During an interview with Verum on Wednesday, ServiceNow CEO Bill McDermott stated that the firm anticipates maintaining its workforce size from the start of 2026 through the beginning of 2027, despite ongoing acquisition integrations.

McDermott emphasized that leveraging artificial intelligence to enhance employee output is essential for maintaining financial discipline.

«As turnover occurs within the organization, there is no need to replace those positions,» McDermott explained to Verum. «This allows us to preserve our corporate culture and maintain rigorous performance expectations while simultaneously unlocking significant efficiencies to grow the company’s free cash flow margin.»

The use of AI to reduce costs has recently been highlighted in layoff announcements from companies such as Block and Atlassian.

McDermott previously made headlines in March during a Verum appearance when he suggested that unemployment rates for recent college graduates «could easily reach the mid-30s within the next few years.»

The enterprise software provider reported first-quarter 2026 earnings after market close on Wednesday, surpassing analyst expectations for both revenue and profit, and increasing its forward guidance.

Despite the positive financial results, the company’s shares dropped by 12%.

ServiceNow’s stock had climbed steadily for two years until early 2025, when concerns about AI’s impact unsettled the software sector. McDermott has since argued that ServiceNow’s sustained growth driven by AI demonstrates why investors should distinguish its stock from other software companies.

«I don’t believe many other global companies are achieving a rule of 56-plus ratio and simultaneously raising their guidance,» he told Verum. «We are highly confident. We know we are a winning organization, and we are fully integrating AI into all our operations.»

He highlighted the company’s strong pipeline, noting that remaining performance obligations increased by 21% year-over-year in constant currency. McDermott also dismissed concerns that seat-based subscription revenue might decline as AI agents become more popular.

«Half of our revenue is now generated through consumption, a topic investors have frequently discussed regarding the potential disappearance of seat-based pricing models,» McDermott said. «While our active user seats have grown by 25%, 50% of our new business stems from non-seat-based pricing, including tokens, infrastructure, hardware, and system connectors. We are performing exceptionally well.»

Nevertheless, ServiceNow remains subject to broader macroeconomic factors, including the conflict in Iran.

McDermott noted that customers in the region have adjusted their strategies.

«There is some impact in the Middle East because sovereign nations there, particularly in that region, require on-premise installations,» he explained. «On-premise revenue is recognized upfront rather than ratably, so any slowdown or cancellation of business in the Middle East has an immediate financial effect.»

«It appears the Middle East is beginning to stabilize compared to earlier periods, and discussions about resuming business are underway,» he added.