ServiceNow CEO Bill McDermott speaks on CNBC’s Squawk On The Street outside the World Economic Forum in Davos, Switzerland, on January 21, 2025.
Jerry Miller CNBC
ServiceNow Chief Executive Officer Bill McDermott told CNBC on Wednesday that the company expects to have the same number of employees at the start of 2027 as it did at the start of 2026, even after integrating the acquisitions.
McDermott said leveraging artificial intelligence to increase employee productivity is key to cost discipline.
“We’re losing headcount internally, so we don’t need to fill it,” McDermott said. “So we’re still able to maintain a great culture. We’re still able to maintain huge, huge high-performance standards and at the same time gain significant efficiencies to expand the company’s free cash flow margins.”
Recent layoff announcements cite AI. block and atlassian This is because companies are looking to reduce costs through technology.
McDermott made headlines in March when he appeared on CNBC and said that the unemployment rate for new college graduates “could easily reach the mid-30s in the next few years.”
The enterprise software maker announced its first-quarter 2026 earnings after the bell on Wednesday, beating consensus estimates on revenue and bottom line and raising its outlook.
Despite the beat, the stock price fell 12%.
ServiceNow stock rose significantly in the two years leading up to early 2025, when concerns about AI dominated the software market. Since then, McDermott has pointed to ServiceNow’s continued growth using AI as proof that investors shouldn’t lump the stock in with a bunch of software names.
“I don’t think there are too many other companies in the world that are following the 56-and-over rule and raising their guidelines,” he told CNBC. “So we’re really confident. We know the company is a winner and we’re really leveraging AI in everything we do.”
He pointed to the company’s pipeline with current remaining performance obligations up 21% year-over-year, excluding currency effects. And he said he’s not worried about seat-based subscription revenue disappearing as AI agents gain traction.
“Half of our revenue comes from consumption, which I know investors are really grappling with. There’s always talk of the seat-based pricing model disappearing,” McDermott said. “Our available seats are up 25%, but 50% of our net new business is from non-seat-based pricing, like tokens, infrastructure, hardware, connectors to all the different systems. So we’re really on track.”
That said, ServiceNow is not immune to the effects of the macro environment, such as the Iran war.
McDermott said customers in the area are making adjustments.
“There’s some impact in the Middle East because, as you know, these sovereign countries, especially in the Middle East, are insisting on having it in-house,” he said. “With on-premises, you recognize revenue all at once instead of recognizing revenue in equal installments. So if business slows down in the Middle East or business is canceled in the Middle East, the impact is immediate.”
Now, it seems like the Middle East is starting to get a little more normal than before. They are talking about doing business again,” he added.
ServiceNow’s 5-year stock price chart.
