“We continue to expect subscription gross margin of 84.5%, operating margin of 29.5%, free cash flow margin of 31%, and GAAP diluted weighted average outstanding shares of $208 million.”

In context

“Gina Mastantuono (Chief Financial Officer): Thank you, Bill. Q3 was another stellar quarter for ServiceNow with substantial outperformance across all of our growth and profitability metrics as digital transformation and Gen AI remain top priorities for C-suites, the Now Platform and Now Assist continue to see robust demand. ServiceNow stands out as the strategic partner to deliver intelligent solutions driving incredible business in every corner of the enterprise. Q3 subscription revenues were $2.715 billion, growing 22.5% year-over-year in constant currency, exceeding the high end of our guidance range by 200 basis points. RPO ended the quarter at approximately $19.5 billion, representing 33% year-over-year constant currency growth, accelerating both quarter-over-quarter and year-over-year. Current RPO was $9.36 billion, representing 23.5% year-over-year constant currency growth, a 150 basis point beat versus our guidance and a 100 basis point acceleration from Q2. From an industry perspective, technology, media, and telecom was very strong, growing net new ACV over 100% year-over-year. Retail and Hospitality also had a fantastic quarter, growing over 80% year-over-year. Health care and life sciences and manufacturing also saw strength. Year-to-date, U.S. Federal has demonstrated outstanding execution, further growing net new ACV on top of a phenomenal 2023. In Q3, we landed five deals over $5 million and two over $20 million. Overall, we once again achieved a robust renewal rate in the quarter reflecting the value ServiceNow consistently provides to customers. The importance of the Now platform has driven the number of customers paying us over $1 million in ACV to 2020. What's more, the number of customers paying us $20 million or more grew nearly 40% year-over-year, powered by large deal momentum. We closed 96 deals greater than $1 million in net new ACV in the quarter, including six with new logos. Among them, 15 deals were over $5 million and six deals were over $10 million. The proliferation of large deals reflects a greater emphasis on selling the platform, and with it, more products per transaction. In Q3, 18 of our top 20 deals included seven or more products. Our GenAI capabilities also continue to gain commercial traction in the quarter. As Bill mentioned, we now have 44 customers spending more than $1 million in Now Assist, including six over $5 million and two over $10 million. Pricing has also remained healthy as our Plus SKUs continue to see a greater than 30% price uplift over Pro in Q3. With more proof points from real-world case studies, we're seeing rising demand from customers increasing confidence in Now Assist's ability to deliver significant productivity improvements and savings. For instance, a multinational conglomerate has seen a 75% improvement in case deflection rates with ITSM and HRSD Enterprise Plus, pushing towards its goal of automating 60% of transactional work. Another large tech company adopted ITSM Enterprise Plus to increase self-service by 30% while enhancing employee satisfaction. The majority of GenAI deals were sold direct, so we're starting to see our partner enablement for its results. For example, in Q3, with the help of one of our largest GSI partners, we closed an HRSD Enterprise Plus deal with a federal agency. In fewer than 60 days, they were fully configured and production-ready. Our industry SKUs also had a phenomenal quarter, tripling net new ACV year-over-year led by Financial Services and TMC, which both quadrupled. Turning to profitability. Non-GAAP operating margin was over 31%, more than 150 basis points above our guidance, driven by the timing of spend, our top-line outperformance, and OpEx efficiencies. Our free cash flow margin was 17%, up over 800 basis points year-over-year. We ended the quarter with a robust balance sheet, including $9.1 billion in cash and investments. In Q3, we bought back approximately 272,000 shares as part of our share repurchase program with the primary objective of managing the impact of dilution. As of the end of the quarter, we have approximately $562 million remaining of the original $1.5 billion authorization. Together, these results continue to demonstrate our ability to drive a strong balance of world-class growth, profitability, and shareholder value. Moving to our guidance, given the Q3 outperformance, we are further raising our 2024 growth outlook. For 2024, we're raising our subscription revenues by $78 million at the midpoint to a range of $10.655 billion to $10.66 billion, representing 23% year-over-year growth or 22.5% on a constant currency basis. We continue to expect subscription gross margin of 84.5%, operating margin of 29.5%, free cash flow margin of 31%, and GAAP diluted weighted average outstanding shares of $208 million. For Q4, we expect subscription revenues between $2.875 billion and $2.88 billion, representing 21.5% to 22% year-over-year growth or 20.5% on a constant currency basis. We expect cRPO growth of 21.5% on both the reported and constant currency basis. We expect an operating margin of 29%. Finally, we expect $209 million GAAP diluted weighted average outstanding shares for the quarter. In summary, Q3 was another spectacular quarter driven by strong demand for the Now platform and exceptional team execution. ServiceNow continues to be laser-focused on delivering a complete end-to-end platform experience. With the Xanadu release marking our most comprehensive set of new AI innovations yet, we're empowering enterprises to quickly, seamlessly, and responsibly harness the power of intelligence and we're in great company with strong partners like NVIDIA, Microsoft, Snowflake, and Databricks. I'm excited about the opportunities created by our latest innovations as they fuel our durable top-line growth and margin expansion on our journey to becoming the defining enterprise software company of the 21st century. Bill and I would like to extend a heartfelt thank you to our employees worldwide for their continued hard work and dedication. Our people are our greatest strength. Their commitment to elite level execution has positioned ServiceNow among the best places to work globally. With that, I'll open it up for Q&A.”