ServiceNow, Inc.

Hello, everyone. Thank you for joining us and welcome to the third quarter 2026 ServiceNow earnings conference call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Darren Yip, Senior Vice President, Investor Relations and Market Insights. Darren, please go ahead.

Good afternoon and thank you for joining ServiceNow's third quarter 2026 earnings conference call. Joining me are Bill McDermott, our Chairman and Chief Executive Officer, Gina Mastantuono, our President and Chief Financial Officer, and Amit Zavery, President, Chief Product Officer, and Chief Operating Officer. During today's call, we will review our third quarter 2026 results and discuss our guidance for the fourth quarter and full year 2026. 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. We undertake no duty or obligation to update such statements as a result of new information or future events. Please refer to today's earnings press release and our SEC filings, including our most recent 10Q and 10K, 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 for, 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, or RPO, current RPO, and cash and investments. 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. A replay of today's call will also be posted on our website. With that, I'll turn the call over to Bill.

Thank you, Darren, and thank you, everyone, for joining today's call. For more than seven years now, I've said ServiceNow is a one-on-one company, one of one. As you'll hear, these Q3 results represent a trifecta moment for ServiceNow. quarterly results beating expectations across the board again, significantly accelerating AI performance at the largest quantum yet, a hybrid business model shifting more to consumption. So let's do the standard results first. Subscription revenue growth was 20.5% in constant currency, 50 basis points above the high end of our guidance. CRPO was 21% in constant currency, 100 basis points above our guidance. Operating margin was 32.5%, 150 basis points above our guidance. Free cash flow margin was 20%. We had 19 deals greater than 5 million net new ACV in Q3, up 135% year over year. We have a $30 billion remaining performance obligation growing at 23% year-over-year. That's growth at scale. To my trifecta point, here is where the Q3 print gets even more dynamic. For many quarters now, we've been aggressively building the consumption engine into the business model. Our ambition is to be the governed execution layer for enterprise AI. with multiple commercialization paths, all driven by customer choice. Q3 is the banner achievement to date. The strategy is working. We have tangible AI monetization. AI, net new, ACV, with 65% year-over-year growth in Q3. Control Tower, net new, ACV grew over 6x year-over-year. Our agentic front door employee works reached 100 million ACV in less than three quarters. The number of 1 million plus AI deals grew 4.5x year over year. Year to date, agentic AI consumption in production is up 13x year over year. If you look at the consumption of action fabric assists alone, that number is up 500% month over month. This is not only the direction of our customers, this is where they want us to go. It's the right direction for long-term shareholder value creation as well. As a reminder, we began the year with a billion dollar AI target by year end. We raised that target to $1.5 billion at Financial Analyst Day in May. Today, we are raising that target again, this time to $1.7 billion plus by year end. And as you've come to know me pretty well by now, I've challenged the team to even surpass that number. Overall, the company is now full speed in our Q4, and Gina will give you the guide shortly. But I don't want you to wait too long. She will raise. As everyone on this call knows, ServiceNow always closes strong. We have no intention of delivering anything less than the best year in our history. Let's spend a few minutes on what remains a very complex environment for the enterprise. We hosted our biannual CEO event with more than 125 CEOs a few weeks ago. Here's what I heard. all of them are investing in the intelligence revolution. They've spent billions on it so far. They all went through the token maxing phase. Here's the big lesson they all learned. All of the vibe slop flops. Sprawl and lack of integration are even greater risks in the AI world. When I spoke to them about ServiceNow's role as the super intelligence control tower for business reinvention, Their endorsement was universal. Our SICT, Super Intelligent Control Tower, brings together the right model for the right workload to solve the right problem and unlock the right opportunity for our customers. Businesses in every industry need a harness for enterprise AI. This is more than orchestration, governance, or security alone. It's the nexus of all three categories coming together. We're now in the rules and rails phase of enterprise intelligence. 94% of enterprises report gaps in AI visibility. 88% can't even distinguish personal AI accounts from corporate instances. ServiceNow's control tower discovers and inventories the entire AI estate. As stories of rogue agents persist, ServiceNow controls what agents can do. That's why we introduced AI Passport to issue every agent an official attested record based on context in our platform. Who owns the agent? What's it allowed to do? What data can it access? How much risk exposure is it allowed to take? This enables the most capable kill switch available in the enterprise today. When our control tower revokes a passport, NVIDIA Sentry stops honoring it, and the agent stops at the infrastructure layer. We are scaling that capacity everywhere. Our control tower signals Okta, Microsoft Azure AI Foundry, and Google Gemini Enterprise Agent Platform so they can cut off the agent's access wherever it runs. ServiceNow already sits at the operational core of the world's largest enterprises, the CMDB, the Workflow Data Fabric, 20-plus years of embedded operational intelligence and context across IT, security, and risk. With Armis and Vesa, we can now pinpoint specific known vulnerabilities against the cybersecurity landscape that has irreversibly changed. We call this shift zero. It moves security from remediation to prevention, from human speed to machine speed, and from blind to governed. The average enterprise runs more than 70 security tools. ServiceNow offers a single governed system with proof of what acted, why, and who is accountable. This is not an incremental improvement to a reactive model. It is the replacement to consolidate a fragmented market. It is the gateway to autonomous defense. That's why we're the fastest growing cybersecurity company at scale and why the growth is accelerating so rapidly. When you're operating in the superintelligence era, the pace of innovation has to keep pace with the growing size of the opportunity. I'm really proud of what the ServiceNow team has delivered. Our level one service desk specialist resolves incidents 85% faster than human agents. This is now in full autonomous production across customers of varying size and sector from a global automotive leader to a leading enterprise technology company. Our AIOps specialist has already reduced median time to resolution by 40% within the first month. We now have over 100 customers actively innovating with our AI specialists. AIOps, HRSD, and CRM specialists are expected to become generally available in Q4. As enterprises rethink the mandate of their CRM systems, ServiceNow is leading the way. The old CRM was built for sales teams. The new one has to work across your entire business. That's a different product. That's a different architecture. And that's why we're seeing customers rip and replace, not just add, alongside. Conversational voice AI is the next big leap in connecting the front office to the entire enterprise. The customer conversation is where the work starts. The platform has to carry it through every system and workflow behind it. We're redefining how enterprises engage with customers. Our tuck-in of SWEEP adds deep expertise in rapid agentic deployments, giving us another gear to accelerate while improving customer outcomes. and one year after we brought Logic AI into ServiceNow, we've been named the leader and customer favorite in the forest away for configure, price and quote solutions. We see a similar change in gravity for the employee experience. For the Fortune 500,000, we introduced Flow. There are many enterprises that want leading domain expertise but aren't ready for formalized ITSM. Flow fills the gap, a new conversational service desk that is self-serve and consumption built. A customer that signs up for Flow today can begin using Flow today. That's a big reason it's off to a lightning-fast start with businesses and government agencies around the world. ServiceNow Employee Works continues to be a fast-growth machine. This gives enterprises one place to search, knowledge, get things done, and route work across IT, HR, finance, and procurement. It also becomes the destination for employees to build AI assistance, agents, and automations, all secured by enterprise guardrails. This is only scratching the surface of the groundbreaking innovation on the ServiceNow platform. Even the best platform won't deliver for enterprises alone. ServiceNow Control Tower Alliance is a new ecosystem of leading companies in AI, cloud infrastructure, security, governance, and token management who will help customers adopt trusted enterprise AI safely at scale. Founding partners include Anthropic, AWS, Cisco, Hidden Layer, Kong, Okta, OpenAI, Witness AI, and Zenity. Today's service now announced an expanded partnership with OpenAI to help enterprises move seamlessly from AI reasoning to governed action. The partnership expansion starts with a new ServiceNow plug-in for ChatGPT enabled by Action Fabric. We aim to develop security and risk solutions powered by OpenAI cyber models, a codex integration and AI workflow factory, and voice-driven governance for ServiceNow's super intelligence control tower. We have very big plans for this partnership, especially in cybersecurity. We expanded the partnership between Google Gemini Enterprise and ServiceNow Action Fabric. Gemini Enterprise provides the conversational front end, while ServiceNow provides the governed industry workflow execution. Our partnership with INRI, a C-prime company, shows what happens when a partner builds on ServiceNow before they sell it. INRI went live on employee works in six weeks. That's the new bar for time to value rather than the exception. They didn't sell the solution until they lived on it themselves. Median submission time is now down 60%. Completion rates, 97%. ServiceNow and Aramco Digital established an agreement to standardize and govern digital workflows across Aramco's affiliates, subsidiaries and joint ventures in more than 50 countries. And the list goes on and on. I could end on the countless industry accolades we've earned. Three new Gartner Magic Quadrants, two new Forrester Waves, IDC Reports and many more. Instead, I'll close with the ultimate measure of a defining enterprise technology company, our customers. A major Asian telecommunications leader with over 130,000 employees and contractors became the first enterprise in the region to deploy ServiceNow autonomous workforce for a zero-touch help desk in IT and HR. This will handle 70,000 IT requests and 6,000 HR inquiries annually. The Salvation Army Australia is using ServiceNow AI specialists to give frontline employees more than 5,000 hours back, so far, time that is redirected towards supporting community members that are in need. Germany's professional soccer league expanded with ServiceNow as its official CRM partner. It's about one month, only one month, they've already consolidated fan services from seven digital channels into a single ServiceNow platform, resolving 89% of inquiries at first contact, cutting previous case volumes in half. When a global logistics leader, Shipman Operations, were drawing terrible manual work processes across siloed systems that were soul-crushing, ServiceNow built them an AI partner, the Shipment Issue Analyzer. The result is nearly 100,000 hours saved annually, resolution from three days to less than 30 minutes. Jack Henry & Associates, one of the leading financial technology companies in the US, chose ServiceNow CRM to modernize its CRM capabilities with AI that automates routine tasks and strengthens post-sale operations. At a consumer finance company, spotting risk meant sending it nowhere. Multiple channels, unclear ownership, legacy systems swallowing signals. Our applied AI FDE team, fully deployed engineers, built them the AI risk front door, a two-layer agent architecture targeting 85% accuracy. It compressed signal to routed case time by more than 85%. Nestle has started to leverage our control tower to scale AI with strong governance across its operations. They are progressively deploying agentic marketing operations across 60 countries with the potential to reduce marketing campaign coordination by 25%. And together, we continue to drive innovation across all key business functions. Intercontinental Hotels Group, one of the world's largest hospitality and travel services companies, is using Vesa from ServiceNow to govern who and what can access its systems so it can safely scale across its 7,000 hotels worldwide. These amazing enterprises are putting AI to work for people. They're doing it with ServiceNow on our Thank you for joining us today. which once again delivered in its biggest quarter of the year. We're not compute constrained. We don't have capital constraints. We're activating a hybrid business model. As you'll hear in the raised full year guidance, we're a company going from the rule of 56 to the rule of 57 on our way to the rule of 60. That, of course, is free cash flow plus revenue growth. We have six businesses that have now surpassed more than a billion run rate with a TAM that continues to multiply and expand. What other businesses are there that can even contemplate these fundamentals? And it's only getting better. As the cost of intelligence falls, the tailwind for software is strengthening. We are a one-of-one growth company. We have deep incumbency in the enterprise. with proven global distribution. We're honoring the principle and the promise that the world works with ServiceNow. I really appreciate your belief and support. I look forward to your questions. And now I'll turn things over to our president and chief financial officer, Gina Mastantuono. Gina, over to you.