AI will boost productivity so ServiceNow won't have to backfill open jobs, CEO says

In a recent interview with CNBC, ServiceNow's CEO, Bill McDermott, expressed confidence that the company's workforce will remain stable as it heads into 2027, despite ongoing integration of acquisitions. He emphasized the pivotal role of artificial intelligence in enhancing employee productivity, which he believes will allow the company to maintain its workforce levels without needing to replace departing employees. McDermott stated, "As attrition occurs, backfilling those positions isn't necessary. This approach will help us preserve a strong company culture and uphold our high-performance standards while simultaneously achieving significant efficiencies that will expand our free cash flow margin." The trend of leveraging AI for cost savings has been evident in recent layoffs at companies like Block and Atlassian. Earlier this year, McDermott garnered attention when he warned that unemployment rates for recent college graduates could soar into the mid-30s over the next few years. Following the announcement of ServiceNow's first-quarter earnings for 2026, which surpassed market expectations, the company's stock experienced a 12% decline despite the positive results. After a robust two-year performance, the stock has faced turbulence since early 2025, primarily due to widespread concerns surrounding AI in the software sector. McDermott argued that ServiceNow's ongoing AI-driven growth sets it apart from many software companies, stating, "I don’t think many companies are achieving such significant results and still raising guidance." He highlighted the company's promising pipeline, noting a 21% year-over-year increase in remaining performance obligations when adjusted for constant currency. McDermott reassured investors regarding the sustainability of revenue sources, mentioning that half of their income now comes from consumption-based models rather than traditional seat-based pricing. However, McDermott acknowledged that external factors, such as geopolitical tensions in the Middle East, could influence business operations. He explained, "In the Middle East, there's been some impact because these nations often require on-premise installations, which affects revenue recognition. If business slows or cancels in that region, the effects are immediate." Despite these challenges, McDermott remains optimistic about the region's recovery, indicating that discussions of business activities are picking up once again.