ServiceNow CEO Bill McDermott goes one-on-one with Jim Cramer

Jim, it's great to be with you as always. How you doing?

Jim, you know, this is the fastest company in enterprise software to ever hit a billion, 5 billion, 10 billion, and now 15 billion plus organically. We have a once in a generation platform. We closed the year exceeding Q4 expectations in full year and we're operating at the rule of 55, meaning we're growing revenue more than 20% and free cash flow margin more than 35 and we actually upped that to the rule of 57 company this year. And basically, you know, we're in an agentic AI universe and companies today want a platform where they can fundamentally reinvent their business model. That platform has to work with the language models, the hyperscalers, the data lakes, and all the systems of record to compose a masterpiece. And we put that together, and we're winning.

Yeah, that is again not true. And I'm very excited to tell you that not only is that thesis not in line with reality, but the contrary opinion is actually where the market is. Today we announced a partnership with Anthropic, and I think Dario at Anthropic said it best, so I'll just quote him. There's a meaningful difference between giving enterprises access to an AI model and building that model into workflows where real decisions are made. So we already have partnerships with OpenAI and Anthropic and again if you remember Jim the world was going to change when there were hyperscalers and software companies going to disappear and now it's the language models actually we're harmonious with the language models. It's synchronous with business process reinvention and we're leading the way. What I do see is I see feature companies and perhaps some functional companies actually being eaten by AI because we're becoming the great consolidator. Meaning that these features and function companies are actually being consolidated into ServiceNow as we connect all of the workflow and the data fabric of these great companies so they can improve their return on invested capital. AI doesn't pay off by infrastructure alone. You got to connect it to business applications where companies can get the value. That's what we're playing.

Great question, Jim. We're actually increasing the monthly active users at ServiceNow 25% year-over-year, and there's still 1.3 billion seats in our target market. So, we barely scratched the surface. Having said that, we have a hybrid pricing model where it's based on seats and consumption. And so we'll meet the customer wherever they want us to. But right now, we're expanding across east to west, across all business functions with the platform. And customers are consuming the apps in every department. And we're also kicking in customers now purchasing additional assist AI packs as they run through the tokens in their original licensing agreements. So you're seeing now new vectors of revenue kicking in, which is why not only why we beat the consensus and overachieved all of our objectives last year, but it's why I actually raised the guidance way beyond analyst expectations this year. And I want to make a point to the shareholders because you're absolutely right. We got lumped in with a cadre of companies that have been sort of functional or feature companies and that has rerated the multiple. That's the only thing that happened with ServiceNow. And the second thing that happened is we tucked in a few M&A moves and I think they were saying, 'Hey, are they buying growth like they've seen so many times before?' We proved that we weren't buying growth. We knocked that out of the park. And just to make it very clear, we don't live in the neighborhood where others live. We are one of one in the enterprise. It's the only platform that can reinvent business processes on the fly using AI and all the tools that customers are deserving of. And just to show the shareholders some love, I approved a $5 billion share repurchase and an immediate deployment of two billion of that today. So as soon as we can and the window opens in the next couple days for us, we'll be in at two billion. I also bet my personal comp all on the stock. So I couldn't possibly be more confident of where ServiceNow's entry point is now. How I expect the multiple to rerate based on results that are one of one. Let's go.