ServiceNow Is Pursuing the “$10T Tax” On Productivity, Focusing AI Tools as Investors and Rivals Grow Wary

While many companies retreat from the tariff typhoon, ServiceNowNOW

is dancing in the downpour. The cloud-based process management platform’s shares are up 32% this year after a strong Q1, with revenue rising 19% — easily topping forecasts. And that’s not why they’re cheering; CEO Bill McDermott believes the current economic turbulence actually gives them a leg up, as organizations scramble to optimize costs and improve efficiency during uncertain times.

Tariffs as tailwinds: As trade barriers jack up costs, AI-first platforms like ServiceNow are stepping in to streamline workflows, reduce labor-heavy tasks, and boost margins. McDermott calls it an opportunity to slash the “$10T tax” on productivity — his term for the economic sludge bogging down the US thanks to traditional, outdated systems. So while other CEOs worry about falling demand, ServiceNow sees tariffs as fuel for faster adoption of its automation tools. That’s helped push sales up 18.5% and net income up 32.6% year-over-year, as more turn to its automation stack for both immediate relief and long-term efficiency.

• Public sector revenue soared 30% despite fears that DOGE cuts would spook demand, with ServiceNow securing 11 federal deals exceeding $1M each in Q1 alone.
• Its subscription revenue, which includes tools that help automate tasks across IT, security, and HR, reached $3.01B, while AI-related deal sizes surged 33% YoY.

Smarter Agents, Bigger Bets

As backers grow skeptical of tech giants’ massive AI spending sprees, ServiceNow is doubling down. At its Knowledge 2025 event, the firm unveiled an expanded partnership with NvidiaNVDA

to develop smarter AI agents with advanced reasoning and evaluation tools — reinforcing McDermott’s vision of making ServiceNow the control center for enterprise AI. It also launched AI agents for security and risk, partnering with MicrosoftMSFT

and CiscoCSCO

to create more proactive cyber defense.

• During its May 2025 Investor Day presentation, the org noted its AI tools have brought in $250M in annual contract value, and expects that to hit $1B by the end of 2026.
• ServiceNow claims AstraZenecaAZN
  is saving 90K work hours a year, while Bell CanadaBCE
  is shaving $1M annually off support costs through their AI-powered chatbots.

The productivity paradox: ServiceNow has been undergoing leadership changes, with the recent departures of EVP Erica Volini and International Chairman Ulrik Nehammer, following top sales executive Paul Smith’s exit last month. While framed as “regular business rhythms,” not everyone’s convinced. Jefferies points to lean AI challengers like DeepSeek, arguing their efficiency “punctures some of the capex euphoria” surrounding legacy platforms. Yet McDermott remains optimistic that, since autonomous AI agents “don’t eat” or need benefits, they could reduce staffing by 30% within five years. However, analysts remain wary as insider stock sales are stirring doubts about leadership’s confidence, and the pivot to a consumption-based AI pricing model could delay revenue recognition — making near-term growth harder to forecast, even with solid fundamentals.