Procore Technologies, Inc. (PCOR) Earnings

Management highlights

### Core Business & End Market Performance • Delivered an outstanding Q2 with 15.8% YoY revenue growth, 21.5% non-GAAP operating margin (800 basis points of YoY margin expansion), and achieved the first quarter of GAAP operating profitability in company history. • Outperformed a uneven U.S. construction end market: residential/multifamily has seen deceleration over 2.5 years, but unprecedented strength in data center construction (driven by AI infrastructure investment) has become a major growth tailwind. Procore is the market leader in this segment, with 9 of the 10 largest North American data center sites using its platform. • Secured several high-profile wins, including the King Salman International Airport (Saudi Arabia) project and a $7 million EMEA hyperscale data center contract, the largest in Procore EMEA history. • CRPO YoY growth accelerated 100 basis points, driven primarily by stronger underlying bookings and a minor increase in average contract duration. ### AI Strategy & Acquisitions • Procore's long-term strategy is to become a leader in the AI era by building an AI-native construction management platform, anchored by four core pillars: extensive contextual construction data, secure compliant infrastructure, strong network effects, and a focus on enabling actionable outcomes. • Completed the integration of DataGrid (acquired January 2026) and launched generally available Procore AI with 20 pre-built, construction-specific AI agents, called digital coworkers, designed to address the industry's widespread labor shortage. Early customer adoption has been very positive, with large contractors reporting major time savings on common workflows. • Announced a binding agreement to acquire DroneDeploy, a leader in AI-powered visual intelligence, reality capture, and robotic automation for construction, for $845 million in cash. DroneDeploy's complementary capabilities (no product overlap with Procore) add perception (automated visual data capture via drones, robots, and cameras) to Procore's AI strategy, and bring 20 trillion square feet of annotated visual construction data to improve Procore AI models. • DroneDeploy currently has ~$78 million in trailing 12-month revenue, ~600 existing mutual customers with Procore, and is already used on 3 million job sites across 180 countries. Post-close, Procore plans rapid integration and cross-selling to its broader customer base. ### Operational & Capital Discipline • Management has reorganized and recruited key talent to execute the new strategy, and maintained rigorous operational discipline that drove the quarter's strong results. • Capital allocation prioritizes strategic acceleration of AI roadmap with strict financial rigor: all acquisitions are required to be accretive over time, and the DroneDeploy acquisition will not change existing margin outlooks.

Guidance

• All FY26 guidance reflects the organic business only and excludes any contribution from the DroneDeploy acquisition, which is expected to close later in 2026. Management confirmed it can maintain current margin guidance after the acquisition closes. • For Q3 FY26, management expects revenue of $382 million to $384 million, representing 13.3% YoY growth at the high end of the range. Non-GAAP operating margin is expected to be 19% to 19.5%. • For full-year FY26, management raised revenue guidance to a range of $1.51 billion to $1.514 billion, representing 14.5% YoY growth at the high end. • For full-year FY26, management raised non-GAAP operating margin guidance by 50 basis points to 18.5% to 19%, implying 440 to 490 basis points of YoY margin expansion. Free cash flow margin guidance was also raised 50 basis points to 19.5%, implying ~310 basis points of YoY free cash flow margin expansion. • Management initiated FY27 non-GAAP operating margin guidance of 25%, which represents nearly 1,100 basis points of improvement compared to FY25. This guidance reflects confidence in long-term margin expansion and includes cushion for potential future acquisitions, with no change to the target from the DroneDeploy acquisition. No FY27 revenue guidance was provided, as annual planning is still in process.

Segment performance

Procore reports its business geographically, with 85% of revenue coming from the domestic U.S. market and 15% from international markets. In Q2 FY26, total company revenue was $375 million, representing 15.8% year-over-year growth. International revenue grew 23% year-over-year (19% on a constant currency basis), making international revenue contribution approximately 15% of total revenue. No additional product segment financial performance data was provided in the call transcript.

Risks & headwinds

No explicit discussion of material business risks, operational failures, or new unexpected downside risks was included in the prepared remarks or Q&A section of the earnings call. Management noted that all forward-looking statements are inherently subject to general business and market uncertainties, as disclosed in Procore's SEC filings.

Analyst Q&A

• Q: Why acquire DroneDeploy instead of continuing the existing partnership? What motivated the deal? /

  A: Procore's core strategic goal is to build a fully integrated, AI-native next-generation construction platform centered on digital coworkers that collect data, reason, and take action. The perception (automated visual data collection) capability DroneDeploy has built was a missing core component needed to deliver this vision. As long-time partners with 600 mutual happy customers, deep complementary technology, and aligned culture, DroneDeploy was a natural fit. The acquisition also gives Procore exposure to the fast-growing construction robotics space and creates immediate near-term cross-sell opportunities with thousands of existing Procore customers who do not currently use DroneDeploy.

• Q: What gives management confidence to issue a 25% non-GAAP operating margin target for FY27, six quarters in advance, and what are the key margin levers? /

  A: After receiving significant investor questions about margin following the last quarter, the CFO spent four months conducting a deep dive into Procore's cost structure. This analysis gave high conviction that the company can deliver this level of margin expansion. The 25% target is a milestone on the multi-year path to best-in-class vertical software margins, and it is intended to signal the company's long-term trajectory. The target is a statement about cost structure optimization, not a comment on future revenue, which will be released in the normal planning cycle early next year. The target also includes built-in cushion for future M&A activity, and the DroneDeploy acquisition does not require any change to the 25% FY27 target.

• Q: How does DroneDeploy's non-construction end market exposure (energy, agriculture) fit into Procore's focus? What portion is core to construction? /

  A: DroneDeploy's core visual intelligence AI technology works across adjacent infrastructure use cases, but the company's primary focus, and the focus of the acquisition, is construction and infrastructure buildout and management. DroneDeploy already sells to both builders and infrastructure owners, which aligns perfectly with Procore's existing end market focus on both stakeholders. There are no plans to pivot into unrelated non-construction end markets.

• Q: How does adding DroneDeploy advance Procore's opportunity in construction robotics, and what role will Procore play in the robotics space? /

  A: While general-purpose humanoid robots for construction are still early, special-purpose robots that work alongside humans are advancing rapidly. DroneDeploy already has core technology to autonomously manage drones and robotic cameras on unconstrained construction sites, for example capturing scheduled progress updates without on-site personnel. Procore does not plan to build robots itself, but it will become the central management platform for robotics activity on construction sites, which aligns with its core role as the unified system of collaboration for all construction activity. This is an early but high-potential long-term opportunity.