Under pressure from shareholders, the company announced it would lay off workers and replace jobs with AI.
Software company ServiceNow posted billion-dollar revenue and double-digit growth in recent months. While other software companies were announcing layoffs, ServiceNow CEO Bill McDermott pledged to hold headcount steady into next year.
But Wednesday, ServiceNow, whose software platforms help companies manage workflows and integrate AI, announced it would lay off 63 workers in its San Diego office,— topped with an AI-generated image of McDermott standing before a stormy sky with the words “You’re fired! ” — blew up Thursday. It has more than 800 comments from stunned former employees, speculating the total layoff count is as high as 2,500. It is not surprising that a software company is executing large layoffs, as they increasingly replace workers with AI. Everyone fromInstead of directly cutting jobs, he planned to integrate agentic AI slowly. ServiceNow would “absorb positions created by natural attrition through productivity gains from AI,” McDermott said to CNBC. Still, the financially healthy company on Wednesday sent out layoff notices to dozens of employees across California.
A majority of the roles being permanently eliminated are senior positions focused on middle-market sales and consulting at the San Diego office at 4801 Eastgate Mall. Roughly half of the cuts affect senior-level employees — directors, senior managers, staff engineers and senior consultants — alongside reductions in roles exposed to AI automation, such as solution consulting, training, sales enablement and customer support.
In the first quarter of 2026, the software company posted $3.77 billion in revenue, representing a 22% increase year-over-year, and a profit of $469 million.
“The stock is down 12% after hours, so something’s not getting through to investors,” said Keith Weiss, head of U.S. software research, during the call on April 22. “When are we going to see the benefits of ServiceNow’s positioning for this generative AI opportunity? Because we aren’t seeing it. ” Weiss pointed out that other AI labs were each adding $5 billion in net new revenue in a single quarter.
ServiceNow’s AI product, Now Assist, is projected to return $1.5 billion by year’s end — a fraction of that. CFO Gina Mastantuono pushed back, calling $1.5 billion “pretty darn good for a software company building AI into our platform. ” Even so, when the company guided margins down slightly — from 82.1% to 81.5% — shares fell 14% after the earnings call.
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