ServiceNow, Inc. (NOW) Earnings Call Transcript & Summary

Hello, everyone. Thank you for joining us, and welcome to the Third Quarter 2026 ServiceNow Earnings Conference Call. After today's prepared remarks, we will host a question-and-answer session. [Operator Instructions] I will now hand the conference over to Darren Yip, Senior Vice President, Investor Relations and Market Insights. Darren, please go ahead.

Good afternoon, and thank you for joining ServiceNow's Third Quarter 2026 Earnings Conference Call. Joining me are Bill McDermott, our Chairman and Chief Executive Officer; Gina Mastantuono, our President and Chief Financial Officer; and Amit Zavery, President, Chief Product Officer and Chief Operating Officer. During today's call, we will review our third quarter 2026 results and discuss our guidance for the fourth quarter and full year 2026. Before we get started, we want to emphasize that the information discussed on this call, including our guidance, is based on information as of today and contains forward-looking statements that involve risks, uncertainties and assumptions. We undertake no duty or obligation to update such statements as a result of new information or future events. Please refer to today's earnings press release and our SEC filings, including our most recent 10-Q and 10-K, for factors that may cause actual results to differ materially from our forward-looking statements. We'd also like to point out that we present non-GAAP measures in addition to and not as a substitute for financial measures calculated in accordance with GAAP. Unless otherwise noted, all financial measures and related growth rates we discuss today are non-GAAP except for revenues, remaining performance obligations, or RPO, current RPO and cash and investments. To see the reconciliation between these non-GAAP and GAAP measures, please refer to today's earnings press release and investor presentation, which are both posted on our website at investor.servicenow.com. A replay of today's call will also be posted on our website. With that, I'll turn the call over to Bill.

Thank you, Darren, and thank you, everyone, for joining today's call. For more than 7 years now, I've said ServiceNow is a one-of-one company, one of one. As you'll hear, these Q3 results represent a trifecta moment for ServiceNow, quarterly results beating expectations across the board again, significantly accelerating AI performance at the largest quantum yet, a hybrid business model shifting more to consumption. So let's do the standard results first. Subscription revenue growth was 20.5% in constant currency, 50 basis points above the high end of our guidance. cRPO was 21% in constant currency, 100 basis points above our guidance. Operating margin was 32.5%, 150 basis points above our guidance. Free cash flow margin was 20%. We had 19 deals greater than $5 million net new ACV in Q3, up 135% year-over-year. We have a $30 billion remaining performance obligation growing at 23% year-over-year. That's growth at scale margin was 20%. We had 19 deals greater than 5 million net new ACV in Q3, up 135% year-over-year. We have a $30 billion remaining performance obligation growing at 23% year-over-year. That's growth at scale. To my trifecta point, here is where the Q3 print gets even more dynamic. For many quarters now, we've been aggressively building the consumption engine into the business model. Our ambition is to be the governed execution layer for enterprise AI. With multiple commercialization paths, all driven by customer choice. Q3 is the banner achievement to date. The strategy is working. We have tangible AI monetization net new ACV was 65% year-over-year growth in Q3. Control Tower, net new ACV grew over 6x year-over-year. Our Agentic frontdoor employee works reached $100 million ACV in less than 3 quarters. The number of 1 million plus AI deals grew 4.5x year-over-year. Year-to-date, agentic AI consumption in production is up 13x year-over-year. If you look at the consumption of Action fabric assists alone, that number is up 500% month-over-month. This is not only the direction of our customers -- this is where they want us to go. It's the right direction for long-term shareholder value creation as well. As a reminder, we began the year with $1 billion AI target by year-end. We raised that target to $1.5 billion at Financial Analyst Day in May. Today, we are raising that target again this time to $1.7 billion plus by year-end. And as you've come to know me pretty well by now, I've challenged the team to even surpass that number. Overall, the company is now full speed in our Q4 and Gina will give you the guide shortly, but I don't want you to wait too long, she will raise. As everyone on this call knows, ServiceNow always closes strong. We have no intention of delivering anything less than the best year in our history. Let's spend a few minutes on what remains a very complex environment for the enterprise. We hosted our biannual CEO event with more than 125 CEOs a few weeks ago. Here is what I heard. All of them are investing in the intelligence revolution. They've spent billions on it so far. They all went through the token maxing phase. Here's the big lesson they all learned. All of the Vibe slop flops sprawl and lack of integration are even greater risks in the AI world. When I spoke to them about ServiceNow's role as the Super Intelligence control tower for business reinvention, their endorsement was universal. Our SICT, Super Intelligent Control Tower brings together the right model for the right workload to solve the right problem and unlock the right opportunity for our customers. Businesses in every industry need a harness for enterprise AI. This is more than orchestration, governance or security alone. It's the nexus of all 3 categories coming together. We're now in the rules and rails phase of enterprise intelligence. 94% of enterprises report gaps in AI visibility. 88% can't even distinguish personal AI accounts from corporate instances. ServiceNow's control tower discovers and inventories, the entire AI estate. As stories of rogue agents persist, ServiceNow controls what agents can do. That's why we introduced AI Passport to issue every agent an official attested record based on context in our platform. Who owns the agent. What's it allowed to do? What data can it access, how much risk exposure is it allowed to take? This enables the most capable kill switch available in the enterprise today. When our control tower revokes a passport, NVIDIA Century stops honoring it, and the agent stops at the infrastructure layer. We are scaling that capacity everywhere. Our control tower signals Okta, Microsoft, Azure AI Foundry and Google Gemini Enterprise Agent platform so they can cut off the agents access wherever it runs. ServiceNow already sits at the operational core of the world's largest enterprises, the CMDB, the workflow data fabric, 20-plus years of embedded operational intelligence and context across IT, security and risk. With Arms -- in Vesa, we can now pinpoint specific known vulnerabilities against the cybersecurity landscape that has irreversibly changed. We call this Shift 0. It moves security from remediation to prevention. From human speed to machine speed and from blind to govern. The average enterprise runs more than 70 security tools. ServiceNow offers a single govern system with proof of what acted, why and who is accountable. This is not an incremental improvement to a reactive model. It is the replacement to consolidate a fragmented market. It is the gateway to autonomous defense. That's why we're the fastest-growing cybersecurity company at scale and why the growth is accelerating so rapidly. When you're operating in the super intelligence era, the pace of innovation has to keep pace with the growing size of the opportunity. I'm really proud of what the ServiceNow team has delivered. Our Level 1 service death specialist resolves incidents 85% faster than human agents. This is now in full autonomous production across customers of varying size and sector from a global automotive leader to a leading enterprise technology company. Our AI Ops specialist has already reduced median time to resolution by 40% within the first month. We now have over 100 customers actively innovating with our AI specialists, AI Ops, HRSD and CRM specialists are expected to become generally available in Q4. As enterprises rethink the mandate of their CRM systems, ServiceNow is leading the way. The old CRM was built for sales teams. The new 1 has to work across your entire business. That's a different product. That's a different architecture. And that's why we're seeing customers rip and replace, not just add alongside. Conversational voice AI is the next big leap in connecting the front office to the entire enterprise. The customer conversation is where the work starts, -- the platform has to carry it through every system and workflow behind it. We're redefining how enterprises engage with customers. Our tuck-in of sweep adds deep expertise and rapid agentic deployments, giving us another gear to accelerate while improving customer outcomes. And 1 year after we brought logic AI into ServiceNow, we've been named a leader and customer favorite in the Forrester Wave for configure, price and quote solutions. We see a similar change in gravity for the employee experience. For the Fortune 500,000, we introduced flow. There are many enterprises that want leading domain expertise but aren't ready for formalized ITSM. FLOW fills the gap, a new conversational service desk that is self-serve and consumption build, a customer that signs up for, FLOW, today can begin using flow today. That's a big reason it's off to a lightning fast start with businesses and government agencies around the world. ServiceNow Employee Works continues to be a fast growth machine. This gives enterprises one place to search, knowledge, get things done and route work across IT, HR, finance and procurement. It also becomes the destination for employees to build AI assistance, agents and automations, all secured by enterprise guardrails. This is only scratching the surface of the groundbreaking innovation on the ServiceNow platform. Even the best platform won't deliver for enterprises alone. ServiceNow Control Tower Alliance is a new ecosystem of leading companies in AI, cloud infrastructure, security, governance and token management, who will help customers adopt trusted enterprise AI safely at scale. Founding partners include Anthropic, AWS, Cisco, Hidden layer, Kong, Okta, OpenAI, Witness AI and Xenity. Today's ServiceNow announced an expanded partnership with open AI to help enterprises move seamlessly from AI reasoning to governed action. The partnership expansion starts with a new ServiceNow plug-in for chats PT, enabled by Action Fabric. We aim to develop security and risk solutions powered by OpenAI cyber models, a Codex integration and AI workflow factory and voice-driven governance for ServiceNow's super intelligence control tower. We have very big plans for this partnership, especially in cybersecurity. We expanded the partnership between Google Gemini, Enterprise and ServiceNow Action Fabric. Gemini Enterprise provides the conversational front end while ServiceNow provides the governed industry workflow execution. Our partnership with In Re, a C prime company shows what happens when a partner builds on ServiceNow before they sell it. In Re went live on employee works in 6 weeks. That's the new bar for time to value rather than the exception. They didn't sell the solution until they lived on it themselves. Median submission time is now down 60%, completion rates 97%. And ServiceNow and Aramco Digital established an agreement to standardize and govern digital workflows across Aramco's affiliates, subsidiaries and joint ventures in more than 50 countries, and the list goes on and on. I could end on the countless industry accolades. We've earned 3 new Gartner Magic Quadrants to new Forrester Waves, IDC reports and many more. Instead, I'll close with the ultimate measure of a defining enterprise technology company, our customers. a major Asian telecommunications leader with over 130,000 employees and contractors became the first enterprise in the region to deploy ServiceNow autonomous workforce for a zero-touch help desk in IT and HR. This will handle 70,000 IT requests and 6,000 HR inquiries annually. The Salvation Army, Australia is using ServiceNow AI specialists to give frontline employees more than 5,000 hours back. So far, time that is redirected towards supporting community members that are in need. Germany's professional soccer league expanded with ServiceNow as its official CRM partner. It's about 1 month, only 1 month. They've already consolidated fan services from 7 digital channels into a single ServiceNow platform, resolving 89% of inquiries at first contact, cutting previous case volumes in half. When a global logistics leader shipment, operations, we're drawing terrible manual work processes across siloed systems that were soul crushing, ServiceNow built them an AI partner, the shipment issue analyzer. The result is nearly 100,000 hours saved annually, resolution from 3 days to less than 30 minutes, Jack Henry & Associates, one of the leading financial technology companies in the U.S. chose ServiceNow CRM to modernize its CRM capabilities with AI that automates routine tasks and strengthens post-sale operations at a consumer finance company, spotting risk, meant sending it nowhere. Multiple channels, unclear ownership, legacy systems swallowing signals. Our applied AI FTE team fully deployed engineers built them the AI risk front door, a 2-layer agent architecture targeting 85% accuracy. It compressed signal to routed case time by more than 85%. Nestle has started to leverage our control tower to scale AI with strong governance across its operations. They are progressively deploying agenetic marketing operations across 60 countries with the potential to reduce marketing campaign coordination by 25%. And together, we continue to drive innovation across all key business functions. InterContinental Hotels Group, one of the world's largest hospitality and travel services companies is using Veta from ServiceNow to govern who and what can access its systems, so it can safely scale across its 7,000 hotels worldwide. These amazing enterprises are putting AI to work for people -- they're doing it with ServiceNow on our AI platform with the security of our Super Intelligence control tower. We see clear momentum and AI monetization, driven by our organic innovation, our pricing and our intelligent packaging. Our security business is differentiated with the potential to be even bigger in a few years than all of ServiceNow is today. We're strong across industries, including the public sector, which once again delivered in its biggest quarter of the year. We're not compute constrained. We don't have capital constraints. We're activating a hybrid business model. As you'll hear in the raised full year guidance, we're a company going from the rule of 56 to the rule of 57 on our way to the rule of $60 million. That, of course, is free cash flow plus revenue growth. We have 6 businesses that have now surpassed more than $1 billion run rate with a TAM that continues to multiply and expand. What other businesses are there that can even contemplate these fundamentals. And it's only getting better as the cost of intelligence falls -- the tailwind for software is strengthening. We are a one-of-one growth company. We have deep incumbency in the enterprise with proven global distribution. We're honoring the principle and the promise that the world works with ServiceNow. I really appreciate your belief and support. I look forward to your questions. And now I'll turn things over to our President and Chief Financial Officer, Gina Masentuno. Gina, over to you.

Thank you, Bill. We delivered another strong quarter, exceeding the high end of our guidance across every top line and profitability metric. Q3 results reinforce that ServiceNow is becoming even more strategic as enterprises move from experimenting with AI to deploying it at scale. Customers want the productivity and growth that come with super intelligence. But they also need the visibility and security to do so with confidence. With the ServiceNow AI platform at the operational core of the world's largest enterprises, we are perfectly positioned to help customers put AI to work across their business, govern every agent in action and translate intelligence into secure measurable outcomes. Q3 subscription revenues were $3.988 billion, growing 20.5% year-over-year in constant currency and 50 basis points above the high end of our guidance. RPO ended the quarter at $29.7 billion, representing 22.5% year-over-year constant currency growth as average customer contract duration continues to expand. Current RPO was $13.65 billion, representing 21% year-over-year constant currency growth, a 100 basis point beat versus our guidance. Across our workflows, we saw widespread demand. Technology workflows had 54 deals over $1 million, including 6 over $5 million. Demand for our core workflows remains robust as every new AI asset and agent introduces greater requirements to manage monitor, secure and govern the enterprise. ITSM was in 11 of our top 20 deals, ITOM was in 9 of our top 20 deals with 14 deals over $1 million. Asset management crossed $1 billion in ACV this quarter. It was in 13 of our top 20 deals with 11 deals over $1 million. and our Security and Risk Solutions were in 16 of our top 20 deals with 13 deals over $1 million. CRM and industry workflows maintained its rapid growth trajectory and we're in 13 of our top 20 deals with 1 million-plus deals surging to 28 in the quarter. Core business workflows had 15 deals in the top 20 with 24 deals over $1 million, and creative workflows had 19 deals in the top 20 with 13 over 1 million. From an industry perspective, Business and Consumer Services led the way with net new ACV growing over 3x year-over-year. Technology had robust growth as well at nearly 40%. The -- our U.S. federal business also delivered an excellent quarter with deals over $1 million growing over 30% year-over-year. We expect federal net new ACV growth to accelerate further in Q4 as agencies increasingly see ServiceNow as the AI operating system for the enterprise. In Q3, our renewal -- our renewal rate remained best-in-class at 98%, reflecting the enduring value we deliver to our customers. We ended the quarter with 680 customers generating more than $5 million in ACV, with 31 additional customers surpassing $20 million in ACV over the past year. As our largest customers continue to scale with ServiceNow, they're expanding their platform adoption with 19 of our top 20 deals including 6 or more products. The momentum in our AI solutions continues to build. We continue to exceed our AI expectations for the year with AI net new ACV growing 65% year-over-year in Q3 allowing us to raise our AI ACV target for the second time this year from $1 billion at the start of the year to now $1.7 billion by the end of 2026. In Q3, the number of AI deals over $1 million grew 4.5x year-over-year. We're also seeing customers embrace AI more broadly across their enterprises with deals spanning 5 or more AI products increasing over 8.5x year-over-year. AI adoption is pervasive across the platform, evident in every workflow. ITSM AI deal volume increased nearly 80% year-over-year. HRSD AI deal volume nearly doubled. Newer AI solutions saw deal volume grow even faster with ITOM growing more than 7x and portfolio management book more than 6.5x. We also saw strong net new ACV momentum with security and risk AI growing more than 4.5x year-over-year. App Engine AI more than 4x and asset management AI nearly tripling. CRM AI had a standout quarter as well with net new ACV tripling both quarter-over-quarter and year-over-year. Just as importantly, customers are moving rapidly from adoption to production. As Bill mentioned, our year-to-date consumption of Agentic-AI in production is up more than 13x year-over-year. We're passionate about helping customers realize value faster. With the help of our forward deployed engineers, we've seen an accelerated time to value of 80% year-to-date. For example, 1 European customer went live in just 12 weeks and is on track to consume nearly $1.5 million in annual assists. When we provide deployment expertise, as we've seen AI adoption moved twice as fast in just the first 5 weeks of involvement. Turning to profitability. Non-GAAP operating margin was 32.5%, 150 basis points above our guidance, driven by the revenue outperformance, efficiency gains and timing of spend. From a productivity standpoint, our internal use of AI is now generating more than $1 billion in annualized value, more than double the level we exited 2025. Free cash flow margin was 20%. Together, these results continue to demonstrate our ability to drive a strong balance of world-class growth, profitability and shareholder value. Moving to our outlook. For 2026, we're raising our subscription revenues by $15 million at the midpoint from $15.77 billion to $15.785 billion, representing 21% year-over-year growth on a constant currency basis. We are raising our full year free cash flow margin target by 100 basis points from 35% to 36%, driven by lower CapEx spend. Against the backdrop of growing investor scrutiny around AI-related infrastructure spend and leverage, ServiceNow is positioned to capture the AI opportunity, while reducing its CapEx and and expanding free cash flow margins. We continue to expect subscription gross margin of 81% and operating margin of 31.5%, up 50 basis points year-over-year. Our execution has enabled us to fully offset the dilution from acquisitions this year and still deliver meaningful margin expansion across both operating and free cash flow margins. Reinforcing the strength and scalability of our business model. Finally, we expect GAAP diluted weighted average outstanding shares of $1.04 billion. For Q4, we expect subscription revenues between $4.245 billion and $4.255 billion, representing 21.5% year-over-year growth on a constant currency basis. We expect CRPO growth of 18.5% on a constant currency basis. This reflects a higher mix of on-prem deals and excludes a rising balance of T for C backlog both of which contribute to revenue, but not CRPO. We expect an operating margin of 32%, and we expect $1.05 billion GAAP diluted weighted average outstanding shares for the quarter. In closing, Q3 was another strong quarter of execution and accelerating AI adoption. What excites us even more is the scale of the opportunity still in front of us. From SI control tower and autonomous security to employee works and our growing portfolio of AI specialists, while helping customers operationalize AI across the enterprise turning innovation into measurable business outcomes and ROI. Just as important, while helping customers accelerate adoption without losing control. This is where ServiceNow is differentiated. By combining workflow, data, AI and governance on a single platform, we can help customers manage the complexity of the AI era, while unlocking its full potential. This gives us confidence in the substantial growth opportunity ahead and our ability to create long-term value for customers and shareholders. Bill and I would like to thank our employees around the world for their continued focus execution and commitment. Their ability to innovate while operating with discipline is what enables us to consistently deliver quarter after quarter. With that, I'll open it up for Q&A.

[Operator Instructions] Your first question comes from the line of Brad Zelnick from Deutsche Bank.

Fantastic. Bill, we increasingly hear about AI native applications companies implementing outcome or value-based pricing. And I was just curious to what extent you're seeing customers asking you to go down this path? I know you have a perfect mix of subscription and consumption. But it seems like the market is moving in this direction. And maybe for Gina, I imagine this is something you've contemplated internally what would the impact of something like this be on the financial model?

Brad, thank you. We have the best of both worlds in the sense that the customer likes the predictability of the seat-based pricing model for their budgeting purposes, people that run Fortune 2000 companies run on budget. So we give them that. And also, we're driving consumption -- and the idea is simple. Get the customer live fast. And once they're live, the token economics take off, whereby we have a chance to improve our revenue per user by a factor of 5x. And that's only because the customer derives substantially more value than that. So it's kind of a win-win. I would also point out that with the announcement of FLOW, the native AI stand-alone autonomous service desk type of provider are no longer required as we have that now shipping it globally so you could buy it online and you can go live in the same day. So that will be yet another net new ACV engine for the company and obviously a problem for the competition. So again, best of both worlds. One thing that really is interesting with the Super Intelligence control tower, you should know a 500% growth month-over-month in terms of the AI action that's activated in that super intelligence control tower, coupled with a 13x improvement in AI consumption. So clearly, we're benefiting from our current model because we're growing 21% year-over-year. And this hockey stick formation has yet to be fully realized. And so I think that is yet another exciting point for the investors to contemplate.

And then Brad, from the impact on the financial model, as Bill said, our customers are very focused and quite happy with the hybrid model that we have today. and are not asking at all for outcome pricing. And so you would imagine if the day were to change, that we'd be ready and waiting for that. But as of now, our customers are very, very happy with the hybrid model, as Bill talked about.

Your next question comes from the line of Alex Zukin from Wolfe Research.

On another strong performance. I guess maybe Bill or Gina, for you, there were some nuance on kind of some of the impacts that you're seeing on the numbers in the guide, particularly for Q4 on CRPO and subscription revenue. Maybe to the extent that, again, all of the metrics that you're citing sound like you're expanding your growth opportunity, expanding your growth potential. Obviously, the stock is down pretty meaningfully after market on some of the, I think, the 4Q guide. But any constant kind of comments on your confidence in growth going kind of either staying high or going higher, particularly even for next year as some of these nuances normalize, and they don't necessarily impact subscription revenue as much as maybe the CRPO deceleration would imply?

Thank you, Alex, and I appreciate the question. And yes, so first and foremost, we remain as confident as ever in our growth opportunities, as I hope came through very clearly in both Bill and my prepared remarks. We had strong beats across the board, revenue, CRPO, op margin, free cash flow, we raised free cash flow margin. On the revenue beat, what I'd say is that while we actually pass through half of the beat all of the FX and half of the beat that we saw in Q3 to the full year guide. With respect to why we didn't raise but by the entire beat, there's a couple of things. And so #1, with our scale, the speed is really strong, and we feel really good about that. But to help our customers realize value even faster at scale. We've made the strategic decision to invest in their success by including delivery expertise with our platform solutions to accelerate AI deployments for select large deals. From an accounting perspective only, the value of those deployments are carved out of subscription rent revenue and they're included in professional services rather than subscription revenue. Notably, upon renewal of those contracts, the value of those services return to subscription revenue. So it provides a structural acceleration to growth. And it's not huge, about 25 bps in Q3 and expecting it to have approximately 50 bps in Q4, which is -- the only reason why we didn't pass through the full beat in Q3 into the rest of the year. So subscription revenue feel really, really strong about that. With respect to CRPO, we saw strong early renewals in Q3 that contributed about half of the beat in Q3. Now that has a negative impact in Q4 because we pulled those deals out of Q4 and into Q3. So that growth is already in Q3. A couple of other things to factor in strong public sector demand is driving higher on-prem mix in Q4, which is actually a great result. But that is driving a 25% -- sorry, 25 basis points headwind in Q4 CRPO but we'll absolutely hit revenue and be part of revenue. The other thing is those incremental investments in deployment expertise, a small, modest RPO headwind also does not impact revenue in the long term. And just more generally, I'd note, and we've talked about this before, right? CRPO very nuanced accounting metric, and it doesn't necessarily capture all of the momentum in the business. A good example for that is there's approximately 50 basis points of year-over-year subscription backlog growth that's excluded from CRPO in Q4 due to cheaper set provisions, but absolutely will be included in revenue. And so while CRPO is a good indicator of next year's revenue, it's certainly not perfect. And the momentum you're hearing in the business, especially around all of the AI amazing things will absolutely translate to strong revenue growth in 2027 and beyond. And at the end of the day, we feel as confident, if not more confident today in our growth opportunities than ever before.

Your next question comes from the line of Adam Wood from Morgan Stanley.

[indiscernible] for Adam. I wanted to just zoom out a little bit and just talk about the momentum you're seeing on the AI ACV side. As you noted, you've raised the guidance twice now to $1.7 billion in revenue -- at the same time, if we look at just the broad story of CRPO, we could call it stable, maybe on an organic basis, modestly decelerating but sort of generally stable. So my high-level question, Bill, is -- when do you think the AI momentum will start to translate to overall offline acceleration, CRPO acceleration? And with respect to that, in terms of the go-to-market loadoyou guys have made a lot of pricing and packaging changes. You guys just noted that you're doubling down on delivery. Do you feel you have the sort of AI and genetic sale go-to-market motion right? Or is there room for improvement on that front?

Thank you very much, Adam. First of all, let me just be extremely clear, the business has never been in better shape than it is right now. And I think one of the luxuries that you have when you have the Super Intelligence control tower and every partner that's a hyperscaler or a lab company, these are great companies. from NVIDIA all the way through to the labs or teaming up with ServiceNow and realize the importance of coming through our Super Intelligence control tower to drive enterprise value for their customers also. -- and that's where the network effect is really starting to kick in to extra high gear. So I want you to please register that as a significant momentum advantage that we are experiencing. And also, we are very cognizant of the importance of getting these customers live fast. They have to get value out of AI now. And so as Gina said, we've made the necessary decision strategically to get them live fast, invest in doing that. So ultimately, they can not only derive the benefit from the license but they can also activate the tokens to create the toconomics that our shareholders are looking for and also that their shareholders are looking for. So that virtuous cycle is kicking into high gear. And as I mentioned, we have a 500% month-over-month increase in the activity on the Super Intelligence Control Tower and a 13x improvement on the AI consumption itself. So the strategy is working and yet we're still in the early days. You will absolutely see in some now, but also in 2027, as Gina said, the true acceleration because it's all about the customer getting these implementations and getting these tokens activated in their workflows or their business processes. But we have made a decision as a company and our ecosystem to do that because that's where the long-term value creation exists for us. for the shareholders and most importantly for the customer. So I feel great about it.

And then I'll take you back to Financial Analyst Day, Adam, when we talked about by 2030, our AI business would be 30% of our ACV -- and so we're absolutely on path and trajectory to get there, if not actually ahead of schedule, as you can tell by our continued raise of AI, but we are well on our path.

Your next question comes from the line of Samik Chatterjee from JPMorgan.

Maybe if I can just go back to decision to invest with your customers to accurate AI adoption with them. It sounds like you did some of that investment in Q3 already. Any early data points in terms of those engagements that is driving the confidence about sort of expansion on AI adoption from them? And what you -- what are sort of the ideal metrics you have been focusing on to measure that outcome there with the customer.

Absolutely. And as you can imagine, this market for AI is moving very quickly, and so are we. And we noticed that customers receiving the support saw AI adoption progress twice as fast during just the first 5 weeks of that support with multiples higher of assist consumption and product usage versus those without support. So that assist consumption and product usage are the metrics that we're looking at. And when we're seeing accelerating customer AI consumption, as you would expect, it unlocks a significantly larger monetization opportunity making the ROI very compelling. Therefore, we're reacting by building more of these deployment teams into our forecast because we're seeing such incredible results.

And I would add to that, Samik. Just one very interesting move that we made, which was the acquisition of Sweep. And as you know, one of the big reasons why customers sometimes have a more difficult time changing from one CRM system to another is they have a long implementation cycle. And nobody wants to have a long implementation cycle, especially when it relates to taking care of their customers. And so now we're able to accelerate the deployment times for CRM to -- instead of talking years, we're talking a month. We're talking like days, 30 days, 60 days for a serious company of serious scale -- this same logic also applies to the enterprise super intelligence control tower and all of the workflow processes on ITSM as an example. In 24 hours, we activated that. So what we're looking at here is a super intelligence control tower. A completely open ecosystem feeding into the rules and the rails of the way the enterprise runs, connecting the fabric of the data and the processes, and we're going to do this at record pace. So it's going to drive implementation cycles to record speeds, which is necessary to get the tokens fully consumed, activated and generating revenue. But as I always want to remind everybody in our company and otherwise, there's no other company growing at the rule of 57% in the enterprise software industry. If you could find it, please let me know. I want to talk to them. I want to get the best practices with 21% growth on revenue and 36% growth on free cash flow, all while building the most superior super intelligent control tower that the world has ever known. So I want to meet that company.

Your next question comes from the line of Peter Weed at Bernstein.

I think 1 of the impressive things you've been doing is investing internally in productivity optimization. And I think we're seeing that come through pretty significantly in some of the head count numbers. Can you help us understand how that's playing out? Because it looks like a lot of it is actually focused in maybe front office product and sales and marketing. And how are you able to get that productivity in these areas to the level that you want, while this is also what will be driving revenue looking forward?

Thanks, Peter. So first and foremost, so excited to say that we've crossed the $1 billion in efficiency gains through our own internal use of AI. And the lion's share of that is coming from our own use of our own products now on now. So it's just incredible. And yes, that efficiency gains means that we're able to not hire as many people. That being said, we're absolutely hiring folks in the right spot. And so while you might see total sales and marketing head count come down, actually quota-bearing heads are up double digits, while sales operations, for example, is down significantly and very similar in the R&D organization. As you would imagine, real increases in AI engineers in top talent, but there's lots of efficiency gains that we're driving through AI. That means that we don't have to hire as many support people, for example, or overhead in the R&D organization. And so we're absolutely still hiring across the board in both go-to-market and R&D. We're hiring in the right places, but that's being offset by incredible efficiencies that allow us to bring those more operational roles, those head count rolls down significantly.

And I would build -- just to share with you, Peter, a couple of things are very interesting. We have our own employee works solution in the company. And so if you think about our great go-to-market machine, which is the best in the industry by far, they all have a coach, and that happens to be employee works. And so it is autonomously activating all of the controls that are necessary to build great customer relationships and bring all of our innovation to the customer. This is being done autonomously. Not that they have to even request it. They're also getting the insight pushed to them to make them more productive on the front line. Think about it. If you go back 3 years, that was like 100 people in the sales operations department moving around information on e-mail. That is now completely autonomous. It's a sales coach in the pocket. It's driving enormous productivity. And just to be clear, we're actually significantly improving and increasing feet on the street. And while our ultimate head count has actually slightly declined, which is a gorgeous situation, as Gina pointed out, the 90% response time to customer service or employee service inquiries is now done autonomously. In a way that is so much easier for people to deal with and it gives them an improvement in their life experience here at ServiceNow. Finally, while the head count may remain consistent, we continue to strengthen the workforce. So we continue to bring in net new talent in AI on the innovation side and on the quota bearing side, we have a higher standard for the kind of individuals we need to take us from here to there. So while the head count is steady, the innovation and the improvement of the human capital condition has only increased substantially. So that's a very important thing that sometimes doesn't show up in the numbers.