Procore (PCOR) Q3 2026 Earnings Call Transcript

DATE

Wed, Nov. 4, 2026

CALL PARTICIPANTS

• President and Chief Executive Officer - Ajei S. Gopal
• Chief Financial Officer - Rachel Pyles
• Vice President of Investor Relations - Alexandra Geller

TAKEAWAYS

• Revenue -- $402 million, growing 19% year over year driven by stronger bookings and consistent execution throughout the quarter.
• Organic Revenue -- $397 million, increasing 17.1% year over year when excluding the $5 million contribution from the DroneDeploy acquisition.
• Non-GAAP Operating Margin -- 23.5%, exceeding the high end of management's guidance by 400 basis points due to operating leverage and disciplined spending.
• Non-GAAP Gross Margin -- 84%, remaining stable as the company absorbed new AI product costs and acquisition impacts.
• Free Cash Flow -- $73 million, representing an 18.1% margin and including $19 million in onetime cash costs for the DroneDeploy acquisition.
• Adjusted Free Cash Flow -- $92 million, reflecting a 23% margin when excluding the onetime costs associated with the DroneDeploy closing.
• CRPO Growth -- 28.9% year over year, with 6 percentage points of that growth contributed by the DroneDeploy acquisition.
• Organic CRPO Growth -- 22.6% year over year, representing an acceleration of approximately 70 basis points from the second quarter.
• High-Value Customers -- 2,968 organic customers contributing more than $100,000 in annual recurring revenue, up 14% year over year.
• Gross Revenue Retention -- 95%, reflecting broad-based stability across general contractors, specialty contractors, and owners.
• International Revenue -- 30% year over year growth, or 26% on a constant currency basis, driven by product-market fit in Europe and the United Kingdom.
• DroneDeploy Acquisition -- $845 million in cash, funded through cash on hand and a $950 million convertible note offering issued in August.
• Deferred Revenue Contribution -- $37 million added to the opening balance sheet following the acquisition of DroneDeploy on Sept. 9, 2026.
• Q4 2026 Revenue Guidance -- $420 million to $422 million, representing growth of 20.3% to 20.9% at the high end including inorganic contributions.
• FY 2026 Revenue Guidance -- $1.557 billion to $1.559 billion, reflecting an organic raise of $21 million at the high end beyond the third-quarter performance.
• FY 2026 Margin Guidance -- 19.0% to 19.5% for non-GAAP operating margin, representing a 540 basis point expansion year over year.
• Share Repurchases -- $175 million in shares repurchased concurrent with the convertible note offering, with a new $300 million authorization now in place.
• General Contractor Segment -- 60% of total revenue, with management seeing continued opportunities for both new logos and strategic expansions.
• AI Productivity -- 80% of Procore's internal code is now written by AI, contributing to long-term efficiency gains and margin expansion.

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RISKS

• Gopal stated, "their constraint is really not having enough people to get the work done," referring to how skilled labor shortages limit the capacity of customers to work through their construction backlogs.
• Pyles warned that the company is "absorbing its near term margin headwind" from the DroneDeploy acquisition while working to reach its long-term profitability targets.

SUMMARY

Procore Technologies, Inc. (NYSE:PCOR) reported third-quarter results that exceeded management's guidance for both top-line growth and operating margins. The company finalized the $845 million acquisition of DroneDeploy, integrating 3D reality capture and visual intelligence into its construction management platform. Management reported that the business is shifting toward an AI-native framework, supported by the general availability of digital coworkers and a new voice-first mobile experience for field crews. The company's go-to-market performance was characterized by strength in large strategic deals and continued momentum in international markets, leading to an increase in full-year financial guidance.

• Management highlighted the strategic focus on a "see, understand, and act" paradigm, utilizing DroneDeploy's data set of 20 trillion square feet of visual data to automate job site workflows.
• CEO Gopal stated, "Procore is where decisions turn into work on the job site," noting that the platform acts as a secure system of intelligence for construction stakeholders.
• The company launched Procore AI Go, a hands-free mobile application that allows workers to query project documents through Meta AI glasses.
• A new partnership with NVIDIA extends digital twin capabilities to mega projects including healthcare facilities and critical public infrastructure.
• The Magpie reasoning engine, which powers Procore AI, is designed to break complex tasks into specialized sub-agents and provides cited evidence from drawings and specifications for every answer.
• CFO Pyles indicated that the target for a 25% non-GAAP operating margin in fiscal 2027 does not depend on the specific revenue growth outlook for that year.

INDUSTRY GLOSSARY

• CRPO (Current Remaining Performance Obligation): The amount of contracted revenue that is expected to be recognized as revenue within the next 12 months.
• FedRAMP: The Federal Risk and Authorization Management Program, a United States government-wide program that provides a standardized approach to security assessment for cloud products.
• DroneDeploy: A reality capture and visual intelligence software provider acquired by Procore to integrate 3D ground and aerial site data.
• Groundbreak: Procore's annual customer conference focused on construction technology and platform innovations.
• Magpie: The proprietary reasoning engine behind Procore AI designed to process construction-specific tasks and unstructured project data.
• Submittals: Documents, samples, or product data provided by a subcontractor to a general contractor for approval before materials are ordered or installed.
• ENR 400: The Engineering News-Record's annual ranking of the 400 largest general contractors in the United States by construction revenue.

Full Conference Call Transcript

Operator: Hello, everyone. Thank you for joining us, and welcome to the Procore Technologies fiscal year 26 third quarter earnings conference call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press 1 to raise your hand. To withdraw your question, press *1 again. I will now hand the conference over to Alexandra Geller, Investor Relations. Gal, please go ahead.

Gal Munda: Good morning, and welcome to Procore's 26 Third Quarter Earnings Call. I am Alexandra Geller, VP of Investor Relations. With me today are Ajei S. Gopal, president and CEO and Rachel Pyles, CFO. Further disclosure of our results can be found in our press release issued last night which is available on the Investor Relations section of our website and our periodic reports filed with the SEC. Today's call is being recorded, and a replay will be available following the conclusion of the call. Comments made on this call include forward-looking statements regarding, among other things, our financial performance, our platform, products, our partnerships, customer demand, AI, DroneDeploy, and our business strategies and operations.

You should not rely on forward-looking statements as predictions of future events. All forward-looking statements are subject to risks, uncertainties, and assumptions are based on management's current expectations and views as of today, 11/04/2026. Procore undertakes no obligation to update any forward-looking statements except as required by law. This call is replayed after today, the information presented may not contain current or accurate information. Therefore, statements made during this call should not be relied upon as representing our views as of any subsequent date. We will also refer to certain non GAAP financial measures to provide additional information to investors.

A reconciliation of non GAAP to GAAP measures is provided in our press release and our periodic reports filed with the SEC. And with that, let me turn the call over to Ajei.

Ajei S. Gopal: Good morning, and thank you for joining us. I am excited to report that our business continues to perform exceptionally well, with outstanding financial and operational results for the quarter. Procore has built 1 of the most essential vertical software platforms. We are the center of the construction industry. Capturing information, automating workflows, and enabling collaboration among every stakeholder on a project. We operate where the physical and digital worlds meet. Driving designs and decisions into the field and turning job site realities into actionable intelligence. We believe we are well on our way to becoming a next generation AI native construction management platform. And a true system of intelligence for construction.

1 that automatically sees what happens on the job site understands what it means, and acts on it. Such a system will deliver meaningful efficiency and safety gains across the construction life, saving our customers time, and money. This quarter, we completed our acquisition of DroneDeploy, which adds visual intelligence to our platform and accelerates our transformation. I am also delighted that the executive changes we made earlier this year are already making a difference. Procore now has a veteran team deep vertical software experience that is working well together and driving outstanding results.

At Groundbreak, our customer conference, hosted more than 5 thousand attendees, and what I heard from customers there strengthened my belief in our portfolio and the value it delivers. I am more confident than ever that the strength of our business, our ability to execute, and the depth of our customer relationships gives us a clear runway to durable growth, meaningful margin expansion, and compounding free cash flow per share. Q3 picked up where Q2 left off, and both revenue and margins came in above the high end of our guidance. Revenue for the quarter grew 18.7% year over year, or 17.1% year over year, excluding DroneDeploy. And non GAAP operating margins 23.5%.

Given this momentum, we are raising full year guidance beyond our Q3 beat. Rachel will share the details shortly. Growth this quarter came from all 3 of our customer stakeholders. General contractors, specialty contractors, and owners. GCs are our largest segment at about 60% of our business, and we see opportunity in both new logos and expansion. For example, in Q3, we signed a new contract with Suffolk, a top 25 E&R contractor and longtime customer, to leverage Procore to standardize their project and financial management workflows into more of their many projects. The company uses Procore to consolidate field to office workflows, and improve project team performance and efficiency.

1 of our largest contracts this quarter was with Schneider Electric Secure Power, a specialty contractor that designs, builds, and manufacturers data center infrastructure. As the company ramps up production to meet hyperscale AI demand, it is expanding Procore usage across the secure power organization and broadening the solution scope to include project execution and resource management to connect engineering, program and project management, and construction field operations. With the goal of unifying the customer execution and experience deployment through handover. Owners are another important part of our business and in Q3, we added a notable new 1. A US government agency. This contract was won in part thanks to Procore for Government's FedRAMP moderate authorization.

The agency is replacing both a competing solution and spreadsheet based project tracking. By standardizing drawing distribution and version control on Procore, the agency aims to eliminate manual revision management enable real time reporting, and meet federal security requirements. During Q3, we completed our acquisition of DroneDeploy. As a software offering, DroneDeploy works across various hardware environments, including drones, ground robots, mobile devices, and cameras. Connecting what Procore already knows about a project with what DroneDeploy sees on-site is how we build the system of intelligence I described earlier. Product integration is underway, and our early focus is on expanding the pre acquisition connectivity between the 2 product suites connecting data sets, and bringing DroneDeploy's AI agents into Procore AI.

Moving to go to market, I am excited about the revenue synergy opportunities ahead of us. At the time of the acquisition, Procore and DroneDeploy shared approximately 600 customers. Which shows clear demand for the 2 product suites working together. Beyond expanding within those customers, we see significant near term cross sell opportunities in both directions. Procore customers can add visual intelligence that works natively with the Procore tools they already rely upon. And many DroneDeploy customers are owners to whom we can introduce the full set of Procore's owner solutions. Rachel will discuss the combined financial outlook shortly. Procore's shift to an AI native company builds on 4 advantages which are hard to replicate. First, users' data and context.

More than 3 million active users this year, more than 20 years of project data and activity history, and now DroneDeploy's approximately 20 trillion square feet of visual data. Second, security and trust. Customers already run their most important projects on Procore's platform. Which is designed to be secure and compliant. Third, a network effect. Dozens of companies work together in Procore on every project each new project can bring more of them onto the platform. Fourth, action. Procore is where decisions turn into work on the job site. We believe these 4 advantages empower us to use AI more effectively to both augment our flagship products, to create new offerings.

We are using AI to make our flagship products more powerful, and easier to use. This helps us attract new accounts and expand usage within existing customers. Take submittals, 1 of construction's most labor intensive schedule critical workflows. A submittal shows the GC and design team exactly what a subcontractor planned to install. And nothing gets ordered or installed, until it is approved. The GC runs both ends, It builds a log of every submittal the spec requires, sends it to subcontractors, and then approves or rejects each response. Our submittal builder part of our flagship project management offering, builds that log. It cut days of combing through spec books down to minutes.

But it only read submittal section of the spec book. Our recent AI upgrade reads every section in full. It catches requirements buried elsewhere like warranty and closeout items, and fills in each submittal's type and title. Teams start from a far more complete log and finish in a fraction of the time. We are also building products that were not possible before generative agentic AI. Including Procore AI Go, and our digital coworkers. Which became generally available in Q3. 1 of them, the Submittal Review Agent, handles the GC's review at the other end of the workflow, a problem software had not previously solved.

It checks each submittal against the specs and contract, flags deviations and unapproved submissions, and drafts a response. McCownGordon, a Kansas City GC, shows how the pieces fit. It had already standardized on the upgraded submittal builder, and they recently signed on for Procore's digital coworkers using the submittal review agent to check subcontractors' responses. In 1 case, the agent caught 10-door openings missing from a submittal before the error reached the field. Avoiding costly rework. Procore AI Go, introduced a Groundbreak is a voice first mobile app now in beta. Crews ask questions about their drawings, specs, RFIs, and submittals, and hear the answers without stopping work.

Through a new collaboration with Meta, workers can use Procore AI Go, hands free on Meta's AI glasses. On a construction project, 1 question is rarely a single task. Answering it can mean pulling dozens of records from multiple tools and checking each against the current drawings and specs. Version 3.0 of Magpie, the reasoning engine behind Procore AI, breaks questions like these into parts. Sending specialized sub agents across the project and returns answers with cited evidence. Based on our internal testing, we believe Magpie outperforms the leading frontier models in construction tasks. At Groundbreak, we also reaffirmed our commitment to improving the core products our customers rely on every day. And we are delivering.

Beyond our new AI offerings, we ship more than 500 new capabilities in the last 12 months. We have delivered every major product that we announced at last year's Groundbreak, in GA or beta. That track record is what earns us the right to introduce customers to new technology. And as we saw at Groundbreak, customers are excited about our new AI offerings. Procore AI Go, and Procore's digital coworkers enable customers to see what is actually happening on a project, understand the impact of decisions, and then take action to change the outcome. that is real value for customers. It offsets labor shortages, and saves time and money.

We believe that the opportunity is large, and that AI will help us unlock labor budgets that sit outside traditional software spend. At Groundbreak, we introduced new and expanded partnerships. NVIDIA's CEO, Jensen Huang, joined us virtually to announce that we are extending our digital twin capabilities beyond AI data centers to other mega projects including health care facilities, and critical public infrastructure. The solution, now in closed beta, lets Teams see a project in realistic 3 d and understand how disruptions would ripple through the schedule, so they find problems earlier and avoid costly rework. Switch, a joint Procore and NVIDIA customer, designs, builds, and operates advanced data centers.

Switch uses 3 d visualization to gain greater clarity into construction progress. Take better informed decisions earlier, and keep complex projects on schedule. We also announced a partnership with IBM that creates a continuous flow of asset data from the job site into IBM Maximo. IBM's enterprise asset management software. For many owners, asset handover is still slow manual, and error prone. With turnover packages assembled from spreadsheets, and untagged photos. Partnering with leaders like IBM lets us focus on our strengths while reaching a broader customer base. To summarize, Q3 was another excellent quarter for Procore. We exceeded the high end of our guidance on every key metric, and raised our outlook for the year.

We delivered new capabilities across our flagship products, made Procore AI's digital coworkers generally available, and closed and began integrating DroneDeploy. All of this serves our vision and mission of improving the lives of everyone in construction. With a platform that connects those stakeholders a growing AI portfolio, and an experienced leadership team, we are well positioned for durable growth, meaningful margin expansion, and compounding free cash flow per share. I am excited about what is ahead. I wanna thank my colleagues around the world. Their hard work drives our success, and our customers' success. And with that, I will turn the call over to Rachel. Rachel?

Rachel Pyles: Thanks, Ajei, and thanks, everyone, for joining us. Before I get into the numbers, a note on how I will present them. With the DroneDeploy acquisition closing on September 9, I will review our Q3 results excluding DroneDeploy consistent with the guidance we gave in July. And I will also give you the consolidated figures. For the outlook, I will provide the total revenue including the inorganic contribution of DroneDeploy. The supplemental presentation on our website shows the bridge between the 2. As Ajay highlighted, had an excellent Q3. Excluding DroneDeploy, revenue was $397 million, up 17.1% year-over-year, an acceleration from 15.8% in Q2 That was $13 million above the high end of our guidance range.

Our largest dollar beat since 2023. Revenue outperformance was driven primarily by stronger bookings and the consistency with which they landed throughout the quarter. Including $5 million from DroneDeploy, reported revenue was $402 million up 18.7% year over year. Our non GAAP operating margin, including DroneDeploy of 23.5% was 400 basis points above the high end of our range. Free cash flow was $73 million and 18.1% margin, including $19 million of onetime cash costs paid at the closing of DroneDeploy, primarily via accelerated vesting of certain DroneDeploy equity awards. Excluding these onetime costs, free cash flow was $92 million, a 23% margin, up 36% year over year.

Our Q3 international revenue grew 30% year over year or 26% on a constant currency basis. We ended Q3 with broad based momentum and strong execution across our portfolio. The improvement in large deal execution that we highlighted in Q2 continued this quarter and was the single biggest contributor to our booking strength. Our new go to market leadership team has improved our and we are now seeing the success of that work. We are seeing customers continue to commit to larger, more strategic partnerships with us which speaks to the critical role we play in their operations.

The quarter was well balanced among our stakeholders, and that balance gives us confidence as we head into the final quarter of the year. Our booking strength in the quarter is also reflected in CRPO. Which grew 22.6% year over year excluding DroneDeploy. Acceleration of approximately 70 basis points from Q2. Most of that growth came from the strength of our underlying bookings, particularly the large strategic expansions we signed in the quarter. Average contract duration increased again, but by less than in Q2. Including DroneDeploy, CRPO, grew 28.9% year over year with DroneDeploy contributing approximately 6 points. Turning to profitability. Non GAAP operating income was $94.4 million and our consolidated non GAAP operating margin reached 23.5%.

A year over year improvement of approximately 26 basis points. That improvement reflects the operating leverage in our business model and disciplined spend. And it comfortably absorbs the modest dilution from closing DroneDeploy in the quarter. Most importantly, this quarter is a further step along the trajectory of profitable growth we outlined last quarter. Next, a brief update on DroneDeploy which we closed on September 9. As a reminder, we acquired DroneDeploy for $845 million in cash. Financed the transaction with cash on hand and the of our $950 million zero coupon convertible notes due in 2031, which we issued in August. Concurrent with the convertible note offering, we repurchased approximately $175 million of our shares.

We believe that the demand for that offering was a strong signal of support for our strategy as we continue to invest in best in class solutions, to deliver on our vision of improving the lives of everyone in construction. Our financial view of the transaction is unchanged, and DroneDeploy's early performance is in line with our expectations with revenue tracking slightly ahead. DroneDeploy contributed $5 million of revenue in Q3 for the approximately 3 weeks since close, and our guidance includes approximately $19 million of inorganic contribution in Q4. Or approximately $24 million for the full year.

Acquisition is accretive to our revenue growth, and we are absorbing its near term margin headwind, while still raising our FY 26 margin guidance and reiterating our FY 2027 outlook. We will continue to disclose its inorganic contribution separately through Q4 and then provide a view of the expected inorganic contribution for FY 2027. We ended the quarter with $614 million in cash and investments. Separately, our board has adopted a new share repurchase authorization of $300 million, consistent with our prior program. With that, let's move to our outlook. Our approach to guidance is unchanged from prior quarters. I will give you Q4 and full year guidance on a reported basis, including DroneDeploy's inorganic contribution.

The bridge is included in the supplemental materials on our website. For the fourth quarter, expect reported revenue between $420 million and $422 million representing year over year growth of 20.9% at the high end. That includes approximately $19 million of inorganic contribution from DroneDeploy, Excluding DroneDeploy, the range is $401 to $403 million, or 15.4% growth at the high end. Q4 non GAAP operating margin is expected to be between 15.5% and 16% on a reported basis. Which includes solution from DroneDeploy. For the full year, we now expect reported revenue of $1.557 to $1.559 billion, representing year over year growth of approximately 17.9% at the high end. Which includes approximately $24 million of inorganic contribution from DroneDeploy.

Excluding DroneDeploy, that is a raise of approximately $21 million at the high end. We are also raising our non GAAP operating margin guidance for the year by 50 basis points to 19% at the low end and 19.5% at the high end on a reported basis, including the dilutive impact of DroneDeploy, which implies year-over-year margin expansion of 540 basis points versus 14.1% in FY 2025. Finally, free cash flow. We are maintaining our f y 2026 free cash flow margin guidance of 19.5% excluding the onetime DroneDeploy closing cost I described earlier. For the year, these costs total approximately $23 million or a 150 basis points.

After accounting for those impacts on a reported basis, we expect free cash flow margin of 18%. Looking ahead, we remain committed to driving sustained efficiency, and we are reiterating our FY 27 guidance for non GAAP operating margin of 25%. As a reminder, our preliminary FY 27 operating margin target does not depend on the revenue growth outlook for year, which we will introduce with our Q4 results. As we scale further, we will continue to optimize our cost structure including tailwinds from AI efficiencies. In that context, we disclosed that Groundbreak that more than 80% of our code is now written by AI.

In summary, we delivered an excellent quarter that showcases the strength of our financial model with organic growth above our expectations and a significant step up in our operating margin profile. Our execution over the last few quarters has been consistent, we are taking that focus into the final quarter of the year. With that, let's turn it over to the operator for Q&A.

Operator: Thank you. We will now begin the question and answer session. Please limit yourself to 1 question and 1 follow-up. If you would like to ask a question, please press *, 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Your first question comes from the line of Take Kalia from Barclays. Saket, your line is open. Please go ahead.

Take Kalia: Okay. Brent. Hey, Ajei. Hey, Rachel. Thanks for taking my questions here, and congrats on these results.

Ajei S. Gopal: Thank you. Thank you.

Take Kalia: Sure. Ajei, maybe for you. First of all, it is great to see the business accelerate organically. Maybe the question is, can you just give us a state of the union on how Procore's push sort of gain more wallet share in the ENR 400 is going? And maybe specifically, how much is that sort of helping with this better growth versus maybe what seems like underlying improvement in the construction market overall?

Ajei S. Gopal: Brent. So. Hey, Saket. Thanks for the question. The overall macro from this quarter to last quarter is pretty consistent. And so there is. There has not been any fundamental change in the overall macro. And you asked specifically about large contractors. But they have. When I talk to them, they are oversubscribed. They have really healthy businesses They have got significant backlogs. And their constraint is really not having enough people to get the work done. So when I when I think about a relationship with them, there is a couple of things. there is a product and the go to market. So let me just briefly talk about product.

We have more product capabilities than we have ever had. And you heard me in my in my prepared remarks. I talked about the capabilities that we announced at Groundbreak and that we have through the year. I talked about enhancements to the flagship products. Howard we are adding AI to the flagship products, And then, of course, all of this. The AI activity that we have put in place around the see, understand, ACK loop and the new products that we have built it is generating a tremendous amount of excitement in the market, and you certainly saw that at Groundbreak. And this is this is exciting to both existing as well as potentially new customers.

And customers are thinking about how we can help them address some of these challenges. I mentioned this at Groundbreak for Pauriol. You know, an incredibly large contractor. They are looking at redoing some of their fundamental processes rebuilding them because they have a, you know, a profound shortage of skilled labor and they are working. We are working with them, around AI and using Procore digital coworkers to try to see if we can help them optimize their performance and drive some of these really large projects. So there is a lot of activity that I am excited about from a product perspective.

On the go to market perspective, you know, Walt is a proven operator, and I and I say that having worked with him for many years. And he is been personally involved in some of our largest deals. he is build. he is bringing deep experience in building relationships at the most senior levels in our customers. And so those relationships are deepening and broadening. So we continue to see a lot of opportunity in large deals and with large customers.

Take Kalia: Got it. that is great to hear. Rachel, maybe for my follow-up for you. First of all, a ton for the clear disclosure on DroneDeploy. My question is around CRPO. Your customers continue to partner with you for longer for longer durations. How do you think about the impact on CRPO? And do we still expect this growth to eventually moderate organically?

Rachel Pyles: Sure. So as you noted, CRPO did go up this quarter, and we signed a lot of lot of large strategic deals. If we take out DroneDeploy from the increase in CRPO, it was up 22.6%, so about 70 basis points faster than we saw last quarter. Now most of that was underlying book The contract duration did go up a little bit, but it went up actually less than it did last quarter. When we look at CRPO on a normal basis, it is growing in line with revenue and ending ARR growth. And so I think, you know, we have not yet seen that duration stabilize.

It is, you know, accelerating at a slower rate, but not yet stabilized. Very helpful.

Take Kalia: Thanks, guys.

Operator: Your next question comes from the line of Joshua Tilton with Wolfe Research. Joshua, your line is open. Please go ahead.

Joshua Tilton: Hey, guys. Thanks for taking my questions. Maybe my first 1, Ajay, your message has and continues to be that of durable growth. However, today, you are obviously accelerating growth. It sounds like the improvements in execution are driving better underlying booking trends. Also have new AI offerings. I will say everyone that I spoke to at Groundbreak about DroneDeploy was pretty bold up. So my question is, should we view this as the new baseline of durable growth for Procore?

Ajei S. Gopal: Hey, Josh, thanks for the question. I am glad you enjoyed Groundbreak. Look. We are not giving any kind of long term view of the business at point. We are specifically, I think, talking about kind of where we are. I think the I think what you are seeing in our results is a reflection of both the product capability and our ability to execute. And I also think that the acquisition of DroneDeploy, as you pointed out, I think that is really very consistent, very consistent with our strategy on being able to see, understand, and act.

And when you put all of that together, customers are seeing innovation that is coming out of Procore, and customers are also seeing the relationship in terms of both customer success well as the sales relationship moving in a in a really positive direction. So taken together, we are excited about our business. And we believe we bring real value to the market.

Joshua Tilton: Super helpful. Maybe just for a quick follow-up. Any clarification you can give us on the acquired deferred revenue from DroneDeploy? Maybe just what the organic deferred revenue growth was in the quarter?

Rachel Pyles: Sure. So you will see this in our 10 q, but the opening balance sheet contribution from DroneDeploy is about $37 million on deferred revenue.

Joshua Tilton: Super helpful. Thank you so much, guys, and congrats.

Operator: Your next question comes from the line of Brent Thill with Jefferies. Brent, your line is open. Please go ahead.

Brent Thill: Thanks. Good morning. Ajay, you are 1 week away from I think, your 1-year anniversary. I am just curious if you kind of look back and say what has surprised you the most And then maybe if you could just talk about the international business good acceleration What. What are next steps there to unlock? What is your biggest opportunity?

Ajei S. Gopal: Look. I think know, coming on coming on board as a new CEO, you obviously have to spend time on strategy. You have to look at the operational capabilities of the business and make sure that you have the right people to deliver against it. it is sort of strategy, operations, people. Those are the kind of loops that run a company. And what I would say is I am delighted with the people that we have at Procore. We have people up and down the chain who provide in value to customers every day. Obviously, we have made some changes to the executive team. But we have experts who collaborate exceptionally well, and that is fantastic.

As far as the operations go, you know, obviously, we have made some changes. But that is. The results of the last few quarters should speak for themselves. And I am really excited about the rate of innovation, the success that we are driving with our customers. And the depth of the relationships with our customers, I think, is something that is unique, a hallmark of Procore. And you certainly saw this reflected at ground break. Strategically, you know, we had to deal with a obviously, a very rapid change in the AI environment.

And I think that I am really excited about how the company has responded We have talked about the see, understand, act strategic paradigm that has been the basis of driving some of the decisions that we have done. The acquisition of DroneDeploy, the new the new. Our new AI products, including things like Procore AI Go. All of those, I believe, are spot on. I feel like we are really--I feel very excited because the capabilities that we are providing are resonating with customers. So it is been it is been a really interesting year. And what I have particularly found gratifying is the relationship that we have, the depth of the relationship that we have with our customers.

And, frankly, the dedication of Procoreans around the world to our success. As far as. You asked about international as well. So international, I think Rachel said this, has we have had another strong quarter. You know, revenue was up 30% year over year. I think it was 26% in constant currency. And that is not an accident. If you look at some of our international success, it is been pivoted upon having both the right product as well as the right go to market.

And so what I talked about in the last call, think, or the 1 before, I talked about how we are investing in a product that is specifically purpose built for The UK, Ireland, and European market, a common data environment, we focused on building that product. We concluded that product. We released it. And that is been a real step forward that is resonating with customers. And, of course, we have a go to market around it. You know, each local market has its own requirements.

And so as we enter these international markets, it is about understanding the product market fit and making sure we have the right capabilities then, of course, building the go to market around that. Thank you.

Operator: Your next question comes from the line of Taylor McGinnis with UBS. Taylor, your line is open. Please go ahead.

Taylor McGinnis: Yeah. Hi. Thanks so much, for taking my questions, and congrats on a really strong quarter. So first, you mentioned the strength was largely driven by your own execution, but hoping you could just give a bit more color on the areas that exceeded your expectation. When I, you know, look at the numbers, it looks like international was a big 1 and large deal activity. When you think about the biggest unlock for the growth algo, I am just curious if there is anything you would highlight more specifically.

Rachel Pyles: Sure. I will start, and then you, Ajay, can jump in here. You know, for us, the growth was really broad based, so it did not come from any 1 particular place. We saw strength across our stakeholders. You know, that is GCs, subcontractors, owners, And then we also, you know, saw success both and domestically. So, really, Brent, the growth was broad based.

Taylor McGinnis: Perfect. And then, Rachel, maybe just building off of that. If I look at the organics, revenue growth guide for 4Q, it is stronger than what we have seen in past guides. So 1, is that indicative of the organic inflection you expect to continue to see in the business? And maybe secondly, I know you mentioned in your prepared remarks that the guidance philosophy remains unchanged. But just given the various levels of outperformance we have seen so far, could you just unpack the assumptions embedded in the guide?

Rachel Pyles: Sure. So for the full year, we did raise the guidance by $45 million at the high end. Now that included $24 million of inorganic contribution from DroneDeploy. If you set that aside, the underlying business is performing really well. You know, we beat the guide by $13 million this quarter. We flowed that through to the full year, and then we are also raising the Q4 guide as well. So what you are really seeing is the momentum that, you know, we had in Q3 giving us confidence as we go into Q4. But nothing about our guidance philosophy has changed.

Taylor McGinnis: Great. Thank you guys so much. Congrats again.

Ajei S. Gopal: Thank you.

Operator: Your next question comes from the line of Joe Vruwink with Baird. Joe, your line is open. Please go ahead.

Joe Vruwink: Great. Thank you. Ajei, something that really stands out in your remarks today and also at ground break is wanting to see if the job site and it does seem like Procore has taken the most aggressive stand around capturing the visual elements of construction I am just wondering about all the strategic implications of this and whether the end outcome might actually be your ability to bring faster automation to customers if agents do not have to work through maybe established workflows or document heavy work workflows. If the path is faster, if you are overseeing kind of a visual side of the site.

Ajei S. Gopal: Hey, Joe. Thanks for the question. You know, I think at the end of the day, what the see, understand, act paradigm, we put that in place because you know, if you anthropomorphize AI and you put it into a complex situation like a like a construction site, that is what, you know, that is what you have to deal with. You have to be in a position to bring the physical into the. You have to bring the physical into the digital. You have to understand what is taking place based on--and it has to be based on what is actually taking place, not some theoretical view that someone built months ago.

You need to know exactly what is--so that is the need. The immediacy of the physical meeting the digital. that is why we needed to see. And then, of course, the understand and act, I think, are fairly obvious. So the see, understand, act loop is really part of the way that we have been thinking about it, and that is that is influenced a lot of a lot of the activities. On the act piece of it, you know, construction is kind of a unique vertical because you have got multiple stakeholders and. Working together, and there are real financial consequences to decisions.

And decisions, you need to be able to log and understand those decisions that is 1 of the reasons why we have well, that is 1 of the reasons why Procore has been successful is you brought all of these stakeholders together in this rigorous environment, secure environment. And certainly from our ability to act, it is being able to tag information so that we. People understand what drove decision making. So that is really an important aspect. So this whole this whole loop drives the way that we have been thinking about our AI strategy. Now as you extrapolate, you can take it in multiple directions, and certainly you can.

I think you are referring to know, can you see an extension that moves into robotics, or can you see an extension in other areas? And those are all things for the future. But I think the. You know, obviously, we support robot cameras and things of that nature. But if you are thinking about full fledged robotic construction, that is something for the future. But the reality is that this paradigm strategic paradigm gives us gives us, if you forgive the pun, lots of legs as we start to build our as we start to build our business going forward. that is great. Thanks.

Joe Vruwink: If I can follow-up, any stats to share on the adoption of the digital coworkers? I think this was the first full quarter of their broad commercial launch, and it might just be too early still. But when you mentioned, maybe capturing labor budgets, what that looks like in practice.

Ajei S. Gopal: I think it is. Look. I feel really good about where we are. You know, we are 3 months into general availability. there is a lot of demand. But as you know, we are we are early in the adoption cycle. You know, and I think we are exactly where we need to be. Think the technology is resonating. I am really excited about Magpie 3.0, which is the reasoning engine we showed at Groundbreak. And I would direct you guys. We. there is a blog on Magpie that we just got published today, and I would direct you to that. That shows, you know, it is. It performs really well. And in a cost-efficient manner, really excited about Magpie.

And even though it is early days commercially, I gave you a couple of examples. I. On the script, I talked about McCownGordon, and earlier I talked about Pauriol. You know, these are sophisticated customers, and they are seeing value in the technology, and they are using the technology to solve real and fundamental problems, their. 1 of their biggest challenges being, how do I deal with the labor shortage supporting my industry. So we are excited about this. About what we have done, and we feel like we are in a really good place given how early the release has been.

Operator: Next question comes from the line of Matthew Martino with Goldman Sachs. Matthew, your line is open. Please go ahead.

Matt Martino: Hey. Yeah. Thanks for the questions here. Ajay, maybe just taking a step back on Magpie. You know, a lot of software companies are building their own layer between the model and the work their customers do. So as those underlying models get better, what does the companies like Procore actually need to own to keep its advantage? And how does owning that piece change what customers will pay you for?

Operator: I think it is worthwhile maybe in response to your question, if you indulge me, perhaps it is worthwhile my stepping back and trying to take you know, top down view on the.

Ajei S. Gopal: On that question. So I will talk about the application kind of what we have and what we built. You know, the first thing to recognize is our customers build buildings. You know, they. They will obviously. They will run IT information technology. They will use information technology. They are not in the business of building information technology. They build buildings. And construction is really unlike any kind of horizontal application or vertical application. And there are a few reasons. I have mentioned them already, and let me quickly go through them. 1 is scale. In construction, you have got hundreds of thousands of documents. You have got gigabytes of data.

Including multimedia data that is spread across multiple locations. it is unstructured. And a decision that is captured in some documents someplace could have a profound impact somewhere else on a schedule or it could trigger rework. And you need to be able to kind of have a broad view across all of this. Secondly, I mentioned this earlier, it is the physical and the digital. You have to be able to reason about what is actually happening on the site as opposed to some. As opposed to a digital abstraction of what is going on. You need to know what is really taking place. This.

The other thing is the application is being used by people who are physically on a job site. And you cannot fire up a laptop and take advantage of technology. You have got to start to deliver technology in a manner that is appropriate. That means mobile, smart glasses, things of that nature, voice. As I said earlier, it is multiple stakeholders working together and that is, you know, real money every day decisions that are being made. And when a decision is made, you need to know who made that decision. Otherwise, billing and payments will not work, so you need a secure system. I have talked about kind of the.

A lot of the moat that we have built over the years. And I mentioned this in the script, I will not repeat it, about data and users and context and security. And that is what that is what gives us kind of the foundation on which to build. And what we have built is essentially a multimodal index, a multimodal index that reads the drawings and photos, meeting minutes. It reads them all. Have a construction ontology. An ontology is a live map of the construction logic based on, you know, our years of working in the industry.

Our decades of working in the industry that connects kind of documents, actions, and decisions we can recognize patterns across these things before they can turn into rework. And our reasoning engine, Magpie, which I talked about earlier, what that does is it breaks complex tasks down, It can route each step to the right tool, the right model, including open weight. And it can cite you know, governing the specification or the drawing or whatever it is used behind every single answer. So that is a lot of machinery that we have built. And then we have done acquisitions with respect to DroneDeploy I already talked about DroneDeploy bringing visual intelligence into the Procore family.

So the physical world comes in. Of course, these new applications like AI Go and these digital coworkers which--and AI Go, obviously, supports, you know, mobile devices, the integration with Meta, smart glasses, and, of course, the digital coworkers as well as AI inside our flagships. That is a significant that is a significant corpus of work. And we are excited about it. it is something that gives us, we believe, differentiation in the market. Based on our experience, based on our history, based on our understanding of the customer, the unique nature of the customer, what we have built, what we have acquired.

And we believe that this gives us the foundation for this rock solid system of intelligence that delivers for our customers in a complex environment. So we are excited about this. It is an important aspect of our strategy. And we believe that we are well on our way to delivering what we need to.

Matt Martino: Appreciate the perspective there, Ajay. Rachel, for you, look. If the recent acceleration in organic growth persists, how much flexibility do you have to reinvest behind that momentum while still delivering the 25% fiscal 2027 margin target? And are those productivity gains you are seeing from AI materially changing that trade off between growth investment and margin expansion?

Rachel Pyles: Yeah. So, you know, I do not think that we are in a position where we have to make a choice on, you know, growth versus profitability. We are still investing significantly in the business. You know, we are investing in new capabilities for our customers. We are investing in AI. We are. You know, what is really changing is the scale. So we have reached a point where we do not need to add operating expenses in proportion to revenue. You see that for sure in the back office in g and a. So that means that every dollar of revenue is coming with higher incremental margins.

The margin expansion that we are planning for is a natural result of the financial model. it is not about pulling back on investment. And so I feel really good about, you know, our ability to continue to invest in the capabilities that our customers need, while also doing it in a very profitable way.

Operator: Your next question comes from the line of Jay Vleischkauer with Griffin Securities. Jay, your line is open. Please go ahead.

Analyst: Hi. Thank you. Good morning. Ajay, Rachel, earlier this year, you introduced, 4 new bundles. Could you comment on the contribution of those new bundles to results so far and what your expectations might be for those? And more broadly, before I ask the follow-up, what is your philosophy towards product packaging and segmentation, particularly as the portfolio has become increasingly complex. So I will start with your question on the bundling.

Rachel Pyles: So as you noted, we did roll out new bundles this year. What we like about those is that they give customers a way to expand with us, you know, depending on what they are looking for. And so we have this concept good, better, best, and you can kind of move through those packages. And then you get more and more features and functionality, you know, depending on what package you are in. And so, for example, in some of the higher tiers, you would have access to more of the AI capabilities that are embedded within our platform. And so, you know, I think those are performing really, really well.

We have been really pleased with them, you know, in particular as we bring new logos on, you know, that is that is a helpful way for them to kind of buy and sort of simplify as the buying experience for them.

Ajei S. Gopal: And as far as the packaging is concerned, Jay, the bundles give us an. We have an opportunity as we think about packaging to figure out how we can add value to customers when we bring incremental capabilities in. So I am thinking about sort of tiers of tiers of capabilities. So if you think about if you think about some of the packaging that we introduced earlier, it is it is it is. At the low end, you have a certain subset of capabilities and, of course, you have got more of the high end.

And as we start to introduce AI capabilities into the flagship offerings, for example, some of that can happen more at the higher end tiers within some of these bundles. And so we have an ability to monetize some of those capabilities. So it is it is. It really gives us flexibility as we start to as we start to think about deploying products, as you note, we have lots of products. And it is fairly sophisticated. So selling a SKU at a time sometimes is less efficient than thinking about it from a bundled perspective. Thank you for that. You noted earlier go to market and just commented to a prior regarding internal investing.

A short term question, over the last few months, there is been a bit of an uptrend in your open sales positions since the spring through the end of October. On the other hand, the positions related to customer success or what might otherwise be called engineers has been flat to actually tailing off a bit. Would not it stand to reason that particularly with all the new products coming to market, and all the complexity in the portfolio we just talked about, that there would be more of a of a rebuilding, or addition to that field support or AE support capacity.

Jay, we have got a lot of great people across the company who are able to support our customers. You know, as Walt is as Walt is taking a broad--and, of course, customer success is part of Walt's organization. As Walt is taking a broad look, and, you know, he is been with the company for about 9 months. As he is taking a broad look at the go to market, he is organizing his team in the most effective way. that is necessary.

Analyst: Alright. Thank you.

Operator: Thank you, Jay. Your next question comes from the line of Adam Borg with Stifel. Adam, your line is open. Please go ahead.

Adam Borg: Awesome. And thanks so much for taking the questions. Jump ball for either Ajay or Rachel. You know, when we think about the data center opportunity, it is great to hear continued momentum in the customer example you talked about. Maybe talk a little bit more about the momentum of the business, the current size of the business, and if we just think about the recent election results from last night, does that have any impact on the data center market opportunity for you guys? And then I have a follow-up.

Ajei S. Gopal: Yeah. So let me start and then I am. I will turn it over to Rachel. Look, Data centers are clearly important and they are a very complex build. AI factories are as they are sometimes referred to, are complex. They are sophisticated. They need to be built quickly. that is exactly the kind of the complexity that Procore can help solve. But it is important to understand that our exposure. We price on annual construction volume. Many of our customers are building data centers, of course, they are also building hospitals, and they are building warehouses, and they are building, you know, residential, multi, and manufacturing. They build different multiple things.

And we are exposed to that entire nonresidential multifamily end market not just to 1--not just to 1 segment. I mentioned earlier that our customers you know, many of our customers have a significant level. Significant backlog and that backlog is across the spectrum of market or subsegments that they support. And so they are not building 1 thing. They are building something else. Their gating factor is labor. Their gating factor is the ability to be able to get to their backlog. And to be able to move forward. So our exposure to data centers is roughly in line with the overall market.

Obviously, we are very capable of supporting these complex bills, which is why, and as customers are building, you see. Certainly see that and you see us highlighting that. But at the end of the day, you have to understand and. That we are tied overall to the construction. The annual construction volume and our large customers do multiple things, not just data centers.

Adam Borg: that is really helpful. And maybe just as a follow-up for Rachel. Really appreciate all the inorganic disclosures across the business. 1 I was curious about was just DroneDeploy and their international exposure. So any color there on of the 5 million in the quarter or the 24th of the year, how we should think about international versus domestic? And any color on inorganic to total RPO as well would be really helpful. Thanks so much.

Rachel Pyles: Yeah. Sure. So on international, we have not disclosed that specifically, but you should think about it as roughly in line with the Procore business, so not, you know, different than our core business. Not having a significant impact on those splits at all. And then in terms of the inorganic contribution, on CRPO, so as I mentioned in the prepared remarks, if you exclude the contribution from CRPO, it is about 21% of the increase in CRPO. Growth in CRPO was 22.6%, up from 21.9% in the quarter. Prior.

Analyst: The great.

Adam Borg: I was just talking total RPO and any color there. If not, really appreciate it. Thanks.

Rachel Pyles: No. I do not think that we have disclosed that.

Adam Borg: Awesome. Thanks again.

Operator: Your next comes from the line of Jason Celino with KenBanc Capital Markets. Jason, your line is open. Please go ahead.

Jason Celino: Hey. Thank you for taking my question. You know, maybe this is a build off of Adam's question. But if we if we annualize the Q4 revenue from DroneDeploy, we get, like, $76 million. I think when you acquired it, it was around $78 million on a last-12-months Basis. Is there something about the Q4 seasonality with DroneDeploy? Are there certain accounting here cuts? Maybe that is just my first 1 there.

Rachel Pyles: Yeah. So when we announced the deal, we said that DroneDeploy would be accretive growth, dilutive to margins, and cash flow breakeven. that is exactly how it is playing out. So in Q3, it contributed $5 million of revenue. That was for roughly the 3 weeks after September 9. For Q4, we expect the inorganic contribution of $19 million, so that is about $24 million for the full year. And then to give you a sense of scale, their trailing 12 month revenue as of September was about $83 million. And then, you know, we are absorbing the margin dilution in our 25% target for FY 2027.

Jason Celino: Okay. Brent. Thank you. that is very And then nice to hear The US agency win. Just curious. Is this the first US agency that you have as a customer? And then curious if there is a percentage of revenue that you have in your business today that you attribute specifically to public sector. Thank you.

Ajei S. Gopal: Yeah. No. it is a--we obviously have US government customers, but this is about FedRAMP because FedRAMP is really an important aspect of this particular contract. And what is important to recognize is that we have customers who deal with both federal business as well as nonfederal business. They are not--they are not GCs, you know, uniquely focused on just the federal business for as. For example, they are there may be some, but many of them focus on both. Will do everything, including federal.

So having that capability, the FedRAMP capability helps us certainly with GCs who are specializing on the federal business, but it also helps us more broadly across other general contractors who are looking at a broad portfolio of activity including federal. That was an important piece of work that we did earlier this year. We were very proud of the rate pace at which we were able to get that done, and that is obviously yielding results.

Rachel Pyles: And then just to add on that in terms of the contribution, if you think about what Ajay said, it is not just, you know, specific US government customers. it is really broader than that. So, you know, from our perspective, we see FedRAMP as helping us not only get, you know, public sector business, but also, you know, customers see that designation, and that kind of assures them of the security of the platform. And so we think about it as helping us, you know, across a broader base than just PubSEC.

Jason Celino: Yeah. Perfect. Thank you both.

Operator: Your next question comes from the line of Alexey Gogilev with JPMorgan. Alexei, your line is open. Please go ahead.

Analyst: Hello, everyone, and congrats with the great results. Wanted to start with gross margin. Rachel, it stayed at 84% even as AI products and Drone deploy is consolidated. So what is the sensitivity of gross margin to AI compute at scale?

Rachel Pyles: Yeah. So first of all, AI is already built into our core products. And as you noted, our gross margins have been stable. So while there is some gross margin impact, from our new agentic digital coworkers, we are seeing efficiencies elsewhere in the business, and we have contemplated all of that in our 25% operating margin target for FY 2027. We do not see AI as a structural risk to the margins, and that is really for 3 reasons. So first, we price our agents on usage. So customers are committing to a level of consumption. Cost is a component when we consider that pricing. Second, the cost of AI is coming down. Models are getting smarter.

You do not need the most sophisticated models for every task. And so it is about using the right model for the right task. that is very similar to what you know, we saw happen with cloud infrastructure costs and how those came down over time. Same thing's happening with AI, just at a much faster pace. And then finally, third, customers really want certainty over their spend. So we introduced Control Tower. We demoed that at Groundbreak. And, you know, customers can use that to see exactly how much they are team is using and set limits. You know, we are not selling an all you can eat AI solution.

Analyst: Okay. Thank you, Rachel. And, Ajay, very strong gross revenue retention of 95%. Could you maybe decompose what is driving that renewal execution versus pricing and customer health? And are you seeing any churn, down sell, concentrated in any cohorts, GCs versus specialty or domestic versus international?

Ajei S. Gopal: You know, nothing stands out. it is it is very consistent. Our business performance is very consistent as it has been in multiple quarters. That 95% is pretty consistent across multiple quarters. Look. At the end of the day, what customers care about is are we able to help them solve their problems? And they wanna be able to build buildings. They wanna be able to manage those buildings. We sell to GCs. We sell to owners. We sell to specialty contractors. And what you are seeing is innovation across the portfolio that is giving them the tools that they need to be able to do their jobs.

And so, obviously, that shows up in the performance of our business, and I am excited about that. Thank you.

Operator: Thank you. We have reached the end of our q and a session. This concludes today's call. Thank you for attending. You may now disconnect.

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