Key Takeaways:
ServiceNow cut hundreds of jobs as CEO Bill McDermott pushes the software maker to reorganize around AI efficiency.
ServiceNow Inc. eliminated several hundred positions as part of a global restructuring, the latest enterprise software company to reshape its workforce around artificial intelligence and operational efficiency.
"It has been a very tough day," one ServiceNow employee told Business Insider, asking not to be identified discussing sensitive matters.
The cuts affected a "low single-digit" percentage of the 29,187 employees ServiceNow had at the end of 2025, a company spokesperson said. The reductions occurred over several months this year as the Santa Clara, California-based company integrated acquisitions including cybersecurity firm Armis and identity security provider Veza.
The layoffs highlight the pressure on enterprise software companies to prove AI investments can translate into margin expansion. ServiceNow shares have gained about 12% this year, outperforming the S&P 500 information technology sector, which has fallen 3% amid concerns that AI will disrupt traditional software business models.
McDermott told staff at the start of 2026 that ServiceNow would end the year with the same head count it began with, even as he pushed employees to reorganize workflows around new technology. The CEO has urged the company to serve as a model for its own customers on how to become more efficient through automation and AI adoption.
The restructuring comes as the broader software industry faces a reckoning over AI's impact on demand. Investors have hammered software stocks over the past year on concern that generative AI will reduce the need for traditional enterprise tools and make it easier for companies to build their own applications. Freshworks Inc., another SaaS provider, said this month it would cut about 500 jobs, with its chief executive noting that more than half of the company's code is now written by AI.
ServiceNow's financial performance has remained solid despite the industry headwinds. The company last week reported quarterly results that met or exceeded Wall Street expectations and raised its full-year subscription revenue guidance, signaling that demand for its workflow automation platform remains intact. Subscription revenue, the key metric for SaaS companies, grew at a pace that analysts viewed as resilient given the macro uncertainty.
For investors, the question is whether restructuring costs today will yield margin expansion tomorrow. ServiceNow trades at about 35 times forward earnings, a premium to the S&P 500 software index, reflecting expectations that AI-driven efficiency gains will boost profitability. If the company can maintain its net revenue retention above 120% while reducing head count, the restructuring could widen operating margins by several hundred basis points over the next two years.
This article is for informational purposes only and does not constitute investment advice.
