ServiceNow CFO Says AI Is a Growth Engine, Not a Budget Squeeze
ServiceNow (NYSE: NOW) is positioning artificial intelligence as one of its biggest growth levers, and the company's finance chief says the spending environment is working in its favor.
In an interview with Deutsche Bank software equity research analyst Brad Zelnick, CFO Gina Mastantuono said AI is expanding ServiceNow's opportunity set rather than pressuring customer budgets. She argued that the company's platform, built on a single data model, common architecture and integrated platform, gives enterprises a practical way to apply AI across IT, human resources, finance, legal and customer service operations.
"In an AI world, autonomous work is more important than ever," Mastantuono said. She pointed to the billions of workflows and trillions of transactions running on ServiceNow's platform, saying the company has the contextual data and governance controls needed to help clients automate more work.
The comments come as enterprise software investors are trying to gauge whether AI will create new spending categories or simply consume funds earmarked for other technology projects. ServiceNow, which sells workflow automation software to large organizations, is often seen as a bellwether for corporate technology budgets. Mastantuono acknowledged that some businesses are spending more on AI tokens and may be trimming elsewhere to pay for them, but she said ServiceNow is winning when its products show quick returns.
ServiceNow reported 23% top-line revenue growth in the second quarter, with headcount flat for the year even after accounting for acquisitions. Mastantuono said the company expects $500 million in AI-related efficiencies this year. Rather than treating those savings as a reason to delay software purchases, she said customers are funneling labor savings back into technology.
"We're seeing a lot of customers lean into a labor pool dollar budget for spend," she said, describing productivity gains as a way to finance software investments.
The AI business crossed $1 billion in the second quarter, Mastantuono said, and remains on track for the company's prior target of $1.5 billion for the full year. That trajectory could help offset concerns that AI-focused rivals are crowding out traditional enterprise software vendors.
On capital allocation, the CFO said organic innovation remains ServiceNow's first priority, followed by smaller acquisitions and talent deals. She noted that ServiceNow completed a $2 billion share repurchase in the first quarter and had more than $4 billion left under its existing authorization.
ServiceNow's long-term roadmap focuses on AI, security and risk, data and analytics, and customer relationship management. Mastantuono said the company expects each of the latter three portfolios to grow more than 25% over a three-year period, and ServiceNow has guided that AI will represent 30% of revenue by 2030.
The company's AI-native bundles are designed to give customers multiple entry points, from basic AI tools to its higher-end Prime package. According to Mastantuono, Prime pricing has climbed more than 30%, while other bundles have produced uplifts of 20% to 30% depending on packaging.
ServiceNow is also trying to ease concerns about AI governance. Its AI Control Tower is a vendor-agnostic layer that can connect to several AI models, cloud providers, software vendors and data sources. Mastantuono said customers want flexibility rather than being locked into a single AI vendor, and finance chiefs are looking for tools to track AI spending and return on investment. Control Tower includes monitoring for spending, governance and controls, plus a "kill switch" for AI systems that behave improperly, she said.
The security and risk business surpassed $1 billion in annual contract value in the third quarter of last year, according to Mastantuono. After acquiring Armis and Veza, she said ServiceNow now ranks among the top eight security providers worldwide, with capabilities spanning detection, alerting, decision-making and remediation. The acquired businesses beat their internal plans in their first quarter under ServiceNow and are helping drive demand for the company's core security and risk, configuration management database and IT operations management offerings.
Data and analytics is another focus. Mastantuono said ServiceNow's Workflow Data Fabric and connectors are meant to let customers combine data across their organizations with AI, workflow and security tools, regardless of where that data resides.
On the customer side, ServiceNow's CRM business has surpassed $2 billion, and the purchase of Logik.ai expanded its configure-price-quote capabilities, giving customers quote, fulfillment and service functions in one platform.
Mastantuono pointed to early AI deployments as evidence that the technology can pay for itself quickly. The City of Raleigh reached 98% accuracy and automated 65% of requests without human intervention within 10 to 15 weeks using ServiceNow's Level 1 specialist, she said. In another 12-week pilot, one customer generated more than $5 million in efficiency benefits from a single Level 1 specialist use case, according to the CFO.
Public sector demand is growing as well. ServiceNow overachieved its federal plan in the second quarter and entered the second half with a strong pipeline, Mastantuono said. The company also plans to target more small and medium-sized businesses with a forthcoming product designed for that market.
The company's track record of building six businesses with more than $1 billion in revenue internally underscores its continued emphasis on organic innovation, she said.
ServiceNow is a cloud computing company that sells software for digital workflow management and business process automation. Its Now Platform includes IT service management, IT operations management, customer service management, HR service delivery, security operations and asset management, replacing manual work and legacy systems with cloud-based service-oriented applications.