ServiceNow Inc Q4 2024 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Kash Rangan - Goldman Sachs - Analyst : Thank you very much. What a superb quarter fiscal year end as well. Bill, a question for you. Can you talk a little bit more about your decision to do a hybrid consumption and subscription? And the reason behind your confidence that you can walk both those tracks very well. And Gina, if you could do a pro forma, had you not done the consumption? What would the subscription revenue growth outlook would have been hypothetically? Thank you once again. Congratulations.

Question: Kash Rangan - Goldman Sachs - Analyst : Thank you.

Question: Mark Murphy - JPMorgan - Analyst : Thank you. So Bill, regarding the DeepSeek models, I'm very interested how you're assessing this moment where we have a Chinese AI model. It seems to perform well at a fraction of the cost, and I'm curious if it's something like DeepSeek, is that an option for ServiceNow? Or is it too risky with the data protections. And just more broadly, what do you think ServiceNow can do to exert its leadership as this cost of one of your input costs, which is the underlying models? It seems like it's starting to drop at a faster pace.

Question: Mark Murphy - JPMorgan - Analyst : Well, congrats on having that foresight and delivering that efficiency, and thank you for taking my question.

Question: Mark Murphy - JPMorgan - Analyst : Thank you very much.

Question: Sanjit Singh - Morgan Stanley - Analyst : Thank you for taking the questions. This is Sanjit Singh for Keith. Bill, when you think about this year, I kind of have sympathy for a lot of enterprise customers, every vendor in software is going to be pushing their agentic capabilities. So Bill, could you just detail a little bit about your agent strategy in that more fragmented landscape, what's going to give ServiceNow, the license to win? And also importantly, what are you contemplating from a go-to-market change perspective that's associated with this move to agents and the move to a hybrid subscription consumption model?

Question: Sanjit Singh - Morgan Stanley - Analyst : I appreciate the vision, Bill. Thank you so much.

Question: Matthew Hedberg - RBC Capital Markets - Analyst : All right, thanks for taking my question. Congrats as well. And Gina, congrats on your expanded role. Really great to see that. Bill, so obviously, a lot of -- Bill, obviously, a lot of enthusiasm on AI, which is great to hear. Just given your global perspective, you have such a good pulse on overall IT spending trends. Did you see things improve from what we last talked on September results? And how do you feel at this point versus, say, this point last year, like are things improving out there in general?

Question: Matthew Hedberg - RBC Capital Markets - Analyst : Great answer. Thanks, Bill. Best of luck.

Question: Brad Sills - BofA Global Research - Analyst : Oh, wonderful. Thank you so much. I wanted to ask a question around customer employee workflow. It continues to represent real key specific incremental growth. We certainly hear about real strong traction in the channel anything to call out there? There's a lot in those two offerings. So would love to get any thoughts from you on what's driving the strength there? And my notion is that perhaps now assisted starting to kind of pull customers into those applications? Are you seeing any kind of halo effect or pull-through, if you will, as customers are getting ready for Now Assist in those categories? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 29, 2025 / 10:00PM, NOW.N - Q4 2024 ServiceNow Inc Earnings Call

Question: Brad Sills - BofA Global Research - Analyst : Super exciting. Thank you, Bill. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 29, 2025 / 10:00PM, NOW.N - Q4 2024 ServiceNow Inc Earnings Call

Question: Samad Samana - Jefferies - Analyst : Hi, good evening, and thanks for taking my questions. Gina, I'll echo the congrats very well heard. Bill, maybe first a question for you. Just you mentioned now a couple of times how the deflation in costs at the computing level will unlock budgets in the application layer and the platform where lease for ServiceNow. I'm just curious if we've been getting feedback from either early customers or those that were in the pipeline that there is a budget constraint or a tough decision as being having to be made, and that's what's leading to that confidence in the unlock or is it more of just a high-level observation? Just maybe help us understand what gives you that confidence that those dollars will shift over? And have you already seen a change in the conversation?

Question: Samad Samana - Jefferies - Analyst : That's great. And Gina, maybe a follow-up for you. Just on I think there is already a consent development. I think early on in the proposed where if there's a certain amount of other tokens or coins associated. What have you observed from the early cohorts of REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 29, 2025 / 10:00PM, NOW.N - Q4 2024 ServiceNow Inc Earnings Call customers how many getting into a level where it required the consumptive element? And maybe just help us think about how that will impact CRP or what goes into CRPO going forward?

Question: Samad Samana - Jefferies - Analyst : Yeah.

Question: Michael Cikos - Needham & Company Inc. - Analyst : Hey, guys. Thanks for taking the question here. I just wanted to cycle back. I know in the press release and the prepared comments, you had cited this go-to-market optimization. Can you just provide a little bit more color on that front as far as what ServiceNow has in store. And I think, Gina, to the top of the Q&A with Kash's question on impact from consumption or federal, but do the go-to-market optimizations in any way, play a role in your guidance philosophy here as well?

Question: Michael Cikos - Needham & Company Inc. - Analyst : It does, Bill.

Question: Michael Cikos - Needham & Company Inc. - Analyst : Excellent. Thanks for closing the loop there, Gina. Thank you.

Question: Derrick Wood - TD Cowen - Analyst : Great. Thanks for squeezing me in. I guess, keeping on the same theme, Gina, I just want to unpack your comments around foregoing new subscription revenue for basically incremental consumption of agents, but it will take time to build up on the consumption REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 29, 2025 / 10:00PM, NOW.N - Q4 2024 ServiceNow Inc Earnings Call side. Is the message here that you expect some kind of near-term headwinds in seat growth as more workloads are being pushed to agents and that it just takes time to start really moving the needle on the consumption side. And if that's the case, just how long do you think this will take for this new hybrid pricing model to be net accretive versus kind of your previous Pro Plus sales motions?

Question: Derrick Wood - TD Cowen - Analyst : Okay. So yeah, it sounds like you're really building up a springboard that's net new that the hockey stick hopefully around the corner. That's clear. Thank you.