CNBC (Mad Money) · Oct 28, 2026
With Bill McDermott, Chairman and CEO of ServiceNow
Photo: SAP, CC BY-SA 3.0 via Wikimedia Commons
ServiceNow just missed earnings-per-share estimates by two cents and posted light cash flow, and Bill McDermott isn't worried. He told Jim Cramer the market is reading the wrong metrics, and attributed the entire miss to one source.
"The two cents has to do with the interest on the companies we just bought." — Bill McDermott
That company is Armis, the $7 billion cybersecurity acquisition ServiceNow funded with debt rather than diluting shareholders, a call Bill defended by pointing to the business underneath the interest expense: 21% subscription revenue growth plus a 36% free cash flow margin, a combination he says no enterprise software peer can match.
The full interview is covered here so you can skip it.
Here are the 3 takeaways that matter.
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Key Takeaways
ServiceNow is "operating at the rule of 57" — 21% revenue growth plus a 36% free cash flow margin, soon to be "the rule of 60"
The 2-cent EPS miss is entirely interest expense on debt used for the $7 billion Armis deal, not an operating problem
RPO grew to $30 billion, up 23%, alongside 150 basis points of operating-margin improvement
ServiceNow and Nvidia built a "kill switch" that can revoke an AI agent's access at the point of execution
OpenAI, Google, Anthropic, AWS, Cisco and Stripe are all connecting into ServiceNow's governance layer
Token consumption on the platform is growing 13x year-over-year, 500% month-over-month
1. The Rule of 57
Bill's defense of the quarter rests on a formula he's coined for the business: revenue growth plus free cash flow margin.
21% revenue growth plus 36% free cash flow margin equals "the rule of 57"
"We have a margin profile that's perfect, and a growth company operating at the rule of 57." — Bill McDermott
"21 plus 36 is 57... I told the markets we'll be 60 soon." — Bill McDermott, on revenue growth plus free cash flow margin
He backed the framing with RPO (remaining performance obligations) growing to $30 billion, up 23%, and a 150-basis-point improvement in operating margin — and argued the growth comes with none of the physical constraints rivals face.
"What other company can say that they're growing the way we are with no compute constraint, no memory constraint?" — Bill McDermott
