It repeats itself. So, it's better than last quarter, but remains consistently strong. And that's really a testament to the fact that our customers are leaning in much more strategically with us. And not only are the portfolio products getting larger and the deal size is getting larger, but the contract terms are getting longer and longer. And that's really what's driving that incredible RPO growth. We have really strong CRPO, but that RPO growth, when our average contract terms continue to move up, is why you see that continuing to strengthen quarter after quarter.

Speaker Change: So I'll start first on the strength of our PL.

Speaker Change: It repeats itself, so it's better than last quarter, but remains consistently strong and thats really a testament to the fact that our customers are leaning in much more strategically with us and not only our R. R.

Speaker Change: The portfolio of products getting larger and the deal sizes getting larger, but the but the contract terms are getting longer and longer and that's really what's driving that incredible RPM growth, we have really strong CRP O, but that RPM growth when our average contract terms continue to move up is why you see that.

Speaker Change: And to strengthen quarter after quarter, and that's testament to the incremental strategic relevance that we have with our customers and so really proud of.

Gina Mastantuono: And that's testament to the incremental strategic relevance that we have with our customers. And so, really proud of all the results that execution elite level across the board. And that's showing not only in our revenues and our CRPO, but our RPO number, which is a really strong long-term measure of the health of our business.

Speaker Change: All the results the execution elite level across the board and that selling not only in our revenues and our CRP O, but our RPI number which is a really strong long term measure of the health of our business.

Bill Mcdermott: And I will talk about this amazing workflow data fabric. So think of it this way in terms of, you know, the monetization of it, RAP to DB, the proversion delivers enormous value for our customers. So think about improving transaction times by up to 53%, and running reports and analytics 27 times faster. And think about bringing next generation performance and scale to ServiceNow customers. So the performance, the speed, the scale. As we get bigger, the customer installs get bigger. Gina talked about all the cohorts, the platform buying. This is, you know, quite a fascinating thing to see.

And I will talk about this.

Speaker Change: Amazing.

Speaker Change: Workflow data fabric, so think of it this way in terms of.

The monetization of it wrapped a DB.

Speaker Change: The pro version delivers enormous value for our customers, So think about improving transaction times by up to 53%.

Speaker Change: And running reports and analytics 27 times faster and think about bringing next generation performance and scale to service now customers. So the performance the speed to scale as we get bigger the customer installs get bigger Gino talked about all the cohorts the platform.

Speaker Change: Buying this is <unk>.

Speaker Change: Quite a fascinating thing to see.

Bill Mcdermott: Then think about enabling enterprises to unify disparate data, and then apply the power of the Now AI platform for business transformation to drive productivity, improve operations, and speed of execution. So all of this is driving performance for the customer. And the migrations take hours, not days or weeks, and we have truly perfected that. So this is going to be an upsell opportunity for every existing installation across the world for ServiceNow. And to get that enhanced benefit, there will be pieces of it that people will invest in, but it will be well worth it for the benefits that they're going to get from it.

Speaker Change: And then think about enabling enterprises to unify disparate data.

Speaker Change: And then apply the power of the now AI platform for business transformation to drive productivity improve operations and speed of execution. So all of this is driving performance for the customer and the migrations take hours not days or weeks and we have true.

Perfect that debt. So this is going to be an up sell opportunity for.

Speaker Change: For every existing installation across the world with service now.

Speaker Change: And to get that enhanced benefit there will be pieces of it that people will invest in.

Speaker Change: But it will be well worth it for the benefits that they're going to get from it.

Bill Mcdermott: And this will be an ongoing story as we continue to build it out. But remember one thing: it's pretty unique to be able to access any data, regardless of the source, whether it's structured or unstructured. And to compose that in a data platform that perfectly coincides with the work, how it flows, and what you're trying to automate on one common pain of glass. No other company in the world could do that. And we believe that that will give us a very exciting position for future growth, and we're super excited. And we're rolling it out now in Q4.

Speaker Change: And this will be an ongoing story as we continue to to build it out but remember one thing.

Speaker Change: It's pretty unique to be able to access any data.

Speaker Change: Regardless of the source, whether it's structured or unstructured.

Speaker Change: And to compose that in a data platform that perfectly coincides with the work.

Speaker Change: It flows and what Youre trying to automate on one common pane of glass.

Speaker Change: No other company in the World could do that and we believe that that will give us a very exciting position for future growth and we're super excited and we're rolling it out now in Q4.

Bill Mcdermott: And we already have great companies like Amadeus that have adopted, wrapped a DB, and we're counting on hundreds more.

Speaker Change: And we already have great companies like Amadeus that have adopted rapid DB and we're counting on hundreds more.

Cash Rangan: Thank you so much. It sounds really good. Thank you very much.

Thank you so much it sounds Kelly.

Kash Rangan: Thank you very much cash cash.

Keith Weiss: Our next question comes from the line of Keith Weiss with Morgan Stanley. Please go ahead.

Speaker Change: Our next question comes from the line of Keith Weiss with Morgan Stanley. Please go ahead.

Keith Weiss: Thank you guys for taking the question, and congratulations on a great quarter. One question for Gina. One question for Bill.

Keith Weiss: Excellent. Thank you guys for taking the question and congratulations on a great quarter.

Keith Weiss: One question for Jim and one question for Bill.

Gina Mastantuono: Gina, last quarter, you talked to us about 200 basis points of duration headwind that came from the strong federal business last year. Given that you had such a strong federal quarter this year, I'm assuming those duration events or headwinds don't exist in Q3. So is that correct that you don't have that duration headwind in Q3.

Keith Weiss: Last quarter, you talked to us about 200 basis points.

<unk> headwinds that came from the strong federal business last year.

Keith Weiss: Given that.

Keith Weiss: Can you guys just a strong federal quarter this year I'm, assuming those duration Ben.

Keith Weiss: Headwinds.

Don't exist in Q3, so is that correct that you don't have that duration headwind in Q3, and then the question for Bill.

Keith Weiss: And then the question for Bill, agents kind of came onto the scene in a really big way over the last couple of months. You guys have your new agent solution as well. A lot of people are talking about agents. Does this change like the sales cycle at all about for like now assist in the pro plus Q. Now that there's this new sort of technology, people are talking about in terms of agents, or does it just kind of flow naturally into the Congress? Thank you very much, Keith.

Speaker Change: Agent kind of came onto the scene in a really big way over the last couple of months.

Speaker Change: You guys have your new agent solution as well a lot of people were talking about agent does it change like the sales cycle at all about for like now assist in the profile of SKU now that there is this new sort of technology people were talking about in terms of the agents or does it just kind of flow naturally into the conversation.

Speaker Change: Thank you very much Keith it flows naturally.

Bill Mcdermott: It flows naturally. It's yet another advancement in the ServiceNow innovation story.

Speaker Change: Yet another advancement in the service now innovation story and I think it does if you're not yet a service now a customer or you're thinking about now assist it further cements you resolve that service now as one of maybe a handful of platforms that companies are going to bet on for the future so not disruptive.

Bill Mcdermott: And I think it does. If you're not yet a ServiceNow customer, or you're thinking about Now Assist, it further cements your resolve that ServiceNow is one of maybe a handful of platforms that companies are going to bet on for the future. So, not disruptive, totally complimentary, and yet another upsell opportunity. And we intend to do very well with it. And, you know, I think a lot of people will benefit from ServiceNow agents working together with each other and with humans to proactively and predictively resolve almost any tasks you could possibly think of. And these partnerships that we've established, you know, with great companies like Nvidia and building market-making solutions, for example, taking on some of the enterprise security challenges that have existed out there for years and years on and out-of-the-box type solution, I think is really pretty breathtaking.

Speaker Change: <unk> totally complimentary and yet another upsell opportunity and we intend to do very well with it.

Speaker Change: And you know I think a lot of people will benefit from service now agents working together.

Speaker Change: With each other and with humans.

Speaker Change: To proactively and predictably resolve and almost any task you could possibly think of.

Speaker Change: And these partnerships that we've established with great companies like Nvidia and building market, making solutions.

Speaker Change: For example, taking on some of the enterprise security challenges that have existed out there for years and years.

Speaker Change: And out of the box type solution I think is really pretty breathtaking.

Bill Mcdermott: And at an architectural level, you know, we don't have to try to translate between our Gen-AM models and some third-party system, which most people have to, since everything is on one platform with one architecture and one data model. So, this has given us an opportunity to innovate faster, but also integrate better.

Speaker Change: And at an architectural level.

Speaker Change: We don't have to try to translate between <unk> models, and some third party system, which most people have too since everything is on one platform with one architecture. One data model. So as this has given us an opportunity to innovate faster, but also.

Speaker Change: Integrate better.

Bill Mcdermott: You know, as I said many times, 85% of digital transformation ROI never came to for our customers because they couldn't integrate those old systems. Now, everything integrates into one platform, and you turbocharge it with now assist in a genic AI, and you're off to the races.

Speaker Change: As I've said, many times, 85% of digital transformation ROI never came to for our.

Speaker Change: Summers because they couldn't integrate those old systems now everything integrates into one platform and you turbocharge it with now assist in a genic, a guy and you're off to the races.

Gina Mastantuono: And then, Keith, on your question on duration for CRPO from Fed, the mix, we had another great quarter—beat expectations from our perspective, but the mix hasn't changed significantly.

Speaker Change: And then Keith on your question on duration for CRP O front that the mix, we had another great quarter beat expectations from our perspective, but the mix hasn't changed significantly. So Q3 that duration definitely goes away as said kind of re ups, but then you will see continue.

Gina Mastantuono: So, Q3, that duration definitely goes away as Fed kind of reups, but then you will see continued headwind quarter of a quarter in Q1, Q2 until we get back to Q3 of next year. Does that make sense? Yeah.

Speaker Change: <unk>.

Speaker Change: Headwind.

Speaker Change: Over quarter in Q1 Q2.

Keith Weiss: Until we get back to Q3 of next year that makes sense.

Keith Weiss: Yes, so like on the duration adjusted basis.

Gina Mastantuono: So, like, on the duration of just a basis, Q2 was stronger than what was reported in Q3, didn't really have a duration headwind, but that duration headwind was going to come back into the numbers as we go through the year and get further away from the federal quarter. That's exactly correct. Okay, for us.

Keith Weiss: Q2 was stronger than what was reported in Q3 didn't really have a duration headwind, but thats recent headwinds when you come back into the numbers as we as we go through the year and get further away from the second quarter.

Speaker Change: That's exactly correct.

Speaker Change: Okay perfect.

Unknown Executive: Thanks, Keith.

Speaker Change: Thanks Keith.

Brad Selnick: Our next question comes from the line of broad sales with Bank of America. Please go ahead.

Speaker Change: Our next question comes from the line of Brad Sills with Bank of America. Please go ahead.

Brad Selnick: Oh, great. Thank you so much. A question on headcount here as well.

Brad Sills: Oh, great. Thank you so much a question on head count here as well.

Gina Mastantuono: It's pretty remarkable, really, since the beginning of last year that you're starting to see R&D headcount outpace sales and marketing. Historically, that was the opposite. And it looks pretty, pretty significant here by almost a two to one ratio there. So, I guess the question is, you know, what does that say about the business? Is the gating factor to growth here really just about your ability to get out more product and categories like AI and some of these newer application categories that you're going after with the platform, and less so about, you know, hiring the next rep to go win new business and go find that bigger expense.

Brad Sills: It's pretty remarkable really since the beginning of last year that youre, starting to see R&D head count outpace.

Brad Sills: Sales and marketing historically that was the opposite and it looks pretty pretty significant here by almost two to one.

Brad Sills: Ratio there. So I guess the question is what does that say about the business is the gating factor to growth here really just about your ability to get out more product and categories like AI and some of these newer.

Application categories that youre going after with the platform and less so about hiring the next rep to go win new business and go find that figure expansion deal. Thank you.

Gina Mastantuono: and Deal. Thank you.

Gina Mastantuono: Yeah, I say it's a couple of things, right? So sales and marketing, there's a lot of stuff in there, right? So it's not only quarter bearing sales. So just because you saw total sales and marketing not growing as fast as R&D, it doesn't mean that we were in growing our feet on the street, quarter bearing sales that are really strong way. There's lots of marketing and sales operations head count that we were building up as we were scaling, that now we're not increasing at the same level. So I want to be clear, and I have, I've said this each quarter. Just because it looked like sales and marketing head count was a little bit lighter, that's the leverage as we're scaling, especially on the operational side of things.

Speaker Change: Yeah, I'd say, it's a couple of things right, so sales and marketing there's a lot of stuff in there right. So it's not only quota bearing sales. So just because you saw our total sales and marketing not growing as fast as R&D. It doesn't mean that we werent growing our feet on the street quota bearing sales that are really strong.

Speaker Change: Long way Theres lots of marketing and sales operations head count that we were building up as we were scaling that now we're not increasing at the same level. So I want to be clear and I have I've said this each quarter, just because it looked like sales and marketing head count was a little bit lighter that's the leverage as we're scaling.

Firstly on the operational side of things with respect to R&D head count it's been pretty consistent it's always been an area of huge focus for us and certainly in the age of AI and all of the innovation that our incredible engineering team has been focused on that has consistently been.

Gina Mastantuono: With respect to R&D head count, it's been pretty consistent. It's always been an area of huge focus for us. And certainly, in the age of AI and all of the innovation that our incredible engineering team has been focused on, that has consistently been a place where we have invested and will continue to invest.

Speaker Change: In a place where we have invested and will continue to invest and so from our perspective head count growth is always first and foremost allocated to incredible engineering R&D talent as well as feet on the street corner Bank sales hitting the road hitting the streets working with our customers to solve.

Gina Mastantuono: And so from our perspective, head count growth is always first and foremost allocated to incredible engineering, R&D talent, as well as speed on the street, quarter bearing sales, hit in the road, hit in the streets, working with our customers to solve their biggest problems. And you'll continue to see us do just that. Wonderful. Thanks, Gina. Thanks, Brad.

Speaker Change: Their biggest fraught polyps and Youll continue to see us do just that.

Speaker Change: Wonderful Thanks Gina.

Brad Sills: Thanks, Brad.

Michael Turin: Our next question comes from the line of Michael Turin with Wells Fargo Securities. Please go ahead. Hey, great. Good afternoon. Thanks for taking the question.

Speaker Change: Our next question comes from the line of Michael <unk> with Wells Fargo Securities. Please go ahead.

Speaker Change: Hey, great. Good afternoon, thanks for taking the question.

Michael Turin: Know the numbers can bounce around a bit, but we've seen and heard the focus on customer workflows and now see the customer employee workflow segment. Get a high at 31% of net new ACV bill. You mentioned opportunity to disrupt the front office there on the prepared remarks. It was hoping you could maybe frame what you're hearing from a demand perspective there for us and maybe couple that with what the representative release and agent solutions could do to help further that opportunity. Thanks. Absolutely. Thank you very much, Michael. As I said, you know, customer workflows were in 15 of the top 20 deals.

Michael: No the numbers can bounce around a bit, but we've seen and heard the focus on customer workflows and now see the customer and employee workflow segment hit a high at 31% of net new ACD Bill you mentioned the opportunity to disrupt the front office there on the prepared remarks. So I was hoping you could maybe frame what youre hearing from a demand perspective.

Michael: There for us and maybe couple that with what the Xanadu release, an agent solutions could do to help further that opportunity.

Bill Mcdermott: Absolutely. Thank you very much Michael as I said customer workflows, we're in 15 of the top 20 deals.

Bill Mcdermott: And it was very, very strong. And we grew net new ACV over 50% 50%. And it's fantastic performance by our industry skews. And the continued traction in the front office has been going on for some time now. But we're getting known for it, and we're winning. We're winning a lot. So it's a healthy adoption of our Pro Plus offering. The industry skews are driving things. Financial services was out in front for sure. Technology and media. Absolutely. Public sector. Technology and media was over 300%; public sector grow over 60%. And in the front office, our sales and order management product has demonstrated significant traction, significant traction.

Bill Mcdermott: It was very very strong and we grew net new HCV over 50% five zero percent and it's fantastic performance by our industry Skus and the continued traction in the front office has been going on for some time now.

Bill Mcdermott: But we're getting known for it and we're winning.

We're winning a lot.

Bill Mcdermott: So it's a healthy adoption of our pro plus offering the industry Skus are driving things financial services was out in front for sure.

Bill Mcdermott: Technology and media.

Absolutely public sector technology, and media was over 300% public sector grew over 60%.

Bill Mcdermott: And in the front office, our sales and order management product has demonstrated significant traction.

Bill Mcdermott: Significant traction.

Bill Mcdermott: And I'm serious. It's like every industry you look at, it's really amazing from, you know, managed service providers to manufacturing, semiconductors, medical devices, chemicals, public sector agencies. It's extremely, extremely exciting. And, you know, I think the idea of our value proposition comes down to sales productivity. You know, just think about reduced time to quote higher deal sizes, lower fulfillment time, a zero-touch provisioning, optimizing for customer lifetime value. All this is resonating with the market in a big, big way.

Bill Mcdermott: And I'm serious it's like every industry you look at it's really amazing from managed service providers.

Bill Mcdermott: Two manufacturing semiconductors medical devices chemicals public sector agencies, it's extremely extremely exciting.

Bill Mcdermott: And I think the idea of our value proposition comes down to sales productivity, just think about reduce time to quote a higher deal sizes lower fulfillment time.

Bill Mcdermott: Zero touch provisioning optum.

Bill Mcdermott: Optimizing for customer lifetime value all of this is resonating with the market in a big Big way.

Bill Mcdermott: Optimizing for customer lifetime value all of this is resonating with the market in a big Big way.

Bill Mcdermott: And I have a feeling that this will end up being the biggest business in ServiceNow. It's all very clear. Thanks very much. Thank you.

Bill Mcdermott: I have a feeling that this.

Bill Mcdermott: This will end up being the biggest business in service now.

Speaker Change: So very clear thanks very much.

Speaker Change: Thank you.

Karl Keirstead: Our next question comes from the line of Carl Kiersted with UBS. Please go ahead.

Speaker Change: Our next question comes from the line of Karl Keirstead with UBS. Please go ahead.

Karl Keirstead: Okay, great.

Karl Keirstead: Okay, Great maybe I'll direct this to Bill Bill.

Bill Mcdermott: Maybe I'll direct this to Bill. Bill, I think a lot of your shareholders are pretty confident about how ServiceNow is doing in your enterprise commercial segments. But I'm sure you're aware there's been a debate over the last two to three months about the federal business. Partly because of the issues that you and Gina raised with us three months ago that led to the leadership changes, but also in the interim where there have been issues with one of your partners, Cara Soft. I'm wondering if you could hit that, hit those issues, head on. Maybe give us an update and talk about how confident you are in continued good Fed bookings over the next couple of quarters.

Karl Keirstead: A lot of your shareholders are pretty confident about how service now is doing in your enterprise.

Karl Keirstead: Commercial segments, but I'm sure you're aware, there's been a debate over the last two to three months about the federal business, partly because of the issues that you and GNL raised with US three months ago that led to the leadership changes, but also in the interim where there has been issues with one of your.

Partners Caris off I'm wondering if you could hit that hit those issues head on maybe give us an update and talk about how confident you are.

Karl Keirstead: And continued good fed bookings over the next couple of quarters. Thank you.

Bill Mcdermott: Thank you.

Bill Mcdermott: Sure, Carl. We didn't see any impact in Q3, and we're currently not involved in any issues regarding Cara Soft with the US federal business. So you should just take that one off of any concern list that you might have. And as I look at the business and Fed, it could not possibly be stronger. The net new ACV growth is fantastic. We have five deals greater than 5 million, a couple of deals over 20 million. And ServiceNow has become the standard platform for federal agencies as they're looking to consolidate contracts and standardize on a single vendor to drive digital transformation.

Sure Karl we didn't see any impact in Q3, and we're currently not involved in any issues regarding caris soft with the U S. Federal business. So you should just take that one off of any concern list that you might have.

Karl Keirstead: And as I look at the <unk>.

Karl Keirstead: The business and said it could not possibly be stronger.

The net new HCV growth is fantastic.

Karl Keirstead: We had five deals greater than $5 million, a couple of deals over $20 million and service now has become the standard platform for federal agencies as they are looking to consolidate contracts and standardize on a single vendor to drive digital transformation and that's the bandwidth that is built into this platform so as I.

Bill Mcdermott: And that's the bandwidth that's built into this platform. So, as I think about where we're going now, GNI is top of mind. I know because I've been there with the US federal government agencies; they're looking for efficiency gains, and they know our software platform does it. They also know the implementations is stellar and the reference ability is fantastic. And so I think getting things done quickly, which is one of our cooling carts, giving people great experiences that really make them happy and more productive. It's all working for us, and I'm very, very excited about our GNI excuse for our government community cloud.

Karl Keirstead: Think about where we're going now.

Karl Keirstead: <unk> is top of mind.

Karl Keirstead: I know because I've been now with the U S. Federal government agencies, they're looking for efficiency gains and they know our software platform does it. They also have the implementations is stellar and the reference ability is fantastic and so I think getting things done quickly, which is one of our calling cards.

Karl Keirstead: Giving people great experiences that really make them happy and more productive it's all working for us and I'm very very excited about.

Karl Keirstead: Our Gen II Skus for our government community cloud.

Bill Mcdermott: As you know, that went generally available recently, was actually in June. And we saw a great traction on it with federal, and we partnered with Accenture, as a matter of fact, to kick off a 60-day pilot with one agency, and they ended it early to get into the GNI race because it worked so well. So everything is thumbs up here, Carl, and I'm very grateful for the question. Thank you. Okay. Good. Nice to hear.

Karl Keirstead: That went generally available recently was actually in June and we saw great traction on it with federal and we partnered with Accenture as a matter of fact to kick off a 60 day pilot.

With one agency and they ended in early to get into the Gen II rates because it works so well.

Karl Keirstead: Sure.

Speaker Change: Everything is a thumbs up here, Carl and I'm very grateful for the question. Thank you, Okay, Chris Nice to hear thanks, Bill. Thank you.

Bill Mcdermott: Thanks, Bill. Thank you so much.

Speaker Change: So much.

Gregg Moskowitz: Our next question comes from the line of Gregg Moskowitz with Mizzouho. Please go ahead.

Speaker Change: Our next question comes from the line of Gregg Moskowitz with Mizuho. Please go ahead.

Gregg Moskowitz: All right, thank you very much for taking the question. So, the growth for now is this, and Pro Plus has obviously been highly impressive, but we've also been hearing about a real uptick in customers choosing to upgrade from Standard to Pro as an intermediate step towards Janai adoption, and obviously that drives an output as well. So, you know, Bill, when you look at the look across your install base, is that something you're seeing quite a bit more of today as compared with three, six, nine months ago, to the point where you would expect a second wave with the set of customers going for work?

Gregg Moskowitz: Alright. Thank you very much for taking the question. So the growth for now assistant Pro plus has obviously been highly impressive but we've also been hearing about a real uptick in customers choosing to upgrade from standard <unk> pro as an intermediate step towards jet AI adoption, and obviously that drives an <unk> uplift as well so.

Speaker Change: Bill when you look across your installed base is that something you're seeing quite a bit more of today as compared with 369 months ago to the point, where you would expect the second wave with the set of customers going forward.

Bill Mcdermott: Absolutely. I do, Gregg. I expect a nice second wave. Pro is still doing extremely well. You know, when you now add the now assist and the premium on top of that, customers don't even blink because the returns to them are so much better. They're much greater than any pricing, and we're a very fair company in the way we do things, and it's highly transparent. I see a plus up with that. I see a plus up with rap to DB globally, because it's such a sensation. People see the clock speed or how the system runs on it.

Bill Mcdermott: Absolutely I do Greg I expect a nice second wave.

Speaker Change: <unk> is still doing extremely well.

Speaker Change: You know when you when you can now add now assist in the premium on top of that.

Speaker Change: Customers don't even blinked, because the returns to them is so much greater than any pricing and we're very fair company and the way, we do things and it is highly transparent I see a plus up with that I see a plus up with Raptor DB globally.

Speaker Change: Because it's such a sensation people see the clock speed of how the system runs on it they all want it and Paul is now rolling that out globally in Q4, we'll see how it goes but we're highly optimistic great engineering built into it amazing.

Bill Mcdermott: They all want it. Paul is now rolling that out globally in Q4. We'll see how it goes, but we're highly optimistic. Great engineering built into it. Amazing. We really hit it with our database and our, I would say, first round draft choice team that built this; it's really, really something to behold. So I am feeling extremely good, and the customer relationship to focus and intensity around those relationships. If you come to our building in Santa Clara, it's a revolving door; CEOs are flying in from all over the world. So I'm not suggesting that they don't stop all the places too, but they definitely don't miss stopping and ServiceNow.

Speaker Change: We really we really hit it with.

Speaker Change: Our database and our I would say first round draft choice team that built this.

Speaker Change: It's really really something to behold.

Speaker Change: So I am feeling extremely good and the customer relationship focus and intensity around those relationships. If you come to our building in Santa Clara, It's a revolving door Ceos of flying in from all over the world.

Speaker Change: So I'm not suggesting that they don't stop other places too, but they definitely don't Miss stopping in service now and they kind of telling me that.

Bill Mcdermott: And they kind of tell me that, you know, at the end of it, what they see from our team and our product is not PowerPoints. It's real products doing real things with a real value proposition.

Speaker Change: At the end of it what they see from our team and our product is not powerpoints, it's real products doing real things with a real value proposition. So.

Bill Mcdermott: So I'm really excited, Greg. Fantastic. Thank you, Bill. Thank you very much.

Greg: I'm really excited Greg.

Gregg Moskowitz: Fantastic. Thank you Phil.

Greg: Thank you very much.

Derek Wood: Our next question comes from the line of Derek Wood with TD Cowan. Please go ahead.

Speaker Change: Our next question comes from the line of Derrick Wood with TD Cowen. Please go ahead.

Derek Wood: Thanks. Bill, really exciting to see this next new chapter of AI with autonomous agents. Just wanted to kind of touch on like what technology is coming to market to power these agenda networks. It sounds like it's technology from Raptor DB, data fabric, zero copy integration, maybe Nvidia's NIM, advancements with various LLM.

Derrick Wood: Thanks, Bill really exciting to see this next new chapter of AI with autonomous agents.

I just wanted to kind of touch on like what technology is coming to market to power. These agenda networks. It sounds like its technology from Raptor DB data fabric zero copy integration, maybe Nvidia is NIM advancements with various llm's, but could you just kind of share the highlights on what is key to unlocking these.

Bill Mcdermott: But could you just kind of share the highlights on what is key to unlocking these new autonomous capabilities on the ServiceNow platform and when some of these capabilities are going to be coming GA. Yeah, sure.

Derrick Wood: New autonomous capabilities on the surface now platform and when some of these capabilities are going to become a gi.

Speaker Change: Yeah sure well first of all.

Bill Mcdermott: Well, first of all, you know, I think there's really three areas that I would highlight for you that are, you know, my top three if that helps just put this into some context. The Gen AI race is one that we're winning; first mover, and we intend to run the table. So now assist is the sensation and Gen AI on the Now platform because of the uniqueness of this platform and its perfection in the way it was engineered and the fact that we never took any shortcuts. And we always protected the single platform with the single architecture, the single CMDB.

Speaker Change: I think there's really three areas that I would highlight for you that.

Speaker Change: You know my top three if that helps just put this into some context.

Speaker Change: The Gen II rates is one that we're winning first mover and we intend to run the table. So now assist is a sensation and Jen AI on the now platform because of the uniqueness of this platform and its perfection and the way it was engineered and the fact that we never took any shortcuts and we always.

Speaker Change: <unk> this single platform with the single architecture. The single <unk>. It really is magnificent now you put raptor DB. So.

Bill Mcdermott: It really is magnificent. Now you put Raptor DB. So, you know, now assist is priority one; you put Raptor DB and you build out the workflow data platform again. If that workflow data platform, which is already in flight, connects to the workflow automation platform, what customer wouldn't want to connect to any data source and their enterprise, the structured or unstructured data to drive the workflow performance to get a business outcome. I literally couldn't pick one out of a lineup. And then you say, what else are you going to do?

Speaker Change: Now assist as priority one you put raptor DB and you build out the workflow data platform again, if that workflow data platform, which is already in flight connects to the workflow automation platform, what customer wouldnt want to connect to any data source in their enterprise with structured.

Speaker Change: Or unstructured data to drive their workflow performance to get a business outcome.

I literally couldnt pick one out of a lineup and then you say what else are you going to do and it's really the front office everything else is still going full pace, but the front office is getting a step function increase in terms of its focus and the innovation and the execution because.

Bill Mcdermott: And it's really the front office; everything else is still going full pace, but the front office is getting a step function increase in terms of its focus and the innovation and the execution. Because it's the biggest ham and because we're winning everywhere we go, we think that that can be like a major catalyst.

Speaker Change: It's the biggest Tam and because we're winning everywhere. We go we think that that can be like a major catalyst.

Bill Mcdermott: And in terms of when the products are coming, they're out. So, you got now assist in full flight. You've got Raptor DB in full flight. Q4 will be a big quarter for that. You got the workflow data platform, which I explain, which works now. And it'll continue to evolve and be a big part of our future. And you have the front office where wins are happening every day. And we're beautifully led there, and we've got amazing dreams, and then take all the core stuff with the upsells and the cross cells and the cohorts that Gina talked about.

Speaker Change: And in terms of when the products are coming they are out.

Speaker Change: So you got now assist in full flight you've got wrapped the DB and full flight Q4 will be a big quarter for that you've got the workflow data platform, which I explained which works now and it will continue to evolve and be a big part of our future and you have the front office, where wins are happening every day.

Speaker Change: And we're beautifully lead there and we've got Amazing Dreams, and then take all the core stuff with the Upsells and cross sells and the cohorts that gene talked about and there's just so much in front of US we feel like our scale company with the heart of a startup and thats kind of emotion.

Bill Mcdermott: And it's just so much in front of us; we feel like a scale company with the heart of a startup. And that's kind of the emotion that's running through ServiceNow now.

Speaker Change: Thats running through service now now and tomorrow, when we get to service now live which is an iconic cultural.

Bill Mcdermott: And tomorrow when we get to ServiceNow Live, which is an iconic cultural event that we do every quarter, I could just imagine deceits are going to be rumbling all over the world. Fantastic. Thanks. Thank you very much. I appreciate the question, Derek. Thank you.

Speaker Change: And that we do every quarter I could just imagine the seats are going to be rumble and all over the world.

Speaker Change: Fantastic. Thanks.

Speaker Change: Thank you very much I appreciate the question Derrick Thank you.

Raimo Lenschow: Our next question comes from the line of Raimo Lenschow with Barclays. Please go ahead.

Speaker Change: Our next question comes from the line of Raimo <unk> with Barclays. Please go ahead.

Raimo Lenschow: Thanks for squeezing me in, and the congrats from me as well. Bill, you talk with a lot of like C, C level executives. How do they think about like AI as we go into next year in terms of is that like coming out of the IT budget? Do you do a second budget? And how do you make sure that you kind of continue to gain share in that one? Just kind of talk us for the dynamic you're seeing in your conversations. Thank you.

Speaker Change: Thanks for squeezing me in and congrats from me as well.

Raimo <unk>: Bill you talked with a lot of like C. C level executives, how do we think about like as we go into next year in terms of is that like coming out of the I T budget due to do a second budget and how do you make sure that you kind of continue to gain share in that one just kind of talk us through the dynamic youre seeing in your conversations. Thank you.

Bill Mcdermott: Yeah, I think the good news, the really good news here, Raimo, is IT budgets continue to grow. So the digital strategy has been and will continue to be the business strategy. And we really work hard on studying the world around us. And Gardner expects global IT spending to grow almost 10 and a half percent next year. And that's double what it was in 2023. And it expects software to grow at 15%. And the secular tailwinds of GNI and workflow automation are clear C-suite priorities and with the best position to take advantage of the opportunity. So I think it's clear to me that customers are focused on digital transformation within the IT budget.

Bill Mcdermott: Yes, I think the good news the really good news here Raimo is it budgets continue to grow so the digital strategy has been and will continue to be the business strategy.

Bill Mcdermott: And we really work hard on studying the world around us.

Bill Mcdermott: Gartner expects global it spending to grow.

Bill Mcdermott: Almost 10, 5% next year and that's double what it was in 2023.

Bill Mcdermott: And then expect software to grow at 15%.

Bill Mcdermott: And the secular tailwind that gen II and workflow automation are clear C suite priorities and we're the best positioned to take advantage of the opportunity. So.

Bill Mcdermott: So I think it's clear to me that customers are focused on digital transformation.

Bill Mcdermott: Within the it budget is growing we're gaining more share is clearly we're gaining share because we're growing faster than markets, especially the customer service management market, which I talked about.

Bill Mcdermott: It's growing. We're gaining more share because clearly we're gaining share because we're growing faster than markets, especially the customer service management market, which I talked about. And we're gaining share, but I also think there's new share to be gained from more investment. And I really believe when I talk to the CEOs, IT is clearly their business focus within IT. The GNI is their number one focus, and they are going to get the money from somewhere. If they have to take it out of another line item to fuel this, they will. So, on top of it, I think there will be money coming from other departments, especially back office functions that will be put to the front of the line around GNI.

Bill Mcdermott: And we are gaining share but I also think there is new share to be gained from more investment and I really believe when I talked to the Ceos.

Bill Mcdermott: <unk> is clearly the business focus within <unk>.

Bill Mcdermott: <unk> is their number one focus.

Bill Mcdermott: And they are going to get the money from somewhere.

Bill Mcdermott: I have to take it out of another line item to fuel this stay will so and.

Bill Mcdermott: And top of it I think there will be.

Money coming from other departments, especially back office functions that will be put to the front of the line around Gen III and.

Bill Mcdermott: And I also see a consolidation effect taking place. People say to me, you know, where's the new money current from? Well, you know, we had one company recently that basically took ServiceNow by consolidating 250 point solutions that the light was so dim on. It really gave you a headache, but there's hundreds and hundreds of accounts like that all over the world that just need to really think about what they want for their future, and the future is now.

Bill Mcdermott: And I also see a consolidation effect, taking place people say to me.

Bill Mcdermott: New money coming from.

Bill Mcdermott: We had one company recently that.

Bill Mcdermott: Basically took service now by consolidating 250 point solutions that delight was so demand. It really gave you a headache, but there's hundreds and hundreds of accounts like that all over the world.

Bill Mcdermott: Just need to really think about what they want for their future and the future is now so <unk> no pun intended but I think that.

Bill Mcdermott: So now, no pun intended, but I think that all of that is goodness for ServiceNow. IT for other line item budgets coming in and, of course, the consolidation to a premier partner, a premier platform like this. Incidentally, the partner ecosystem is grabbing on to ServiceNow in a way that I have never seen before. And it's accelerating quickly. And we just got done with a board meeting where our team presented some of these dynamics in the expansion of the channels and how the channels are now leaning in and building on top of and around ServiceNow in ways they never did before.

Bill Mcdermott: All of that is goodness with service now.

Bill Mcdermott: The other line item budgets coming in and of course, the consolidation to a premier partner Premier platform like this incidentally the partner.

Bill Mcdermott: Ecosystem.

Bill Mcdermott: Is grabbing on to service now in a way that I have never seen before and it's accelerating quickly and we just got done with a board meeting where our team presented some of these dynamics and the expansion of the channels and how the channels are now leaning in and building on top of and around service now in ways. They never did before.

Bill Mcdermott: And I just think all of that says...

Bill Mcdermott: And I just think all of that says.

Bill Mcdermott: Thanks.

Speaker Change: Yes, okay, perfect that's really clear thank you congrats.

Unknown Executive: Thank you very much. Appreciate it.

Speaker Change: Thank you very much appreciate it.

Unknown Executive: We have time for one more question.

Speaker Change: We have time for one more question. Our final question comes from the line of Samad Samana with Jefferies. Please go ahead.

Samad Samana: Our final question comes from the line of Samad Samana with Jeffries.

Samad Samana: Please go ahead. Great, thank you. I will talk fast.

Samad Samana: Great. Thank you I will talk fast Bill I Couldnt help but have my ears perk up a little when you said that Amit has expertise in packaging and pricing and I was wondering if there is a reason why you called that out specifically, especially as you think about kind of this big AI boom period for service now and related just how.

Bill Mcdermott: Bill, I couldn't help but have my ears perk up a little when you said that Amit has expertise in packaging and pricing. And I was wondering if there is a reason why you call that out specifically, especially as you think about this big AI boom period for ServiceNow and related just how his responsibilities as the president when he comes over and joins, how they differ from maybe kind of prior iterations of that role. That's a really great question, Samad. How I learned about that was actually in a live interview with Amit, and we talked about his past and everything that he's done, and he called that out as a unique professional, I guess, strength. But it was also he went into scenario planning and different things that he's done, and I see that as a skill that will help us tremendously.

Samad Samana: His responsibilities as the president.

Samad Samana: When it comes over and joins how do they differ from maybe kind of prior iterations of that role.

Speaker Change: That's a really great question so much.

Speaker Change: So I learned about that was actually in a live interview.

Speaker Change: With Amit and we talked about his past and everything that he's done and he called that out as a unique.

Speaker Change: Professional.

Speaker Change: Our guest strength, but it was also he went into scenario planning and different things that he has done and I see that as a skilled that'll help us tremendously.

Bill Mcdermott: Really, it's a net new add-on to what I think we're good at. And that's what you always try to do. You always try to hire great human beings, first of all, and he is one with a hungry and humble heart. He has one, but also has domain expertise and areas that expand the bandwidth of what ServiceNow is all about.

Speaker Change: Really it's a net new add on to what I think we're good at and that's what you always try to do you always try to hire great human beings first of all and.

Speaker Change: He is one with a hungry and humble heart. He has won but also has domain expertise in areas that expand the bandwidth of what service now is all about and so in terms of his focus and I did call. It out deliberately by the way in terms of his focus.

Bill Mcdermott: And so, in terms of his focus, and I did call it out deliberately, by the way. In terms of his focus, he is an engineer's engineer. We need an absolute thought leader that loves product, loves working with great engineers, builds camaraderie with the best engineering team in the business, which we have, and invent new growth shoots and new opportunities by seeing things through a broad lens, which he has from all of his experiences. So I just think that it was a wonderful opportunity to bring a mid on, and we always are very respectful of this because he's had great careers in other places, including Oracle and obviously Google with the Google Cloud Platform.

Speaker Change: He is an engineers engineer.

Speaker Change: We need an absolute thought leader that loves product loves working with great engineers builds come rotary with the best engineering team in the business, which we have and advance new growth shoots and new opportunities by seeing things through a broad lens, which he has from all of us.

Speaker Change: Experiences so I just think that it will.

Speaker Change: Was a wonderful opportunity to bring them bid on and we always.

Speaker Change: We are very respectful of this because he's had great careers in other places, including Oracle and obviously, Google with the Google Cloud platform and as I said earlier I do really respect that when you get a great individual. It's also good for the company. He came from and all the relationships that he brought with him and.

Bill Mcdermott: And as I said earlier, I do really respect that when you get a great individual, it's also good for the company he came from and all the relationships that he brought with him. And that was part of the ethos of a mid, and the conversation that we had. It was a deeply thoughtful person and a person that wants to do good. And we want to do good because we believe good wins.

Speaker Change: That was part of the ethos of our niche and the conversation that we had it was a deeply thoughtful.

Speaker Change: And a person that wants to do good and we want to do good because we believe good wins.

Unknown Executive: Exciting times, and congrats on all the success to the whole team. Thank you so much.

Speaker Change: Exciting times and congrats on all the success to the whole team.

Speaker Change: Walmart somewhat.

Unknown Executive: This concludes our question and answer session, and with that, we will conclude today's conference call. Thank you all for your participation.

Speaker Change: This concludes our question and answer session and with that we will conclude today's conference call by Thank you all for your participation you may now disconnect.

Unknown Executive: You may now disconnect.

Unknown Executive: Please wait; the conference will begin shortly.

Speaker Change: Please wait the conference will begin shortly.

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