Earnings Call Transcript - VEEV Q2 2026

Operator, Operator

Ladies and gentlemen, thank you for standing by. My name is Abby, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Veeva Systems Inc. fiscal 2026 second quarter results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 a second time. Thank you. And I would now like to turn the conference over to Gunnar Hansen of Veeva Systems Inc. IR. You may begin.

Gunnar Hansen, IR

Good afternoon, and welcome to Veeva Systems Inc.'s fiscal 2026 Second Quarter Earnings Conference Call for the Quarter Ended July 31, 2025. As a reminder, we posted prepared remarks on Veeva Systems Inc.'s Investor Relations website just after 1 PM Pacific today. We hope you had a chance to read them before the call. Today's call will be used primarily for Q&A. With me today for Q&A are Peter Gassner, our Chief Executive Officer, Paul Shawah, EVP Strategy, and Brian Van Wagener, our Chief Financial Officer. During this call, we may make forward-looking statements regarding trends, our strategies, and the anticipated performance of the business, including guidance regarding future financial results. These forward-looking statements will be based on our current views and expectations and are subject to various risks and uncertainties. Our actual results may differ materially. Please refer to the risks listed in our earnings release and the risk factors included in our most recent filing on Form 10-Q. Forward-looking statements made during the call are made as of today, August 27, 2025, based on the facts available to us today. If this call is replayed or viewed after today, the information presented during the call may not contain current or accurate information. Veeva Systems Inc. disclaims any obligation to update or revise any forward-looking statements. We may discuss our guidance on today's call, but we will not provide any further guidance or updates on our performance during the quarter unless we do so in a public forum. On the call, we may also discuss certain non-GAAP metrics that we believe aid in the understanding of our financial results. A reconciliation to comparable GAAP metrics can be found in today's earnings release and in the supplemental investor presentation, both of which are available on our website. With that, thank you for joining us, and I'll turn the call over to Peter.

Peter Gassner, CEO

Thank you, Gunnar, and welcome everyone to the call. We had another strong quarter, delivering Q2 results ahead of our guidance. Total revenue in the quarter was $789 million with non-operating income of $353 million. Thanks to the team and our customers, our industry cloud vision is starting to come together. That means great industry-specific software, data, and business consulting all working together to help the industry become more efficient and effective. I'm especially excited about the clear vision and rapid progress on Veeva AI. That'll be transformative for Veeva Systems Inc. and the industry over time. We'll now open up the call to your questions. Thank you.

Ken Wong, Analyst

Hey. Fantastic. Peter, I wanted to touch on the resolution in terms of the lawsuit with IQVIA. Can you help us walk through what led to that resolution? And what potential opportunities it could unlock? And then for Brian, just on the billings guide, a nice increase there. Although with an in-line 2Q. Just help us understand the confidence in increasing the back half with what was a more in-line-ish second quarter? Thank you.

Peter Gassner, CEO

Okay, Ken. What led to the resolution? Well, we've had this dispute for about ten years with IQVIA, and things are a lot different ten years ago. You know, IQVIA was still IMS, by the way, and just joining with IQVIA and Veeva Systems Inc. wasn't that strong in clinical. And IQVIA had a CRM product, now they don't. So many things have changed, and we just got together sort of at the start of the year. I asked the IQVIA leadership and myself and realized there's no reason for this conflict anymore. We can begin to learn about each other and partner for the benefit of customers, Veeva Systems Inc., and IQVIA. So it's just the passage of time. Things changed, and we woke up and said, you know, what are we fighting about? There's no reason to be doing this anymore. So I'm super happy, and I believe I can represent that IQVIA is very happy as well to have it resolved. Now in terms of what does it unlock for us, historically, in the commercial area, there were two barriers, two sort of artificial barriers. One was with Salesforce. Because of our OEM agreement, we couldn't develop the applications we wanted. We weren't allowed. We couldn't develop them in the way we wanted them either. So now that's gone with Salesforce since we've moved to Vault, and we have 100 live customers in CRM. That's really an anchor tenant in commercial. And then we had these important products. Veeva Network, Veeva Nitro, our commercial analytics offerings, we couldn't put IQVIA data in there. So this was sort of a hole in our boat. These products were in because they couldn't put the industry-leading data in there. That's resolved now. So you got the Salesforce thing resolved, the IQVIA restrictions resolved, so I'm really looking forward to making commercial cloud sort of like development cloud, really no limits. Very excited about that. The biggest news in commercial for a long time.

Brian Van Wagener, CFO

And, Ken, this is Brian. I'll pick up the second question on billings. So, you know, on billings, really, annual is the better indicator, so we're pleased with the $35 million raise there to full-year guidance, which is roughly in line with the revenue increase. Quarterly billings, as we've spoken a bit about in the past, are lumpy because there are a lot of timing factors. There's customer-specific items, operational things, mix on pre and postpaid, and so it's just not a metric we use internally or a great indicator of the business. So annual is a better way to look at it, and we're really happy with the guide there. Thank you, guys.

Joe Vruwink, Analyst

Hi. Great. Thank you for taking my questions. Nice to see R&D subscriptions and services, with larger upside just relative to how we've been modeling it. I've been interested in the evolution of Quality Cloud. It seems like that's receiving an elevated stature inside Veeva Systems Inc. I was hoping you can maybe just speak to what you're seeing. You know, is there a larger role for Veeva Systems Inc. to play and maybe extending that both into the lab and also manufacturing? And then looking ahead, is that maybe, you know, more of an outsized driver? Obviously, I appreciate it's broad-based, but is quality maybe factoring more into the five-year plan than you thought perhaps a year ago?

Peter Gassner, CEO

I'll take that one. This is Peter. For the last one, I think we're very happy with our five-year plan, our six; we have a lot of confidence in our $6 billion revenue plan. And the changes in quality, you know, from what we see are not material. It's on track for where we roughly thought it would be. It is a big area, and it has gotten elevated focus inside of Veeva Systems Inc. in the last couple of years with the start of that was to go after the LIMS area, the laboratory information management. That's a super important area. So and then we have batch release. We have a validation management product. So we really elevated that to the level of the full cloud because, yeah, that can be a very big business for us in quality.

Joe Vruwink, Analyst

Okay. That's great. And then just on the excitement around AI, you know, the first products focus more in the suite and then broadening out there into next year. I guess, how do you see the opportunity? You know, I think it's interesting that commercial cloud takes on basically the look of development cloud in terms of Veeva Systems Inc. controlling its full destiny now. Do you think that starts to be a meaningful incremental driver just monetizing agents into next year? Or do you actually think the bigger consequence is maybe more strategic in that Vault has developed such robust architecture and partner ecosystem that Veeva Systems Inc. is going to be a central role for the industry as they adopt AI, you know, maybe regardless of whether it's a Veeva Systems Inc. agent or not, your Vault's gonna be a part of that mix one way or the other?

Peter Gassner, CEO

Let's see. How I would think of it, you asked a few questions there. Let me reframe a little. The basic way I would think about it, Veeva Vault platform, we started that in 2010, actually, late 2010. It was around this it had content and it had data, and they could do both. And that was very unique. And users work with content and data, and so we were able to make integrated suites clinical and quality and regulatory and safety. And that's what we've been doing for the last fifteen years. Been working very hard at it making these deep industry applications, you know, the business rules around all the data and the content. Now this is the next phase where we're gonna have agents. We still have our data, we have our content, we have our agents, and the users are gonna interact with all the three. And the agents also interact with the content of the data. So it's a fundamental new thing. And what we we've led really and are leading in the industry in this industry cloud area, industry-specific cloud applications. I think we're gonna lead in industry-specific agents and certainly inside life sciences. So that's the way to think about it. The monetization will come from selling Veeva AI, which is two things. The platform so customers can create their own custom agents, but mainly our industry-specific agents that they'll get when they buy Veeva AI. And with the model MCP, model context protocol, it's agent-to-agent interoperability. It's really easy and also vault-to-vault interoperability. We will, in terms of monetizing that, we will create billions of dollars for the industry. No doubt about that. No doubt about that. Sometimes making humans much more efficient. Sometimes reducing the need for certain people doing certain types of tasks. So there's a tremendous amount of value being captured by the industry, and we'll get our fair share of that. For sure. But we're gonna take that slow, work with our early adopters, you know, sort of end of this year in '26 or so, I don't expect any material revenue contribution for '26 or '27. For example, but I expect it's a significant increase in our market size. And that will play out over many years. But this is gonna be a tremendous benefit for Veeva Systems Inc. Our employees, you know, who are building all these agents. And our customers who are getting the value. So we're very excited about it. We've done that hard work over the last seven months or so. Of plumbing it deeply into the Vault platform. That's the really hard work. And now the application agent work is really starting in earnest.

Joe Vruwink, Analyst

Thanks very much.

Brent Bracelin, Analyst

Good afternoon. I guess first one for Peter here. I'd like to go back to the long-standing dispute with IMS and IQVIA that you settled. Specifically, we'd love to get your thoughts on one, what's been the initial customer reaction feedback to the news, just last week here? Do you have any? And then two, how should we think about IQVIA that historically has been a CRM competitor as we're going back to the Segadigm days. You know, sold some of the CRM business to Salesforce. And how does that CRM-specific relationship with IQVIA change?

Peter Gassner, CEO

Okay. So customer reaction to Veeva Systems Inc. and IQVIA has just been overwhelmingly positive because it's such good news for customers. You know, if you're a life sciences company, especially a medium to large one, there's a few things you have to have. You have to have SAP for sure. In the supply chain. You have to have Microsoft on your desktop. For sure. You have to have that. You're gonna have Veeva Systems Inc. inside your organization in one part, two parts, five parts, many parts. And you're gonna have IQVIA as well. Specifically the IQVIA data. That's what you're gonna have. And what they had before was a problem, and they needed a lot of Band-Aids because in a lot of situations, IQVIA and Veeva Systems Inc. didn't fit well together. So it's just a sense of relief from customers and exploring. Hey. What's possible? Can I do this? Can I do that? So very, very, very positive. In terms of IQVIA, they were a historical competitor in CRM. They're not anymore. When Salesforce got into that market, directly pharmaceutical CRM and said they were gonna build a product, IQVIA, you know, went out of that market, and I don't know what was the timing of what decisions there. I just know that IQVIA is not selling that CRM product anymore, so there's no issues there. We still compete with IQVIA in the areas of things like reference data, our open data product, our Compass product, things like that. But that's okay. That's normal healthy competition. We partner in many, many areas, and we compete in some. And customers benefit. And they don't need so many Band-Aids anymore to stitch things together between Veeva Systems Inc. and IQVIA.

Brent Bracelin, Analyst

Helpful color there. And then, Brian, just a quick follow-up on that R&D subscription growth. Sequentially, it looks like it rose the most in two years. What drove the momentum in my side in R&D this quarter? Thanks.

Brian Van Wagener, CFO

Hey, Brent. Yeah. So it continues to, again, be broad-based. We're really pleased with the execution of this team across all areas. And they're working in a pretty stable environment. So I think you saw a really strong Q2. And things firming up as we go into the second half of the year and Q3 and Q4. Broad-based strong execution.

Joe Vruwink, Analyst

Peter Gassner, CEO

Brent Bracelin, Analyst

Peter Gassner, CEO

Brian Van Wagener, CFO

Joe Vruwink, Analyst

Peter Gassner, CEO

Brent Bracelin, Analyst

Peter Gassner, CEO

Brian Van Wagener, CFO

Joe Vruwink, Analyst

Peter Gassner, CEO

Dylan Becker, Analyst

Hey, gentlemen. Appreciate it here. Nice job. Andy, Peter, going back to the idea of around the opportunity with AI, how you're kind of thinking about Veeva Systems Inc.'s platform approach, the network you've built, the scale you've built, giving you kind of that right to win as you embed more AI functionality across the platform, and maybe how more of these top 20 enterprises are going all in, maybe how that can serve as kind of gravity supporting some of that AI momentum with embedded intelligence and things of the like in the future.

Peter Gassner, CEO

Okay. Yeah. The right to win. We refer to that as structural advantage. When you have an application that's a system of record, be it the email system or the supply chain system or all the 50 sort of applications Veeva Systems Inc. has that are deep in life sciences from the CRM system to the drug safety system to the trial management system. When you have that system of record with the users in there, you have the right to win the deep industry-specific agents because it's in the user's workflow. Think about it. If you use Google for your email, your calendar, you would love an agent from Google that works seamlessly with that. If you could get it. So we have a right to win there. You call it the right to win. I call it a structural advantage. We can knit that technology together so that it's a seamless platform that handles the agents, the content, the data. Another thing that Veeva Systems Inc. has is we have a platform that's broad. We make about 50 applications with our platform. So we can touch a lot of things with our Vault platform. We put it in the Vault platform once, and it can extend everywhere. So we have a structural advantage. I think it's early for customers to be going all in on AI with AI because we haven't even, you know, released any agents yet, so we gotta work with our first early adopters and work that out. We have to execute. That's, you know, everybody has a grand plan, but do you execute on it? That's what really makes a difference. So we have to execute, prove our value, and over time, I'm quite confident when customers see the value, you know, they will come and they will want to go all in with Veeva Systems Inc. for AI around the things that we do. You know, and with Microsoft around other things that they do and with SAP around other things that they do. The nice thing about IdentikAI that's framing up is these agents will be able to talk to each other in a much easier way than was possible before AI.

Dylan Becker, Analyst

That's very helpful. Thank you. And that does make sense. Maybe, Paul, for you, with the two top 20 customers live on CRM, and I know there's been a handful of more moments, some of others coming online over the past few months. Wondering how kind of the evidence of that live and successful implementation is resonating with customers, maybe how that stacks up on a like-for-like cost basis versus some of the conviction. And maybe, again, the customer conviction in the fact that that's only going to get more efficient over time kind of compounding the obvious nature of maybe needing to migrate. Thank you.

Paul Shawah, EVP Strategy

Yeah. Thanks. So let me step back a little bit and just give you a little bit of a broader context. We called out seven top twenties committed to Vault CRM in the prepared remarks. I can give you a little more context beyond that. Including verbal commitments. We added two additional top twenties for a total of nine top twenties committed to Vault CRM. So we're doing really well in the market, and part of it is the go-lives and the continued execution there. To be fair, we're also aware that Salesforce had one additional top 20 verbal commit for a total of three. So just to give you the full picture, the latest is Veeva Systems Inc. has nine top 20 wins. Salesforce is at three. All of the wins that I talk about are not equal, and this gets to your question here. There's a very big difference between a Veeva Systems Inc. win and a Salesforce win. So you asked about the two top twenties go-live. Less than two years after they made the announcement, they're now live in major markets, and that just happened this quarter. So with Veeva Systems Inc., a win almost becomes a certainty. Right? We have to work at it. I don't want to make it sound too easy, but these are two significant live and happy customers now in some of their major markets, and they're gonna continue to go live globally through the end of the year and beyond. So that's where we are with wins. That's a huge milestone that has a big impact. With Salesforce, that's obviously very different. The earliest that they'll have a go-live with the top 20 in a single region is 2026. Possibly finishing in, let's say, the 2029 time frame, that's obviously a very long time. A lot can happen between now and then, especially as our customers get the benefit of all the things that Peter just talked about. Around Veeva AI, being able to get started with AI this year, our partnership with IQVIA, that they could take advantage of today, but that will get better over time. So the chance that all three Salesforce customers go live in all regions is actually low. It's just not proven. It's gonna require a lot of custom work. It's gonna take years to mature if it even gets there. So all of those three wins that they have, they're not equal to a Veeva Systems Inc. win, and they all have a contingency plan, which is Veeva Systems Inc. So that's where things play out. The two wins that we had that are now live customers obviously, critically important. And these are multifactor decisions, but these are this is a pretty significant play in kind of how customers are thinking about where they place their chips. Beyond the top 20, that story even gets stronger. Right? As smaller companies, they just can't afford to take a risk on, you know, a risky project. So we're feeling good about the competitive position, and this is a huge milestone that Veeva Systems Inc. had. And I have confidence we'll be able to continue to win and continue to convert to live happy customers.

Dylan Becker, Analyst

Very helpful. Thank you, guys.

Brian Peterson, Analyst

Congrats on the quarter. So I just wanted to take a step back and think about the AgenTeq opportunity. And if you think about how we could maybe size that or where you could see some of the early opportunities. I think in commercial, we see that. But if we're looking at the R&D portfolio and what Vault could be, we AgenTeq opportunities, what are some of the early use cases you'd see there? And how would you kind of look at that opportunity thinking about it maybe commercial versus R&D?

Peter Gassner, CEO

Okay. I'll take that one. Certainly different. Right? That and that's we have a lot of variety in Veeva Systems Inc. Right? We do clinical trial operations, we do commercial and medical things and quality and manufacturing. So each one is different. In the commercial area, don't think it's about reducing the number of people too much inside of life sciences. If at all, but it's enabling them to be more productive and hold more relationships and get more work done. Now in so that's very valuable in itself. If you look at areas within safety and clinical, there's some areas where there's a lot of outsourced hundreds of millions of dollars of outsourced labor. Used to do processing type of things. I think AgenTeq AI can maybe, you know, remove the need for half of that. If you look at a clinical trial master file, IdentikAI can be pretty good at putting a document where it should go and telling you if you have all the documentation you need for that trial based on the protocol. And is any document blurry? Is any illegible, etcetera? It's gonna be really darn good at that stuff. So it'll be different by each area, but AgenTeq AI is gonna do things some of the things that humans can do, IdentikAI is gonna be able to do that. That either frees up more human time for humans to be more productive on what they need to do, or reduces the need for humans. So it's gonna apply to every area just like people apply to every area. But it's gonna apply in different ways.

Brian Peterson, Analyst

Thanks, Peter. And maybe a follow-up. I'd love to get an update on some of your horizontal software ambitions. I know that was a big theme at the Analyst Day last year. Any progress to date that you can share? Thanks, guys.

Peter Gassner, CEO

Yeah. No specific progress. I think just to reiterate, we're working on a platform-first approach here. Our first and we're making great progress. You know, we have a good team, pretty stable team, making excellent progress. Really excited about it. We have said in the CRM area, we'll be our first use case, our first application. We're starting to talk to early customers and getting that, you know, feedback, etcetera. So I think we'll have a project or two starting this year. And then we'll give more of an update on our Analyst Day, more of a fulsome update. But if you think about Veeva Systems Inc., what do we do? We make excellent products. We really buckle down and make excellent products. We sort of avoid the hype and all that stuff. And we improve those products with our customers. And we're very authentic. And maybe everybody thinks that, yeah, you can't do that in horizontal software. Well, I don't know. I think we'll buck the trend, and I think we'll do that. So in the horizontal software, I think you'll see the flavor and the culture of Veeva Systems Inc. come through, and you'll see the product excellence come through. You gotta remember, a lot of these cloud applications, they were made before they were certainly made before AI. But a lot of them were made before the iPhone too. So you know, there's some structural things when we're starting from scratch here that we can really take advantage of and the whole new markets team is super excited about that. So more to come but the activity is definitely going full steam.

Stan Berenshteyn, Analyst

Hi. Thanks for taking my questions. First one, Peter, for you. Going back to the IQVIA news, just with Nitro and Network getting a second life here, can you just size the dollar opportunity for these products? And what kind of uptake we anticipate from clients?

Peter Gassner, CEO

In terms of the dollar opportunity, I would say similar to some of our other add-on products, maybe a bit bigger, but similar. But the way to think about it is that what it enables for our full commercial suite. So this helps our CRM products and all the different products we have for events management, our patient CRM, our campaign management, our data products. It's a more full solution. It really helps our business consulting too, which drives stickiness. I would say it lets customers over time take a bigger bite at the Veeva Systems Inc. Apple in commercial such. And then you saw that in clinical. When our product suite got very mature and got fulsome and got practical for people, you started customers, hey. Maybe I'll just get all that Veeva Systems Inc. stuff at once. And I think that's gonna happen a bit more in commercial. So it's transformative. I would say if you had to think about the benefit for Veeva Systems Inc., maybe 25% of that benefit is related to actual revenue there. You know? Business consulting and network. And Nitro, and 75% of it is related to the network and the network effect that we'll have on the broader commercial.

Brian Van Wagener, CFO

Hey, Stan. So, yeah, great quarter for Crossix in Q2. On the back of a few great quarters in a row now. So we're really pleased with the execution of that team. We expect that to continue to be a meaningful driver of growth in commercial, going forward and in the balance of the year. And then I think more broadly, you see, you know, the growth, as we touched on earlier in the call, in R&D subscriptions, which works for picking up in the second half and seeing firming up of the pipeline in the second half. So good quarter of execution in Q2 and a solid view going into the second half of the year here.

DJ Hynes, Analyst

Hey, guys. So going back to the two top twenties that have gone live on Vault CRM in major markets, can you just speak to the economics of those very early large Vault CRM customers? Both spend levels and margin contribution maybe compared to what that may have looked like on, you know, legacy Veeva CRM?

Peter Gassner, CEO

I guess I can take that one. Prices similar, I guess, the best way you say it. It's not exactly the same because the package is somewhat different. It's a bit simplified in Vault CRM versus Veeva CRM. But revenue-wise to Veeva Systems Inc., about similar. Over the long term, our cost of goods sold will be about will be smaller. In the short term, actually, a little bit bigger because we have some transition costs. But during that transition time, the customers know, we're getting them going on Vault CRM, and the customers are still using the Veeva CRM, and they can continue that for a while to do a cutover and archive. So in the short term, a little more cost of goods sold, and then in the longer term, better cost of goods sold. But from a revenue perspective, should be roughly neutral.

Stan Berenshteyn, Analyst

Got it. Thank you.

Operator, Operator

And that concludes our question and answer session. I will now turn the conference back over to Mr. Peter Gassner for closing remarks.

Peter Gassner, CEO

Thank you, everyone, for joining the call today, and thank you to our customers for your continued partnership and to the Veeva Systems Inc. team for your outstanding work in the quarter. Looking forward to talking with you again at our upcoming Investor Day, October 16. Thank you.

Operator, Operator

And ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.