ServiceNow expects artificial intelligence to significantly boost productivity, reducing the need to replace employees who leave the company, according to CEO Bill McDermott.
McDermott said the company plans to maintain a similar headcount at the start of 2027 as it had in early 2026, even as it continues to integrate acquisitions. He emphasised that AI-driven efficiency will allow the company to manage costs without aggressive hiring.
“As you have attrition in the company, you don’t have to backfill it,” McDermott said. “So we can still have a great culture. We can still have enormous, enormous, high-performance standards, and at the same time, we can capture massive efficiencies to expand the free cash flow margin of the corporation.”
The comments come as AI continues to influence workforce strategies across the tech sector, with companies like Block and Atlassian also citing AI in cost optimisation and restructuring efforts.
ServiceNow reported strong Q1 2026 results, beating expectations on both revenue and profit and raising its outlook. However, its stock fell 12%, reflecting broader investor concerns around AI’s impact on software companies. Despite this, McDermott maintained confidence in the company’s performance and growth trajectory.
“I don’t think there’s too many other companies in the world operating at the rule of 56-plus and raising their guide,” he said. “So we’re real confident. We know the company is a winner, and we’re really leveraging AI in everything that we do.”
The company’s pipeline remains strong, with remaining performance obligations up 21% year-over-year in constant currency. McDermott also noted that while seat-based pricing remains relevant, nearly 50% of new business now comes from non-seat-based models such as tokens, infrastructure, and system integrations.
He acknowledged some macroeconomic challenges, including impacts from tensions in the Middle East, where on-premise deployments can affect revenue recognition patterns. However, he indicated that business conditions in the region are beginning to stabilise.
The update reflects how AI is reshaping enterprise software, not just in products but also in workforce planning and revenue models.
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