PCOR Q3 2026 earnings call transcript, November 4, 2026

Way to becoming a next-generation AI-native construction management platform and a true system of intelligence for construction, one 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 lifecycle, 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.

Program and project management and construction field operations, with the goal to unify the customer execution and experience from deployment through handover. Owners are another important part of our business, and in Q3, we added a notable new one, a U.S. 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 two product suites, connecting data sets, and bringing DroneDeploy's AI agents into Procore AI. Moving to go-to-market, I'm excited about the revenue synergy opportunities ahead of us. At the time of the acquisition, Procore and DroneDeploy shared approximately six... ...100 customers, which shows clear demand for the two 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 drone deploy 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 four advantages which are hard to replicate. First, users' data in context. More than 3 million active users this year. More than 20 years of project data and activity history. And now drone deploys 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. And 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 four advantages empower us to use AI more effectively. to both augment our flagship products and 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, one of construction's most labor-intensive schedule-critical workflows. A submittal shows the GC and design team exactly what a subcontractor plans to install, and nothing gets ordered or installed until it's approved. The GC runs both ends. It builds a log of every submittal.

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 the 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're also building products that weren't possible before generating innovative and agentic AI, including Procore AI Go and our digital co-workers, which became generally available in Q3. One of them, the submittal review agent, handles the GC's review at the other end. of the workflow, a problem software hadn't previously solved. It checks each submittal against the specs and contract, flags deviations and unapproved submissions, and drafts a response. McCowan Gordon, 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 the Procore of the Procore. Digital co-workers using the submittal review agent to check subcontractors' responses. In one case, the agent caught 10 door openings missing from a submittal before the error reached the field, avoiding costly rework. Procore AI Go, introduced at 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, one 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 co-workers enable customers to see what's actually happening on a project, understand the impact of decisions, and then take action to change the outcome. It's 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 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 3D and understand how disruptions would ripple through the schedule so they find problems earlier and avoid costly rework. Switch a joint program. and NVIDIA customer designs, builds, and operates advanced data centers. Switch uses 3D visualization to gain greater clarity into construction progress. Make 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 co-workers generally available, and closed and began integrating drone deploy.

All of us... 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'm excited about what's ahead. I want to thank my colleagues around the world. Their hard work drives our success and our customers' success. And with that, I'll turn the call over to Rachel. Rachel?

Thanks, Ajay, and thanks everyone for joining us. Before I get into the numbers, a note on how I will present them. With the drone deploy acquisition closing on September 9th, I will review our Q3 results, excluding drone deploy, 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 drone deploy. The supplemental presentation on our website shows the bridge between the two. As Ajay highlighted, we had an excellent Q3. Excluding drone deploy, revenue was $397 million, up 17.1% year over year, and 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 drone deploy, reported revenue was $402 million, up 18.7% year over year. Our non-GAAP operating margin, including drone deploy, of 23.5% was 400 basis points. Above the high end of our range. Free cash flow was $73 million, an 18.1% margin, including approximately $19 million of one-time cash costs paid at the closing of. Drone Deploy, primarily the accelerated vesting of certain Drone Deploy equity awards. Excluding these one-time costs, free cash flow was $92 million, a 23% margin, up 36% year-over-year.

Thank you. We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 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 next question comes from the line of Josh Tilton with Wolf.

Your next question comes from...

Thanks.

Good morning.

Ajay, you're one week away from, I think, your one-year anniversary. I'm 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 are our next steps there to unlock? What is your biggest opportunity? Look, I think, you know, 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's sort of the strategy, operations, and people. Those are the kind of loops that run a company. And what I would say is I'm delighted with the people that we have at Procore. We have people up and down the chain who provide incredible value to customers every day. Obviously, we've made some changes to the executive team, but we have experts who collaborate exceptionally well, and that's fantastic. As far as the operations go, obviously, we've made some changes, but the results of the last few quarters should speak for themselves, and I'm really excited about the rate of innovation, the success that we're driving with the customers, and the depth of the relationship. with our customers, I think, is something that is unique, a hallmark of Procore, and you certainly saw this reflected at Groundbreak. Strategically, you know, we had to deal with a, obviously, a very rapid

app. change in the AI environment, and I think that I'm really excited about how the company has responded. We've talked about the see, understand, act strategic paradigm that has been the basis of driving some of the decisions that we've done, the acquisition. Drone Deploy, our new AI products, including things like Procore AI Go. All of those, I believe, are spot on. And I feel very excited because the capabilities that we're providing are resonating with customers. So it's been a really interesting year. And what I've 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 Procoreians around the world. To our success. Oh, as far as you asked about international as well. So international, I think Rachel said this, we've had another strong quarter. Revenue was up. 30% year over year, I think was 26% in constant currency. And that's not an accident. If you look at some of our international success, it's 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, I think, or the one before. I talked about how we're 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's been a real step forward that's resonating with customers.

And, of course, we have a go-to market around it. Each local market has its own requirements, and so as we enter these international markets, it's about understanding the product market fit, making sure we have the right capabilities, and then, of course, building. The go-to market around that. Thank you.

Your next question comes from the line of Taylor McGinnis with UBS. Taylor, your line is open.

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

Your next question comes from the...

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 a company like Procore actually need to own to keep its advantage? And how does owning that piece change what customers will pay you for? I think it's worthwhile. Maybe in response to your question, if you indulge me, perhaps it's worthwhile my stepping back and trying to take a, you know, top-down view on that question. Sort of I'll 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'll obviously, they'll run IT information technology, they'll use information technology. They're 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've mentioned them already. I mean, let me quickly go through them. One is scale. In construction, you've got hundreds of thousands of documents. You've got gigabytes of data, including multimedia data that's spread across. It's multiple locations. It's unstructured. And a decision that's captured in some document 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's the physical and the digital. You have to be able to reason about what's actually happening on the site as opposed to a digital abstraction of what's going on. You need to know what's really taking place. The other thing is the application is being used by people who are physically on a job site. And you can't fire up a laptop and take advantage of technology. You've got to start to deliver technology in a manner that's appropriate. That means mobile, smart glasses, things of that nature, voice. And as I said earlier, it's multiple stakeholders working together. And that's, you know, real money, everyday decisions that are being made. And when a decision. You need to know who made that decision. Otherwise, billing and payments won't work. So you need a secure system. I've talked about kind of a lot of the moat that we've built over the years. And I mentioned this. It's in the script. So I won't repeat it about data and users and context and security. And that's what that's what gives us kind of the foundation on which to build. And what we've built is essentially a multimodal index, a multimodal index that reads the drawings and photos. Meeting minutes, it reads them all. We have a construction ontology and 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.

And 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 the specification or the drawing or whatever is used behind every single answer. So that's a lot of machinery that we've built. And then we've done acquisitions with respect to drone deploy. I already talked about drone deploy bringing visual intelligence into the Procore family, so the physical world comes in. And then of course these new applications like AI Go and these digital co-workers, which, and AI Go obviously supports mobile devices, the integration with Meta, with smart glasses. And of course the digital co-workers as well as AI inside our flagships. That is a significant, that is a significant corpus of work. And we're excited about it. It's 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've built, what we've acquired. And we believe that this gives us the foundation for this rock solid system of intelligence. intelligence that delivers for our customers in a complex environment. So we're excited about this. It is an important aspect of our strategy. And we believe that we're well on our way to delivering what we need to.

Appreciate the perspective there, Ajay. Rachel, for you, look, if the recent acceleration and organic growth persists, how much flexibility do you have to reinvest behind that momentum while still delivering the 25% fiscal 27 margin target? And are those productivity benefits you're seeing from AI? Materially changing that trade-off between growth investment and margin expansion. Thank you. Yeah. So, you know, I don't think that we're in a position where we have to make a choice on growth versus profitability. We're still investing significantly in the business. We're investing in new capabilities for our customers. We're investing in AI. We're, you know, what's really changing is the scale. So we've reached a point where we don't need to add operating expenses in proportion to revenue. You see that for. For sure in the back office in GNA. So that means that every dollar of revenue is coming with higher incremental margins. The margin expansion that we're planning for is a natural result of the financial model. It's 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.

Your next question comes from the line of Jay Vleskauer with Griffin Securities.

Your next question comes from the line of Adam Borg with Stiefel. Adam, your line is open. Please go ahead.

Your next question comes from the line of Jason Salino with KeyBank Capital Markets. Jason, your line is open. Please go ahead.

Your next question comes from the line of Alexey Gogolev with JP Morgan. Alexey, your line is open. Please go ahead.

This concludes today's call.

Thank you for attending.

You may now disconnect.