Procore Technologies, Inc. Q1 FY2026 Earnings Call

Hello, everyone. Thank you for joining us, and welcome to Procore Technologies, Inc. FY '26 First Quarter Earnings Call. I will now hand the conference over to Matthew Puljiz, SVP of Finance.

Good morning, and welcome to Procore's 2026 First Quarter Earnings Call. I'm Matthew Puljiz, SVP of Finance. With me today are Ajei Gopal, President and CEO; and Rachel Pyles, CFO. Further disclosure of our results can be found in our press release issued today, 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 outlook, platform and products, customer demand, operations and macroeconomic and geopolitical conditions. You should not rely on forward-looking statements as predictions of future events. All forward-looking statements are subject to risks, uncertainties and assumptions and are based on management's current expectations and views as of today, May 5, 2026. Procore undertakes no obligation to update any forward-looking statements except as required by law. If this call is replayed or viewed after today, the information presented during the call may not contain current or accurate information. Therefore, these statements should not be relied upon as representing our views as of any subsequent date. We'll 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. With that, let me turn the call over to Ajei.

Good morning, everyone, and thank you for joining us. Continuing our momentum from 2025, Q1 saw strong performance that exceeded the high end of our guidance. For Q1, we delivered 15.7% revenue growth and 17% non-GAAP operating margin, which represents 650 basis points of year-over-year expansion. I'm particularly pleased with these results given the ongoing headwinds from a challenging construction environment. On our last earnings call, I outlined why Procore will be an AI winner. Our flagship products and early investments in AI, including our acquisition of Datagrid, have positioned us well to capitalize on the disruptive technology. Building on our flagship system of collaboration with nearly 3 million active users and a massive proprietary dynamic data set, Procore AI can deliver outcomes simply not possible with traditional software. In that call, I walked through a real example of a customer using our AI agents as a digital coworker capable of executing complex, high-effort tasks with AI, a critical advantage for an industry facing a severe labor shortage. This also opened a meaningful new dimension to our TAM as Procore AI can access construction labor budgets well beyond the industry's software spend. Our path forward is defined by a powerful economic duality: upside opportunity through AI monetization and downside protection through our volume-based model. I believe Procore will unlock unprecedented value as the definitive winner in the Agentic AI era. I would like to begin today's call by discussing the great progress we have made with Procore AI since our last call. Then I want to discuss our continuing success with our flagship solutions. Finally, I'll discuss our intention to continue to improve margins and free cash flow per share. Let me start with Procore AI, which includes our recent acquisition of Datagrid. I am pleased that the technology integration has proceeded rapidly, leveraging the foundational security and platform investments we had made earlier in Helix. We have taken the best of both products to provide customers with new capabilities and are now executing on a combined product roadmap for Procore AI. Our solution enables customers to deploy embedded Procore AI agents that can execute tasks such as RFI analysis, submittal cross-checking and compliance auditing. We recently released agents in Triggers, which enable customers to define automated event-driven AI workflows transitioning from reactive to proactive task execution across their projects. We are piloting a new voice AI interface designed for field workers who want hands-free access to project data on the job site. We also recently introduced a specialized contract review agent that can efficiently analyze construction documents and flag any risk in the contract. By building on the foundations already established in Procore AI, we were able to introduce this workflow in fewer than 30 days, and it is already being tested by customers. At the core, Procore AI is a reasoning engine purpose-built for construction. It understands the language and logic of the project. For example, when an RFI is raised, it understands how a submittal connects to a drawing and how a change order gets approved. On top of that, it works as a stateful system that holds context across multiple steps. It doesn't just answer a question, it understands the thread. For example, why was the RFI sent, what is obligated and what needs to happen next. Think of it as a digital coworker that encodes the logical construction decision-making, reasoning about the project the way an experienced practitioner would. This data and context can only be accessed within a system of record and collaboration like Procore. That capability is backed by a tool library of dozens of construction-specific capabilities, including compliance calculators, drawing analyses and document cross-referencing engines. And it is still early. As we continue to develop Procore AI, going deeper into our proprietary data and broader across project types, the reasoning engine will only become more capable. We expect our solution to continue to improve with every layer we unlock, and we have a long runway ahead of us. Turning to go-to-market. We made a deliberate decision to launch Procore AI through a dedicated specialist team working today as an overlay alongside our core sales force. The team is very small and intentionally so. The goal was to learn what the commercial motion looks like before scaling it. We are now working on translating those learnings into enablement for the broader sales force and we expect much of our sales organization to be selling Procore AI in Q3. I'm excited that customers are adopting our Agentic solutions in addition to our flagship offering. A great example of this is within the estimating department at one of our Enterprise customers, Crest Operations. Crest is already seeing transformative ROI from Procore AI. For their most complex projects, bidding is an arduous process involving thousands of data points across massive sets of drawings. By leveraging Procore AI, Crest has turned a manual process that could take weeks of effort down to an automation that can take as little as 20 minutes. This isn't just an incremental improvement in speed. It is a fundamental shift in their competitive advantage, allowing them to bid more accurately, respond to opportunities faster and ultimately drive a level of ROI that was previously unattainable. Moving to our flagship solutions. In Q1, we have driven more innovation at a faster pace than ever before. We expect that these new product capabilities will help to drive sales, increase customer satisfaction, and improve retention. I'll start with the largest and most mature part of our business today, U.S. general contractors. We are focused on improving our platform by enhancing products like Quality and Safety and by extending Procore Connect to support RFI in addition to drawings. I'm particularly pleased with the general availability of the updated Procore Scheduling, our natively connected scheduling solution that has already been implemented by over 2,000 companies since its February launch, making it one of the fastest-adopted products in our history. Together, these releases defend and extend our leadership while opening new expansion opportunities in civil and infrastructure construction. In Q1, Trinity Group, a long-time GC customer, expanded its construction volume commitment to $1.1 billion, a 6x increase. Trinity is evolving from a heavy user of siloed tools into a platform-first organization to support rapid growth and the growing complexity of large-scale builds and is increasingly relying on the Procore platform to help run its business. Now let me move beyond general contractors. On our last call, I focused on owners, including data center operators. This time, I would like to discuss new functionality available to specialty contractors as well as international customers. For specialty contractors, we introduced Materials Management which provides end-to-end supply chain visibility for self-perform contractors from procurement and better management through delivery tracking to the job site. This is part of our broader investment in a purpose-built self-perform platform that unifies resource management, financials and scheduling for the specialty and self-perform contractor market. This represents a significant step in our strategy to serve the heavy construction market where equipment costs can be just as material as labor for some projects. Also in Q1, Helm Group, a leading specialty and mechanical contractor in the Midwest, ranked #61 on the ENR 600, significantly expanded its construction volume commitment after 18 months of successful usage. The company, which specializes in major projects like data centers and Northwestern University's new football stadium, initially started with only a portion of its construction volume. Following a successful initial rollout of project management tools, Helm Group decided to standardize on Procore. The primary goal of this expansion was to achieve increased labor productivity, mitigate risk and streamline project management operations in a single platform. Moving to international markets. We launched a new BIM model federation and streaming viewer, which enable customers to federate and navigate large 3D building information models directly within Procore. A key requirement for winning upmarket in Europe, this is the anchor of our European common data environment strategy, which combines BIM, asset management, document management and project execution into an ISO-19650-compliant solution. This positions Procore as the connected construction platform for markets where a common data environment is a contractual requirement. In Q1, we signed a new contract with Collin Construction Limited, a large general contractor headquartered in Dublin. Collin had been using over 25 disconnected point solutions and is now standardized on Procore's unified form to solve reporting and mobile access challenges. The customer anticipates saving over 46,000 labor hours over the next 3 years, the equivalent of more than 13 full-time employees, as well as decreasing nonrecoverable change orders by 25%. Moving to strategic partnerships. In Q1, we announced that we are integrating the Procore platform with NVIDIA on a VSX Blueprint to accelerate the building of AI factories and other critical infrastructure. This integration will establish a digital thread throughout the entire construction life cycle to build safer, faster and smarter infrastructure. The combination of Procore and NVIDIA solutions will enable teams to rapidly model design changes using a high-fidelity, physically accurate 3D digital twin resulting in infrastructure that comes online faster and is optimized for peak performance. This has started our strategy of developing meaningful relationships with leading vendors that will reap rewards in the long term. Next, I would like to briefly talk about our use of AI to enable us to grow more efficiently in the future, to increase the speed of the organization and to improve margins. Today, every Procore employee has access to at least one AI platform from the leading vendors. In R&D, we're in the middle of incorporating AI to transform our operating model. The part of that organization that have already gone through this transition are able to deliver products faster and more efficiently than before. The rest of the organization will follow R&D's lead, and we expect to see efficiencies from these changes to provide our financial model with incremental leverage in 2027 and beyond. Rachel will expand on this opportunity in a moment. And speaking of Rachel, I'd like to take this opportunity to formally welcome her to the team as our new CFO, along with our new CRO, Walt Hearn. Rachel and Walt bring business and technology backgrounds and each held a key leadership role with me at ANSYS. They are highly qualified individuals who have been successful in vertical software. We have all worked together and know how to meet challenges and deliver value as a team. I'm excited they have joined Procore at this critical time. I have been CEO of Procore for about 6 months now, and my enthusiasm for the job, the company and the construction industry has only grown. I remain optimistic for Procore's future, which is reflected in our financial performance for Q1, where we exceeded the high end of guidance and increased our full-year outlook. A special thanks to my colleagues at Procore for their hard work and dedication to our customers and stakeholders. Looking to the future, Procore plans to grow its presence in the construction industry, become broader in the AI era and continue to compound free cash flow per share. And with that, I'd like to turn the call over to Rachel. Rachel?

Thank you, Ajei, and good morning, everyone. I am incredibly excited to be joining Procore at such a transformative moment. Before we dive deeper into the numbers and the overall business, I would like to briefly touch on why I joined Procore and my approach to the CFO role. Joining this organization represents a rare opportunity to serve as the CFO for a category leader that is digitizing the industry that builds the world. Beyond Procore's established leadership position, I see a compelling financial profile with clear levers for long-term value creation. Furthermore, my prior history with Ajei and Walt ensures strategic alignment from day one, allowing us to move decisively as we scale. I'm thrilled to be part of this journey and look forward to building on the strong foundation already in place. My philosophy as CFO will be anchored in the pursuit of durable, profitable growth. Given Procore's market opportunity, this should remain our top priority. The pursuit of durable growth will be underpinned by a disciplined and thoughtful capital allocation strategy, specifically to reiterate our capital allocation philosophy. First, we will prioritize high-ROI organic growth investments. Second, we will remain targeted with acquisitions that accelerate our strategic roadmap. Finally, we are committed to returning excess capital to shareholders via opportunistic share repurchases. By aligning our investments with this framework, we aim to consistently compound free cash flow per share, ensuring that our category leadership translates directly into long-term value for our shareholders. Moving on to our Q1 results. Total revenue in Q1 was $359 million, up 15.7% year-over-year. Q1 non-GAAP operating income was $61 million, representing a non-GAAP operating margin of 17% and up 650 basis points year-over-year, and free cash flow was $56 million, up 20% year-over-year. As for our key backlog metrics, current RPO grew 21% year-over-year and current deferred revenue grew 17% year-over-year. Turning to commentary on our results. We delivered another quarter of durable revenue growth driven by healthy demand across our customer base. This performance was underpinned by three primary strengths. First, we secured several significant new logo wins that highlight our increasing market share. Second, we saw a meaningful shift towards larger-scale engagements with six-plus-figure ARR wins growing 24% year-over-year. And finally, we generated strong pipeline in the quarter. This momentum in high-value customer wins and overall pipeline strength gives us confidence in our trajectory and sets a favorable foundation for 2026. Our strength in the quarter also contributed to strength in CRPO. This metric continues to benefit primarily from longer average contract duration. When normalizing CRPO for this dynamic, the year-over-year growth was consistent with both Q1 revenue growth and ending ARR growth. Once contract duration stabilizes, reported and normalized CRPO growth will eventually converge with revenue growth. Our performance this quarter underscores our commitment to driving long-term shareholder value. By delivering durable top-line growth, combined with strong year-over-year margin expansion, we improved our year-over-year free cash flow. Those items, coupled with limiting our share count growth via disciplined equity compensation and our share buyback activity, drove meaningful improvement in our North Star metric, free cash flow per share. We believe this approach of compounding free cash flow while managing our share count remains the most effective way to maximize returns for our shareholders over time. Looking ahead and to expand upon Ajei's commentary, we view AI as a fundamental catalyst for our long-term financial profile. On the top line, we expect AI to serve as a tailwind to revenue growth as we monetize high-value capabilities and deepen platform engagement. Regarding our margin profile, we do anticipate modest headwinds to gross margin given the increased compute expenses to support these workloads. However, we expect this to be more than offset by the tailwinds to our operating expenses as we leverage AI to drive internal efficiencies and scale across all functions. Ultimately, the convergence of durable growth and an optimized cost structure reinforces our conviction that AI will be a powerful tailwind to free cash flow per share, creating a highly efficient engine for long-term shareholder value creation. With that, let's move on to our outlook. For the second quarter of 2026, we expect revenue between $364 million and $366 million, representing year-over-year growth of 13% at the high end. Q2 non-GAAP operating margin is expected to be between 17.5% and 18.5%. For the full year fiscal '26, we are raising our revenue guide to a range of $1.499 billion to $1.53 billion, representing total year-over-year growth of 13.6% at the high end. We are also raising our non-GAAP operating margin guidance for the year by 50 basis points to be between 18% and 18.5%, which implies year-over-year margin expansion of 390 to 440 basis points. Finally, we are maintaining our free cash flow margin guidance of 19%, which implies year-over-year free cash flow margin expansion of approximately 280 basis points. To wrap up, we are pleased with the quarter and are excited about the momentum we have created for the remainder of the year. We are confident that we can continue to provide durable growth, margin expansion, limited share count growth and compound free cash flow per share. With that, let me ask the operator to open it up for questions.

Your first question is from the line of Joe Vruwink with Baird.

Congratulations, Rachel on your appointment. I wanted to start with a few things on financials. One is good to see the upside, but the magnitude of upside in revenue and CRPO is, I suppose, a bit less than the prevailing experience where you've been beating by 3% to 4%. Anything to read into that? And then the second is just on the outlook. You're bringing up the full year by more than the Q1 upside but it looks like that overage or upside remainder is weighted to the second half. Maybe what's informing your expectation there?

Thanks, Joe. I appreciate the question. Excited to be here. First, what I would say about our overall financial detail is we were really pleased with the results. We had strong pipeline and strong new logos, so overall excited about the performance. In terms of the revenue upside that you saw, that was really consistent with what you saw in Q4 in terms of a beat, so nothing really different there. And then if you think about our guide, Q2 at the high end is consistent with Street estimates. No change in our guidance philosophy. We're still going to give you guidance that we feel a high level of conviction in.

Great. And then I wanted to ask on Procore Scheduling and maybe a bit more feedback since general availability. I remember there was discussion at ground break; just spotlighting this particular area is one that's really differentiated in terms of pulling in the full Procore platform capability and AI to the extent that this gets adopted—or maybe seen as a landing point—does it open richer cross-sell opportunities or maybe give customers more obvious and explicit exposure to what Procore AI can do?

Yes. Absolutely, Joe, thanks for the question. Look, we're excited about Procore Scheduling. Firstly, we were able to get the product out and we were able to see very quick adoption because it's essentially natively connected into the platform, and that gives customers tremendous benefits when they take advantage of the product. And obviously, we're in a position to, as part of our strategy, continue to add more AI capabilities, and that will obviously reflect in the flagship products as well.

Our next question is from Saket Kalia with Barclays.

Welcome, Rachel. Ajei, maybe for you, to zoom out a little bit. I'd love to get your views on kind of where we are in this construction cycle. There are tons of factors, of course, to consider. But I know you spend a lot of time with customers—what are they saying to you right now just about project starts this year and how they're thinking about the environment?

Saket, thanks for the question. I would say that the construction environment has been pretty stable in the time that I've been with the company. In the conversations that I've had with customers, it's been pretty stable over the last couple of quarters. What I would say, though, is that there's different levels of excitement about certain portions of the business. In fact, last time I talked about data centers, and even though data centers represent a relatively small amount of the overall construction volume, there's a lot of excitement about data centers. And certainly, we are center of those conversations. I mentioned in the prepared remarks our relationship with NVIDIA, where we are working with them on a blueprint to accelerate the building of AI factories and other infrastructure. So those kinds of activities create a lot of excitement because those data centers are front and center right now. But otherwise, it's a pretty stable demand environment. And I'm excited about those conversations with customers because it does reflect their trust in Procore and their perspective on how we can help them as we move forward together.

Got it. That makes a ton of sense. Rachel, maybe for you: it was great to see CRPO growth continue at 20%. And of course, you noted the duration benefit there as well. Maybe the question is, how do you think about the glide path for that growth rate starting to converge with revenue growth?

Yes, thanks, Saket. That's a great question. CRPO has remained strong. We are starting to see that average contract duration start to normalize. So between Q4 and Q1, duration stayed roughly flat quarter-over-quarter. If you look forward, once that duration does stabilize, it will probably take around three to four quarters following that stabilization before you see the CRPO and the revenue growth come together.

Our next question is from Dylan Becker with William Baird.

Maybe, Ajei, for you to start. It sounds like platform consolidation remains a key theme in customer conversations and expanding volume. I think that makes sense in the context of leveraging your agents and utilizing more of the platform to deliver more of that value. To what extent is the AI conversation playing a role in catalyzing adoption from an industry perspective? And maybe validating the perception or buy-in into Procore AI strategy to help those customers solve for productivity, if that makes sense.

Yes. If I understand the question, let me address it. When I've had a number of conversations with customers about the overall platform and about AI in general, certainly in the context of construction, many of them don't have the time or the inclination to become experts on AI and construction. They look to us as their technology partner. They've worked with us for years. They trust us. Their objective is they just want to be able to build better projects; that's their business. They want to make sure that their tech vendors and tech partners bring them the best and latest technologies, including AI, to help them perform. The fact that we are able to provide Agentic AI capabilities that have such compelling value—and provide those capabilities within the context of security and within the framework of their system of record and system of collaboration where they store their data—gives them a lot of comfort. We can have those conversations with them and they see what we're able to do. That's been very positive for us. For example, we just had one of our largest customers here in Austin for a hackathon last week. They brought together about 85 of their employees in a multi-day event, and we were able to, in the context of the platform, support their creation of agents. They built something like 300 custom automation agents for their particular use cases. That gives you an example of how customers are able to take advantage of our agent capabilities under the overall umbrella of the Procore platform.

Very helpful. And maybe to stick with you or Rachel: you called out some of the commercial learnings and how agents might be deployed more broadly in the go-to-market in the third quarter. Any learnings in receptivity around what the monetization strategy is going to look like? And you also called out that internal efficiency leverage may be more felt in 2027 and beyond. How should we think about the timing between 2026 and 2027 for some of these benefits to layer in?

In terms of go-to-market, it's pretty much what I said in the prepared remarks: we wanted to make sure we completed significant progress on the technical integration after the Datagrid acquisition earlier this year. The Datagrid platform and the data capabilities were integrated into the Helix work that we'd done earlier. Coming out of that, we have an updated product capability and a small overlay sales force—a very small number of people—talking to customers in conjunction with the sales force to get the value proposition and ROI down. The expectation is that in Q3 we'll be in a position to roll it out to the larger sales force. Our expectation is that our agent solutions will be monetized in some capacity-based, consumption-based licensing structures, in contrast with our ACV-based licensing for flagship offerings. That's the path going forward. I'll let Rachel address the margin question.

Ajei highlighted a lot of the top-line benefits we're expecting from AI and from the token-based model as we roll it out across the sales force and engage customers. I'll speak a bit more about the margin impact. As we see more agents deployed, we're going to start to see some gross margin headwinds that come from increased compute. Over time, I expect those costs themselves will come down, similar to how cloud computing costs have trended over time. But even more importantly, on our side, the benefits from deploying AI within our own workflows across the organization should more than offset any gross margin headwinds. I'm optimistic about that opportunity and it gives me conviction about our margin expansion over the long term.

Ultimately, is this more of a fine-tune or should we expect major changes going forward? I'm trying to gauge the approach.

Great question. My core takeaway is we have a really strong foundation: great customer relationships, a great platform to build our products on, and a strong sales and support model. The world continues to change—market conditions and technology evolve—and every company needs to be able to change to reflect market circumstances and move faster. I felt it was important to bring on a couple of executives I know well to allow us to move really fast in a complex business environment. Walt and Rachel have worked with me before; we've navigated similar transformations. Given the opportunity, we need to continue to move fast, and I expect Walt to provide leadership across growth dimensions. I'm excited about the foundation and our ability to continue to evolve the business to take advantage of the optionality in front of us.

Just a quick follow-up: the guidance hasn't changed but you're showing decelerating growth in the guide. Are you embedding potential disruption or more changes in the front half of the year? Is that why it's conservative on the total year deceleration?

If I think about our guidance philosophy, we consistently follow a beat-and-raise methodology, and that's what you're seeing us do here. Nothing different than what we've done historically.

Our expectation is to continue to execute and improve our business. There isn't any subliminal message here.

Our next question is from David (DJ) Hynes with Canaccord.

Ajei, do you think the network effects of the business model get any stronger as AI is increasingly embedded into workflows and collaborators get insight into those capabilities? In other words, is it only the payer that will realize the benefits of Helix and your AI agents, or does the whole ecosystem equally benefit, which could be good for generating broader demand?

When you think about Procore, it is intrinsically a system of collaboration because construction is multiple parties getting together on a project with strong commercial relationships between the parties and an ongoing sequence of changes and modifications. It is a very unique environment where parties collaborate and changes have financial consequences, therefore need to be audited and managed effectively. That uniqueness means when we create agentic workflows, the benefit accrues to all parties collaborating on the project. Creating digital coworkers that help people make decisions faster and more effectively creates speed and accuracy in the overall collaborative effort on the construction side. So the network effects should strengthen as AI is embedded into workflows.

Okay. Makes sense. And Rachel, can you give us a sense for how much Datagrid and FX impacted both revenue and CRPO in the quarter? Investors are trying to wrap their arms around inorganic and ex-FX growth rate in the quarter.

Yes. On FX, FX on our overall consolidated business was immaterial. Where you see FX is in our international business; there was about a 2-percentage-point impact in that business, but consolidated it was de minimis. On the Datagrid side, we're just finishing the integration and going into GA shortly—those capabilities were immaterial to the overall results. Our organic business continues to grow about 15% to 16%.

Our next question is from Adam Borg with Stifel.

Maybe, Ajei, just on the macro going back to that. We talked about it being stable over the last 6 or so months. I'd love to talk a little bit more about the government vertical in particular, especially following the FedRAMP Moderate authorization earlier this year.

Yes. We were very excited about the FedRAMP authorization earlier this year. It is fundamentally a longer-term play for us because it allows us to participate in government contracts. There is inherently some latency in government contracts, but in order to participate we needed that authorization. Government agencies require the authorization, and the GCs that build on their behalf require authorization. We are able to have conversations with customers, but the impact takes a bit of time from the announcement to when you actually see it in results.

Super clear. And maybe as my quick follow-up: earlier this year, Procore began offering four bundled packages each with three tiers. Just curious how that new packaging and pricing has been received by the customer base.

We rolled that out earlier and the feedback from customers has been positive. It gives us an opportunity to position the right capability for the customer depending on what they're looking for, and it certainly gives us an opportunity to generate incremental monetization as customers move up the packaging stack. It's still early days, but we're pleased with the capabilities. The intent behind the packaging was to streamline the sales cycle, providing customers a bundled value price instead of multiple a la carte items, which gives a clear path for customers to adopt more products. That combination works well for customers and for us.

Our next question is from Matthew Martino with Goldman Sachs.

Ajei, with Walt now in the seat, where do you see the most meaningful opportunities to strengthen the international franchise from here? And how do you think about the trajectory of that part of the business over time? I know you announced some new products to capture the upmarket in Europe, so tie that together please.

On new products, we announced a CDE in Europe and had an innovation conference in London where customer feedback on the CDE was very positive. We had about 170 regional customers and prospects and strategic partners. The CDE is an important aspect of the tech ecosystem in that geography and reinforces our central role. International has been a relatively smaller part of our business relative to the opportunity, and it's an area where we'll spend more time. The UK and Ireland are where we're gaining initial momentum, and we see opportunities across EMEA. With Walt in the seat, we have an opportunity to continue to accelerate that part of the business.

Got it. And Rachel, you laid out capital allocation across organic investments, targeted M&A and opportunistic share repurchases. As the new CFO, how are you thinking about the relative priority of those three buckets in the current environment?

I think about them in that order. First, focusing on organic growth and making the right investments there. Second, to the extent M&A becomes available that helps accelerate our strategic roadmap, we will pursue it. M&A timing can be unpredictable, but we will pursue those opportunities when strategic. Finally, third would be opportunistic share repurchases.

Our next question is from Daniel Jester with BMO Capital Markets.

Maybe, Rachel, just starting with you on the seasonality of margin performance this year. I think last quarter it was suggested that maybe the fourth-quarter exit rate of margin expansion this year might be a little bit lower than typical. Any updated color on how we should be thinking about the margin trajectory this year?

Yes, absolutely. We're confident in our overall margin profile. Expenses are somewhat linear and margin will move around by quarter, but from an overall perspective, we're confident in our full-year margin expansion numbers.

And Ajei, on the specialty contractor comments you made, it's great to hear that. Can you double-click on the specialty contractor opportunity and how you can see that being additive to growth this year?

For specialty contractors, we've had incremental product releases like Materials Management and telematics integrations. These products help specialty contractors manage documents, attract labor, track equipment, coordinate deliveries and get paid faster. There's a lot of value we can provide to specialty contractors, and this is a clear area of focus for us going forward.

Our next question is from Jason Celino with KeyBanc Capital Markets.

Maybe my first question is the incremental operating leverage comment you expect to see in 2027 from AI. When we think about internal AI adoption, where is Procore on that journey today? Or said another way, to drive that incremental leverage next year, are those AI efficiencies you've already implemented or based on a roadmap of AI adoption you look to take on?

When you think about our use of AI, as I mentioned, our R&D organization is in the middle of transforming its operating model using AI. Parts of R&D that have adopted a different model and taken advantage of agentic capabilities are already seeing increased speed in product delivery and increased capabilities. We're in the middle of that transformation and expect the rest of the organization to follow. The speed and efficiencies from those changes are the basis of some of the financial leverage we discussed for next year.

To add, R&D is going first and then the capabilities will roll out to the rest of the organization. We also have AI capabilities in other parts of the organization and employees have access to those tools, although not as advanced as in R&D today. As we move into 2027, I'm excited to see the efficiencies come together across all parts of the organization. The leverage will come from multiple places across the P&L.

Okay, great. And then, in prior questions, you've talked about seeing a stabilized macro. Going a step deeper, in your conversations with customers how are they managing the increase in oil prices? It obviously adds to project cost; curious how conversations are going more recently.

The projects where we work with customers are long-term projects. Customers haven't framed this as a short-term issue impacting project starts. In my conversations, they have not indicated long-term disruption; we continue to see a stable demand environment for our products.

Our next question is from Hoi-Fung Wong with Oppenheimer.

When looking at the shape of the guidance, it does seem to imply second-half acceleration from Q2. Should we think of that as purely mechanical, or are you seeing business momentum in the pipeline that suggests improvement and an inflection in the back half?

Thanks, Hoi-Fung. It's really mechanical. Consistent with what you've seen us do in the past, we did a beat and raise this quarter. Again, there's no change in our guidance approach; we're continuing to give guidance that we feel a high level of conviction in.

Got it. And Ajei, great to see you pair up with Walt again. As you and Walt look at the current go-to-market, any changes you think need to be made whether in organization or approach to selling? Any thoughts you can share?

Walt has been in seat since April 1 and is still evaluating the organization and the team. Walt understands the vertical software motion; he spent years in vertical software and has worked closely with me in prior companies to scale sales organizations internationally and across customer segments. He understands the customers and how to have those conversations. As we make changes, we will continue to execute and improve, and I'm excited about Walt's capabilities and leadership.

We have reached the end of the Q&A session, and this concludes today's call. Thank you for attending. You may now disconnect.