ServiceNow, a $150b market cap company, made this statement yesterday in their earnings call :

“In Q4, our gen AI products drove the largest net new ACV contribution for our first full quarter of any of our new product family releases ever, including our original Pro SKU.”

That’s pretty sensational for a company with 3 massive business lines & enough acronyms to fill a dictionary :

“With technology, customer and creator, we now have 3 workflow businesses over $1 billion in ACV. We have 11 individual product lines with north of $250 million in ACV. ITSM, ITOM and ITAM, each had double-digit deals over $1 million in Q4. Security and risk combined for 12 of the top 20 with 9 deals over $1 million. "

Like every major technology wave, AI runs the risk of overhype.

But many large companies are beating predictions & raising their growth expectations because of AI. OpenAI & Microsoft each have multi-billion dollar ARR businesses. Mongo & Snowflake announced accelerations in their businesses as a result of AI. ServiceNow is the most recent.

ServiceNow finds customers are willing to pay more for the software & the CEO Bill McDermott cites a few examples. Here’s one for the appliance repair software category :

“The consumer will pay a lot more if they can get a same-day repairs agreement along with the appliance. And the margins on same-day repair are far greater than the box itself, plus you create a nice annuity stream. So what we’re talking about here is fundamentally rethinking the way business is transformed using our platform and gen AI.”

McDermott also mentioned the benefits within their developers teams from AI code-generation. It’s unclear what developer innovation speed means (lines of code written? features shipped?) but even if it’s directionally accurate, the R&D cost savings for a business of ServiceNow’s scale should be significant.

“ServiceNow’s developers have been using text to code for several months. They are generating high-quality code using text to describe the type of code they won. This has increased our developer innovation speed by 52%.”

Improving customer demand drives greater revenue growth. Better engineering efficiency should improve the cost structure. With statements like these :

“We are raising our subscription revenue’s outlook by $165 million at the midpoint to a range”…

…software companies have a bright future.