The company also raised its full-year 2026 guidance for subscription revenue, which it predicts will make between $15.53 billion and $15.57 billion. This means growth of about 20% to 21%—more than the 18% to 18.5% expected by analysts.

The company reported that Now Assist, its AI product suite, more than doubled net new annual contract value in Q4 compared to last year.

Shares of ServiceNow fell 4% in after-hours trading following the announcement.

This may be evidence that McDermott’s message—don’t join us with other SaaS companies—is starting to land.

“We don’t live in a SaaS neighborhood,” McDermott said luck in an interview before the earnings release. “Functional SaaS and feature SaaS can be automated with ServiceNow and language models that meet us in the middle of our workflow, where the business happens.” Functional SaaS companies are those that provide software to serve a wide range of work functions, such as Salesforce for sales and customer service, or Workday for human resources. The SaaS companies that feature are those that deal with narrow tasks, such as Zooming for meetings, or DropBox for file transfers.

McDermott said ServiceNow is on its way to becoming a central hub where customers can access the data and software tools AI agents need to automate work. “We drive hyperscalers, language models, data lakes, systems of record, and now the security profile of companies,” McDermott said. “It’s all happening on the ServiceNow platform.”

ServiceNow has been on an acquisition spree to bolster its AI and security capabilities so it can deliver on McDermott’s vision. In December, it announced plans to acquire cybersecurity company Armis for $7.75 billion — its largest deal yet — and identity security company Veza. In March, it announced a $2.85 billion deal for Moveworks, an AI-powered employee experience platform, which closed in December.

The acquisitions have caused some Wall Street analysts to wonder if ServiceNow is trying to buy revenue growth. But McDermott pointed out that the latest quarterly results show that ServiceNow can grow by more than 20% year over year organically. He said that each of the acquisitions is about the acquisition of specific product capabilities and talent around AI and cybersecurity: Armis provides technology to monitor IT operations in real time; Veza manages identity for humans and machines; and Moveworks manages the employee experience.

As evidence that ServiceNow is in a different league than its competitors, McDermott points to what he calls ServiceNow’s “Rule of 55-plus” performance. The “Rule of 40” is a rule-of-thumb benchmark in SaaS software that states that a healthy company’s revenue growth rate and its profit or free cash flow margin must total at least 40%. ServiceNow’s combination of 21% revenue growth and 35% free cash flow margin puts it above that threshold. “No company in the enterprise software industry operates on the Rule of 55—only ServiceNow does,” he said. The company’s Q1 guidance implies a score of 57.

McDermott acknowledged the disconnect between ServiceNow’s consistently strong results and the market’s lack of enthusiasm for the stock. “There has been a re-rating of SaaS companies in multiples, so ServiceNow has filed with other SaaS companies, and the multiples are falling for the SaaS industry,” he said. “You can take a look Adobeyou can look at Salesforce, you can look at Workday. “

His pitch was that ServiceNow no longer needed to be valued with peers. “We’re consolidating the feature companies—you know, they have a feature or a tool—and we’re consolidating the function companies into ServiceNow,” he said. “I’m talking hundreds of applications.”

Along with its earnings, ServiceNow announced an expanded partnership with AI company Anthropic. The partnership will see Anthropic’s Claude AI model become the default model powering ServiceNow’s Build Agent for enterprise app development. The partnership follows last week’s announcement of a close collaboration with OpenAI that will also see the company’s models integrated into ServiceNow products.

“Next-generation AI models will work in harmony with the most important business software,” McDermott said. He said Anthropic CEO Dario Amodei sees a “significant difference between giving businesses access to an AI model and turning that model into workflows where real decisions are made by businesses around the world.” He also made a distinction between large-scale language models, which he described as “indeterministic,” and ServiceNow’s ability to also use its own workflow automation tools to deliver “deterministic results.” “Businesses must have deterministic results for management, for security, for auditing, and clearly for smooth operation without hallucinating,” he said.