Procore Technologies (PCOR +3.75%), a provider of cloud-based software for the construction industry, released its Q2 FY2025 results on July 31, 2025. The company reported GAAP revenue of $323.9 million, above the analyst estimate of $312.4 million. However, profitability faced pressure as non-GAAP operating margin slipped to 13% from 18% in Q2 2024, and Free cash flow (non-GAAP) dropped significantly from $47 million in Q1 2025 to $11 million. While GAAP revenue growth outpaced internal and external forecasts, the quarter showed trade-offs as operating expenses expanded. Overall, the period was defined by strong customer momentum and product innovation, set against compressed margins and a cautious near-term outlook.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $0.35 | $0.26 | N/A | N/A |
| Revenue (GAAP) | $323.9 million | $312.4 million | $284.3 million | 13.9% |
| Non-GAAP Operating Margin | 13% | 18% | (5.0 pp) | |
| Non-GAAP Gross Margin | 83% | 87% | (4.0 pp) | |
| Non-GAAP Free Cash Flow | $10.6 million | $46.6 million | (77.2%) |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Company Overview and Focus Areas
Procore Technologies develops cloud-based construction management software that connects project teams, owners, contractors, and specialty trades. Its platform addresses the fragmented and traditionally paper-based processes that dominate the construction sector. By digitizing project management, financials, and communication, it aims to improve collaboration and reduce risk for stakeholders.
The company’s growth strategy centers on delivering a subscription-based product that encourages broad user participation without per-user fees. Success depends on increasing construction volume managed through its platform and cross-selling new modules such as analytics and financial management. Procore also focuses on continual product development, including integrating artificial intelligence and building information modeling (BIM) features. Customer expansion, especially among high-value clients and international markets, remains a priority.
Quarterly Highlights: Revenue Growth, Margin Pressure, and Investment
GAAP revenue rose 14% to $323.9 million, comfortably beating both company guidance and consensus estimates. Management attributed this to continued success attracting new clients and expanding within existing accounts, with total organic customers reaching 17,501. The count of customers each contributing more than $100,000 in annual recurring revenue climbed 15% year over year to 2,517. The quarter saw 195 net new organic customers added, emphasizing stable demand even as the quarter progressed.
The majority of Procore’s business comes from subscription licensing, with a reported 95% gross revenue retention rate. This metric, which tracks the proportion of recurring revenue retained from existing customers, was 95%. However, growth came with a cost: operating expenses increased as the company invested in research and development (R&D) and sales initiatives. R&D expenses (GAAP) grew 23% to $88.9 million, with capitalized software development costs rising from $10.2 million in Q2 2024 to $17.2 million.
Several one-time or non-recurring events shaped the quarter. Procore completed two acquisitions -- Novorender and Flypaper Technologies -- to bolster its Building Information Modeling (BIM) tools, a foundational set of products allowing digital planning and collaboration on building projects. The company also achieved a key milestone for selling into government accounts by receiving the Federal Risk and Authorization Management Program (FedRAMP) “In Process” designation for cloud security compliance. These moves signal an intent to expand its product suite and enter regulated sectors with large project pipelines.
Non-GAAP operating margin fell five percentage points from the prior year, while GAAP gross margin dropped four points. Free cash flow (non-GAAP) fell sharply to $10.6 million from $46.6 million in Q1 2025. Nonetheless, the company ended the quarter with $324.3 million in cash and equivalents, despite returning approximately $100 million to shareholders through stock repurchases in the first half of 2025. Remaining performance obligations (RPO) posted double-digit growth, suggesting ongoing sales momentum and multi-year engagement from larger customers.
Looking Ahead: Guidance and Key Themes for the Remainder of Fiscal 2025
Management projects Q3 2025 revenue between $326 million and $328 million. This range implies year-over-year growth of 10–11%, down from the 14% growth rate reported in Q2 2025. Non-GAAP operating margin is expected to hold steady between 13% and 13.5% for the full year 2025. The full-year 2025 outlook now anticipates $1,299–$1,302 million in revenue and a non-GAAP operating margin of 13–13.5%. Despite beating expectations this quarter, leadership chose not to raise full-year 2025 targets, citing the potential for slower construction activity and ongoing macroeconomic risks such as tariffs and project delays.
Procore’s management continues to emphasize balanced growth and cost discipline. Management did not offer new or expanded guidance outside the published ranges and stressed a conservative approach in forecasting, noting the breadth of scenario planning undertaken in response to ongoing sector uncertainty. Investors and analysts should monitor margin trends, cash flow stability, the pace of large-customer wins, and the sustainability of the international growth strategy in the months ahead.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
