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DATE

Wednesday, June 3, 2026 at 5 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Peter Gassner
• Chief Financial Officer — Brian Van Wagener
• Executive Vice President, Strategy — Paul Shawah
• SVP, Finance & Investor Relations — Gunnar Hansen

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TAKEAWAYS

• Total Revenue -- $883 million in fiscal Q1 2027, above internal guidance per management statement.
• Non-GAAP Operating Income -- $395 million in fiscal Q1 2027, directly reported for the period.
• Professional Services Revenue -- Record quarter, with growth attributed to strong project execution in R&D and consulting rather than solely implementation projects.
• Commercial Subscription Revenue Guidance -- Increased by $15 million for the year, with $10 million attributed to the Ostro acquisition's forecasted contribution in the next three quarters.
• Ostro Acquisition -- Management described Ostro as a "brand engagement platform" aimed at improving compliant engagement between pharmaceutical brands, healthcare professionals, and patients.
• AI and Agentic Labor Strategy -- Veeva Falcon targets immediate replacement of high-volume manual processes in clinical trial documentation and safety case handling, with pricing likely "you can imagine most likely that Falcon will be charged by the document, most likely. We haven't fully decided that. You can imagine that safety will be most likely charged by the case," according to management discussion.
• Vault CRM Migration -- Over 150 customers live, with more than 40 migrations completed to date, and a current win rate exceeding 80% this year in top-20 decisions referenced by management.
• Crossix Segment -- Continued quarterly strength, driven by innovation in measuring emerging digital channels including OpenEvidence and Meta, leading to market share gains.
• AI Commercialization -- Early adoption in commercial content, with over 10 customers live on quick check agents; further scale-up planned during the year.
• Guidance and Macro Trends -- No change in macro environment reported versus prior period; outlook assumes current conditions persist.

SUMMARY

Veeva Systems Inc. (VEEV 0.82%) reported a quarter with several major product, customer, and strategy developments aimed at expanding both their addressable market and customer relationships. Management confirmed the official introduction and near-term prioritization of Veeva Falcon, an AI-driven suite designed to provide "agentic labor" for high-volume data management processes in life sciences, with initial launch efforts directed to customers operating on Veeva Basics due to standardized platform usage. Executives indicated that the Ostro acquisition will play a strategic role in enabling compliant, on-demand engagement between biopharma brands and healthcare professionals, integrating with other Veeva and third-party tools for seamless information flow. Management further clarified that professional services outperformance was largely driven by consulting activities uncorrelated with subscription implementations, reducing its value as a forward indicator. Additionally, internal application of generative AI tools such as Claude Code is cited by leadership as supporting heightened productivity and a slower pace of hiring, especially in engineering and R&D cost centers.

• Gassner announced, "Falcon, for example, reports directly to me. This is our first step into digital labor," underscoring leadership focus on Falcon's disruptive AI initiative.
• Shawah stated, "The remaining 4, there's 10 wins for Veeva so far, 6 for Salesforce. So there's 4 decisions left. We expect to win the majority of those 4 remaining decisions."
• Van Wagener clarified, "for this year, our overall expectation had been for AI to be fairly immaterial outside of Ostro." He further noted that AI-related margin impacts are incorporated into company guidance for the year.
• Management detailed that Falcon's early focus will be on standardized, high-volume operational tasks, asserting that its contribution will be "Definitely all accretive because this is not a market we address today. We don't play in that market today. This is not type of labor or work that we supply. So it's definitely going to be accretive." rather than cannibalistic to existing revenue streams.
• Gassner named over 100 Basics customers in the clinical segment as primary early adopters for Falcon, due to standardized adoption and uniform configuration, suggesting smoother deployment and immediate use cases.
• Crossix’s diversification was highlighted by Van Wagener, who asserted, "we don't see that kind of major concentration risk that would impact the business," referencing broad client coverage and product breadth.

INDUSTRY GLOSSARY

• Agentic Labor: Automation of skilled, repeatable business tasks using AI-driven “agents” that fully replace certain manual functions previously performed by humans.
• TMF (Trial Master File): A regulatory-required collection of documentation and data related to clinical trials, commonly used in pharmaceutical research.
• Veeva Basics: Veeva's standardized platform and process offering targeted at smaller biotech firms, featuring uniform configurations for easier implementation and support.
• Crossix: Veeva’s business unit focused on digital measurement and analytics for pharmaceutical marketing and audience segmentation, especially across emerging digital channels.
• Ostro: Veeva's newly acquired digital engagement platform specializing in compliant, real-time information delivery for healthcare professionals and patients.
• GLP-1s: A class of drugs (glucagon-like peptide-1 receptor agonists) used primarily in diabetes and obesity management, referenced in healthcare analytics segmentation.

Full Conference Call Transcript

Gunnar Hansen: Good afternoon, and welcome to Veeva's Fiscal 2027 First Quarter Earnings Conference Call for the quarter ended April 30, 2026. As a reminder, we posted prepared remarks on Veeva's Investor Relations website just after 1:00 p.m. Pacific today. We hope you have 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-K. Forward-looking statements made during the call are being made as of today, June 3, 2026 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 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 measures 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: Thank you, Gunnar, and welcome, everyone, to the call. We had a strong start to the year, delivering results ahead of our guidance. Total revenue in the quarter was $883 million with non-GAAP operating income of $395 million. Our execution continues strong across the business. And it's an exciting time for Veeva and for life sciences overall, as we execute against a clear vision for industry AI. We'll now open up the call to your questions.

Operator: [Operator Instructions] Your first question comes from the line of Joe Vruwink with Baird.

Joseph Vruwink: Great. I was hoping to go into a bit more detail on Veeva Falcon. This certainly seems more complex and consequential in scope. I think you call it disruptive in the remarks. Can you maybe expand on what this product is targeting and how you envision customers operating in drug development with maybe now this interplay between Vault, the Vault standard agents and Falcon?

Peter Gassner: Joe, this is Peter. I'll take that one. Yes, there's a lot of things to unpack there. What you're seeing is sort of the next chapter of Veeva in our industry cloud, right? We used to talk about applications, data and consulting to make the industry more efficient and effective. Now we're talking about software, AI, data and consulting, right? So Falcon specifically is at the agent layer and that's agentic labor. So fully replacing parts -- jobs that people used to do. People who used to do these jobs using our applications, now will deliver the agentic labor to do that. So it's a big new area for Veeva.

It's something we haven't done before, and that's why it's disruptive. Those agents have to become users of our applications, which means our applications have to become very good in operating at a headless manner. Now at the same time, we have agents inside of the Vault applications. So that's Vault AI inside of the applications. That's where when people are actually using the application because there's definitely things that people still need to do in our applications, that's where the AI agents can help them do it more efficiently, much like you might use ChatGPT or Gemini at your work, okay, that helps you do it more efficiently.

But for life sciences because it's kind of specific what they do and some of it is a bit standardized due to regulations and just efficiency concerns, some of those jobs or slices of people's jobs our agents would just do those for them. And that's never something that we set out to do when Veeva started. Why? Because there was not technology available, there was not probabilistic technology available to do this. There was no AI that could do this. Now there is. So that's why you see Veeva leaning into this new market.

Operator: Your next question comes from the line of Brian Peterson with Raymond James.

Brian Peterson: So maybe just a follow-up on that. As we think about pharma appetite for AI applications more broadly, I'm curious what areas you think they lean into first and how we should think about the transition from traditional SaaS applications to AI in pharma. Peter, I'd love to just get your perspective on that.

Peter Gassner: Well, I would say it's not that they're thinking mainly about transition from applications into AI applications. What they're really leaning into is this new technical architecture, we call it the MAAP architecture of Models, Agents and Applications. So the applications that they get from Veeva, they're looking for them to be more efficient, to have AI in there and help the users. What they really want to get to be is an agentic biopharma so that agents can do a lot of the work. And so the humans can do the more higher value work. And of course, to do that, they leverage models like Anthropic or Gemini.

To put it in perspective, there's -- I don't know the exact number, I should, off the top of my head. But let's just say there's 100 million documents collected from clinical research sites around the world every year having to do with clinical trials, they have to be checked for quality and they have to be sorted into the right places. That's work that agents can do, it's difficult, specific work, but we can make agents that are very specific on that. Agents that take in a bunch of free text via e-mail or other channels and have to sort it out to see, is this a product complaint? If so, how to handle that? And categorize that?

Or no, this is an adverse event. This is the issue with a medicine-making somebody potentially ill, okay? Well, what is that illness? Is that a headache or a throbbing headache? How serious is that? Is that involved in the clinical trial? What drug is that involved with? We will make agents to do that and do those very standard things. And this is an area where I'm enthused because Veeva can lead. This is where -- just like for cloud applications, you got the very specific industry-specific cloud applications could add tremendous value if you went to the last mile and solve the thing.

In industry-specific agents, agentic labor, we may be able to go the last mile and make specific agents that just do the thing for life sciences because we'll go to that last mile and make it work, we may make agents that are better safety case processors and more reliable than humans.

That's a heck of a lot of work, but we have a structural advantage to do that because we're deep in life sciences, we have a consulting in life sciences, and we have the applications that those agents can use, it's the same reason why Claude is getting very good at Claude Code because they have the agent, the coding agent and they have the model, and they have 2 layers. We don't have a model we use, but we have applications and the agents. So that is a structural advantage. And I do want to emphasize again, the consulting because a lot of this is about change management.

Operator: Your next question comes from the line of Ken Wong with Oppenheimer.

Hoi-Fung Wong: Brian, I wanted to just touch on the R&D business real quick. It looks like a really strong start to Q1, potentially kind of outpacing the full year guide by a couple of points. Yet only raised the full year by $5 million. Can you provide some context into kind of the rest of the year? Is that conservatism? Is there something that we're not seeing around the corner there?

Brian Van Wagener: Yes. Ken, I think first off, we are really happy with the growth of R&D in Q1. It's a healthy business overall in DevCloud and Quality Cloud, very long way to go in that business. I think the main factor you're seeing there is the same dynamic that we called out at the start of the year, which is we've got a number of products that are very large, but are also early in their life cycle, eCOA, RTSM, EDC, Safety, LIMS. And so we're seeing those products scale and grow, but they're still early in their scaling and you're seeing that factor drive the full year growth.

But pleased with the progress that we're making with the momentum coming out of Q1 and what we see for the balance of the year.

Operator: Your next question comes from the line of Alexei Gogolev with JPMorgan.

Alexei Gogolev: Glad to hear you had another strong quarter for Crossix. What did you see in Crossix activity in the quarter in terms of demand and deal size and mix and verticals. And how should we think about growth durability through the year, specifically what's driving the share gains that you called out?

Paul Shawah: Yes. Alexei, this is Paul. Really strong quarter with another continued strong quarter with Crossix but just take a step back and think about the overall market. Digital is a very healthy end market. Pharma companies are spending more and more in the digital space because there's more channels. They're making more investments in those markets. So that's really good for Crossix over the long term. You'll see fluctuations quarter by quarter, but it's a really healthy market for us. And we are investing a lot in the product.

And I saw some of this at our Summit, when we had our Summit, we had -- there's a lot of innovation at Crossix, measuring new channels like OpenEvidence as an example, Meta, those are things that we didn't historically do. We didn't have to measure OpenEvidence before because it wasn't a thing, and now it's a thing and Crossix is doing that. So we're innovating across the product in a really, really deep way, and that's driving market share gains for us. So really pleased with the execution in Crossix and a lot of the progress we're making, and I expect that to be a durable growth business for us over the long term.

Operator: Your next question comes from the line of Rishi Jaluria with RBC.

Rishi Jaluria: Just wanted to drill a little bit more into Falcon. I think one thing that we've seen increasingly in this AI era versus the SaaS and cloud era, is there's more desire for customization especially as a result of how flexible these tools have become? How do you think about the opportunity not just to build your own custom Falcon agents to solve industry-specific problems, but also give your customers and your partners the ability to build heavily customized, heavily tailored solutions for the unique problems that they may have and kind of open up a little bit more of a platform story.

Peter Gassner: Yes, Rishi, this is Peter. For Falcon, the actual effort there is taking the path less traveled. So that's a platform for us to build and operate standard agents to actually solve the problem for the industry. So it's not really a platform for customers to develop their custom agents. For custom agents that live inside of our applications, of course, they can use Vault AI for that. For custom agents that are outside the applications, there are many agent building tools, and they will dip into the Veeva applications operating in a headless manner. But we're not -- with Falcon, we're not making AI tooling. We're actually agentic labor to solve the problem.

We are the believers in simplification and standardization of the industry, and that's how the industry will grow and Veeva will grow along with it. I think, Rishi, the thing to parallel with is in 2012 for the first time we laid out our first visions for Development Cloud. 2014, they got sharper; in 2016 that really became apparent what we were doing. We're trying to simplify and standardize and integrate the tech of the development area of life sciences. That's not anything that anybody asked us for, right? That's the vision that we have, and that's not anything that anybody has tried to do before. Falcon is the same thing. It's the same magnitude of disruptive innovation.

It's not giving tooling to people to design agents. This is to designing and operating the standard agents for the industry rather than the industry having to hire humans for those specific jobs. So that way, humans can do the more important things and the industry can produce more medicines at the end of the day, and that's how the industry grows. If they can get more of the right medicines to the right patients because that doesn't always happen today. If that can happen, that's how the industry grows and Veeva grows along with it. I was -- when we're starting off something big like this, we always think we want to deliver $10 of value.

And if we do that, it's okay to take $5 for Veeva, right, if we're delivering that much value. I think Falcon is just going to deliver value. It's going to be great revenue for Veeva, but it's going to deliver value far above and beyond that for the industry, and that's going to allow the industry to grow. It's a disruptive thing. It's not an incremental thing or a tool.

Operator: Your next question comes from the line of David Windley with Jefferies.

David Windley: Good segue. Peter, how are you -- on Falcon, how are you pricing Falcon? And how are you deciding which labor roles to address or to attack with Falcon agents?

Peter Gassner: Those are 2 great questions, and I'll take them in reverse order because the second one comes first, which labor rules are we looking to do? I think the most right there ones are actually the simplest and the highest volume. And actually, when you look inside of life sciences, those are the areas where they have a tendency, some of the companies to do some outsourcing today already. So that makes it also -- they're used to outsourcing. Of course, they would outsource that to humans.

In Falcon, the first ones we're looking at are processing of documentation involved with clinical trials, specifically the stuff that comes from clinical sites, the millions and millions, hundreds of million, tens of millions of documents that come from research sites. They need to be collected, inspected for quality, categorized, the metadata pulled out of them, filed in the TMF the right way. So that's one, the intake and control of documents. Another one is the safety cases, the safety cases that come in, the triage and the categorization and the collection of the safety cases. So those are the 2 main ones, we'll also take on regulatory health authority correspondences because that's another high-value one, and there'll be more.

Now in terms of how we're going to charge for those, you can imagine most likely that Falcon will be charged by the document, most likely. We haven't fully decided that. You can imagine that safety will be most likely charged by the case. So that's how that is. Some -- if you have an agent, first all they did is a very young kid outside the house, picking strawberries in the field, plus they would pick you up, you'd go out there and they didn't pay you by the hour, they paid you by the flat because that's how that worked. If we had an agent picking strawberries, they'd be paid by the flat.

Operator: Your next question comes from the line of Andrew DeGasperi with BNP Paribas.

Andrew DeGasperi: I wanted to ask a clarifying point you mentioned earlier and then just really on the Veeva Falcon. You're mentioning the displacement of potential roles at these larger firms. I'm just wondering, is there anything that you would consider timing-wise from an economics perspective. So let's say, these roles were to move in another direction? Do you think it could potentially cannibalize some of the revenue that you get from those customers? Or do you think it would be all accretive?

Peter Gassner: Definitely all accretive because this is not a market we address today. We don't play in that market today. This is not type of labor or work that we supply. So it's definitely going to be accretive. And these agents, they need a system of record. You can't operate them without a system of record. So it definitely doesn't cannibalize the systems of record. It's an excellent question, but I actually hadn't considered that. And I don't see -- I mean the future is pretty difficult to predict. But as of now, I can't see any potential for cannibalization.

Operator: Your next question comes from the line of Jailendra Singh with Truist Securities.

Jailendra Singh: So I want to better understand your comments about the guidance, assuming no significant changes in the macro environment. Clearly, Q1 results came in ahead of expectations. Did you see macro trends improving in Q1 versus when you gave guidance, and now you assume that guidance reflects trends remain at these levels. Just could you give us some flavor about in which areas you're seeing pockets of strength? You've called out Crossix and areas where recovery is still ahead of us. Just give us a little bit color about the macro development.

Brian Van Wagener: Jailendra, this is Brian. I'll take this one. I think overall, what we see in the macro is an environment that is unchanged from when we gave guidance a few months ago. And so there are pockets that are always relatively stronger or weaker. But overall, the business is performing well and our customers are performing really well. And there are times of change that they go through regulatory changes, changes in their business and the patent profile of their portfolio, but that ebbs and flows in there, they're quite adept at navigating that change. And so we continue to see a strong and healthy end market that we're selling into.

We see that across the commercial as well as the DevCloud and Quality side, and we're feeling good about that, and that's all factored into our guidance for the balance of the year.

Operator: Your next question comes from the line of DJ Hynes with Canaccord.

David Hynes: Paul, I'm curious if you've had any update on top 20 CRM migration decisions or discussions that you're having. And I guess related to that, I think at one point, you had said, hey, we're going to kind of pause on the commercial cross-sell opportunity and focus on migration first. When do you start leaning in on the cross-sell conversations with the customers that have made a decision to go with Vault.

Paul Shawah: Yes. So DJ, yes, I can give you an update. First, things are going really well. Just across -- broadly across all CRM, we had -- you probably just saw over the last 2 weeks, we had a couple of big announcements with Teva and Merck KGaA. Those are significant wins. Obviously, very proud they selected us globally. We're going to make them very successful. Just maybe a clarifying point. We don't actually count them in the top 20. We built a top 20 list about 5 years ago. We created it. We use it across all of our products. We haven't changed it in the last 5 years.

And that list includes the largest 17 biopharmas, which generally don't change year-by-year. And then kind of the final 3 on the list. They change a little bit annually, but we've kept our list the same. And those final 3 are Astellas, Biogen and Daiichi Sankyo. So we won Merck KGaA and Teva, but we don't count them in that top 20. The remaining 4, there's 10 wins for Veeva so far, 6 for Salesforce. So there's 4 decisions left. We expect to win the majority of those 4 remaining decisions. And we're very confident in that, and we have -- I'll give you maybe one stat from this year, overall, our win rate is over 80%.

So we're just executing really, really well in the Vault CRM space. I expect that win rate to continue. And that showed through with all of the innovation that we have. We have customers now, over 150 customers live on Vault CRM. We've done a lot of migrations. It's over 40 migrations that we've done. We're just executing well, and now we have customers turning on AI at Vault CRM. So a lot of the innovation that we talked about, it's there, customers are using it. So it's just -- it's a lot of excitement. There's a lot of energy and a lot's happening in the CRM space. So we're pleased where things are headed there.

Operator: Your next question comes from the line of Charles Rhyee with TD Cowen.

Charles Rhyee: Paul, I just want to follow up there because I think with the last quarter, the quarter before, you guys have kind of indicated that you could have expected 14 of the top 20 to retain 13, 14. Listening to your comments now, it sounds like maybe you are stepping back from that, is maybe 13 the right number to think about? Just maybe help us understand that part of it. I appreciate it.

Paul Shawah: Yes. No, there's only 4 decisions left that will play out through the rest of the year. We think we're going to win the majority of them. All the decisions are not made. So you certainly don't want to make a prediction on them before the decisions are final. So we still feel really good. And that's why I said the majority -- we expect to win the majority. And again, will play out through the remainder of the year.

Operator: Your next question comes from the line of Jeff Garro with Stephens.

Jeffrey Garro: I want to ask about the strength in professional services revenue, both in the quarter and in the outlook. Curious if the drivers are there, whether it's just overall demand, whether it's insourcing versus outsourcing or if it's driven by AI or other products? And on that last note, if professional services demand is at all a leading indicator of future monetization opportunities with some of these usage-based models in AI?

Brian Van Wagener: Jeff, this is Brian. I'll take this one. Really proud of the services quarter in Q1. It was a record quarter for our services team, and we saw strength really across services and across the entire breadth of our portfolio. The main drivers of the outperformance were strong project execution in R&D as well as in our business consulting team. But I think the main thing here is that it was not just in implementations. A lot of that outperformance was in the consulting work and the work that happens outside of implementations, including things like digital events that are completely unrelated to deployments. We also saw some of the expected uptick from Vault CRM migrations.

It contributed to some of the increase year-over-year. It wasn't the main driver of top line outperformance but a contributor to the year-over-year growth. And so all those factors when you bunch them together is why we generally caution against using services as a leading indicator of subscriptions. There are a lot of services that we provide, especially in business consulting that really are not related to the underlying subscription implementations. And so I wouldn't read those 2 together.

Operator: Your next question comes from the line of Ryan MacDonald with Needham & Company.

Ryan MacDonald: Congrats on the nice quarter here. Maybe one for Peter or Paul on this. Can you just provide a bit more color on the strategic rationale around the Ostro acquisition. Obviously, we're seeing sort of doctors increasingly using AI applications due to prescription medication, drug-to-drug interaction type questions. And so it seems to be a natural fit there. But how do you drive sort of visibility and awareness of Ostro within that population and maybe get docs out of something like an OpenEvidence or DocGPT. And then, for Brian, as you think about the commercial revenue -- subscription revenue guidance increase, how much of that was attributed to Ostro contribution?

Paul Shawah: Yes, Ryan. So Ostro is super exciting. If you -- the buyer of Ostro is the biopharma company, the user of Ostro is the health care professional or the patient. So it's a brand engagement platform for biopharma companies to help HCPs and patients ask questions and get answers instantaneously and do that in a compliant way. That's very, very hard to do. It's hard to do that at scale. It's hard to do it in a compliant way, and that's exactly what Ostro does. So we are marketing to -- we're selling to the biopharmas and they're driving the engagement and the traffic to the patients and the health care professionals that use that.

Now it's -- why did we do this? And I talked a little bit earlier about how digital is increasing and we're seeing new channels, and you mentioned OpenEvidence. And OpenEvidence is important from a number of different perspectives, one which I referenced earlier from a measurement standpoint, as companies spend more with OpenEvidence, it's more important that you measure those channels. But also as they turn the channels like OpenEvidence for information, that's an entry point into going to a pharma company's digital site and using Ostro on that site to get information really quickly. So all these pieces they all natively work together. This is a core part of our strategy.

It unlocks better engagement with HCPs and patients. It also unlocks something that we talk a lot about at our -- we introduced at our commercial summit called Commercial Evidence. You may have seen Peter refer to that in the prepared remarks, but this is groundbreaking. This is about understanding what HCPs and patients are thinking about, what are they asking about and getting it in an unfiltered way. So that you can gain this commercial evidence, which can help you identify barriers to getting medicines to patients. So it's a really exciting area.

It's going to play a bigger and bigger role in Commercial Cloud over time, and we see it as a really significant acquisition and a potential long-term growth opportunity for us. It generated a lot of excitement for us as it relates to that.

Brian Van Wagener: And on the second part of your question, this is Brian, we acquired Ostro late in Q1. We expect it to contribute about $10 million in the remaining 3 quarters of the year. So it's about 2/3 of the $15 million increase in commercial subs overall for the year.

Operator: Your next question comes from the line of Tyler Radke with Citi.

Tyler Radke: I was wondering if you could double-click on some of the wins on the R&D and Quality and Development Cloud. Were there a lot of top 20s included there? Can you just talk about the pipeline, particularly in Development Cloud. I think last quarter, you did talk about maybe a bit of an air pocket, but just curious how the pipeline is shaping up for the rest of the year.

Peter Gassner: I'll take that one. It's Peter. Pipeline is good. The level of engagement is pretty comprehensive from all the way from Veeva Basics, small biotechs. We continue to win a lot of those that are going on Veeva Basics. And by the way, those will be some of the first consumers of things like Falcon and our other AI solutions. To up -- to where we're right now talking about some of the most strategic deals we've ever done because the aperture in Development Cloud is just getting so much broader with Falcon and Safety and clinical data management and clinical all working together and Vault AI in there as well. So we're getting more and more strategic.

Actually, in the quarter, we didn't have any particular large top 20 wins in Development Cloud in the quarter, and that happens sometimes. It's -- pipeline is strong. What happens sometimes where things don't align on the quarter boundaries, we had a number of great enterprise wins in safety, also in quality. I know we had some in clinical as well. So really happy with the progress there. There's definitely growing momentum that I feel in the EDC area that's as a result of our eSource initiative. Now we have to prove that out first. If you, look, step back, what are we doing in Development Cloud, we are expanding its potential super broadly.

I think our vision is now very clear to our customers. So at our R&D Summit recently in Copenhagen for Europe, it was the largest crowd we've ever had and the most excitement than we've ever had by far. Why is that? They're looking at Veeva doing an eSource initiative out to the clinical research sites to bring the data and documentation data, mainly in without any intermediary steps right into the pharmaceutical system that's never been done before. Then they're looking at Falcon. Wow, that's never been done before. And they're looking at Vault AI, how productive that could make them plus the growth in our application areas, the growth we're getting in the RTSM area, the interest there.

We signed our first top 20 last quarter on that for enterprise-wide ELA and our ePRO product in the clinical data management area. I think our vision is becoming clear and it's becoming very clear that we can execute on it and integrate it. So super exciting times. No particular top -- large top 20 applicant wins to report in the quarter, but that's just a timing thing.

Operator: Your next question comes from the line of Hannah Rudoff with Piper Sandler.

Hannah Rudoff: I wanted to ask another question on Falcon. On the development of that platform. Just wondering what exactly is going into the next 5-plus months ahead of your early adopter launch? And what has been done today and what still needs to be done? And how closely you're partnering with your customers ahead of that launch?

Peter Gassner: Lots of things need to be done. So developing the platform layer, which we're doing well, assembling the team, assembling that in the hurry, we're really much in a hurry right now. And it's a disruptive technology. Falcon, for example, reports directly to me. This is our first step into digital labor. You can't -- you have to operate that effectively, back when we were the CRM company, way back when before we went public, Vault was this tiny little thing that reported directly to me. Falcon is like that.

So we have to build the platform out of the team, get the early customers sign early agreements with the early customers to use their data and documents to quality control and basically train our agents, get the first customers live and happy. It's great hard work to do, Hannah, but it's something we're very used to. It's what you do on any new product, nothing particularly different there.

I guess one small one is there's a small part of it that goes a little faster than it used to, and that's the actual coding of the platform in the deterministic parts where we can lean in and leverage things like Claude Code to do that faster than we did before. But other than that, all parts of the cycle are actually the same.

Operator: Your next question comes from the line of Corey DeVito with Wells Fargo.

Stanislav Berenshteyn: This is Stan on for myself. There must have been some confusion when I dialed in. But Brian, I want to ask you for Q1 EBIT margin, I think it arrived at 45%, you're guiding 44% for the year. Is there anything to call out on COGS or operating expenses as we think about the balance of the year? And is there any non-Ostro AI-related revenue embedded within guidance?

Brian Van Wagener: Stan, so on the first part of your question around COGS and overall margins for the year, I think the main factor that you see that's different this year is some of those services investments that we're making that we've talked about in the past and had been ramping up over the course of last year. And so you see that effect in the services gross margins if you look year-over-year. On the subscription side, year-over-year, it's a little bit of a dip in the margins. That's really more a function of last Q1's outperformance.

You recall we had a breakout quarter in Crossix audiences, which really flowed through to the bottom line as well as certain expenses that shifted at that time out into Q2. So last Q1 was really an outlier, and subs is really on kind of a steady trajectory here. We're continuing to invest across the business. You see us making investments in our data network to support data cloud in acquisitions like Ostro in Falcon and Vault AI. So there are a lot of investments we continue to make to drive growth. but feeling good about the efficiency of the business and the guide that we're posting for the balance of the year.

There was a second part of your question, Stan, I think I missed.

Operator: Your next question comes from the line of Craig Hettenbach with Morgan Stanley.

Craig Hettenbach: Peter, given you're furthest along on AI and kind of the Vault CRM agents that launched back in December. Curious kind of what the initial uptake is there. If there's anything you want to tie in to the recent commercial Summit? And then for Brian, just a question on just kind of cost of compute and how you're thinking about the puts and takes on gross margin as AI ramps?

Peter Gassner: In terms of the commercial agents, it's actually the one where we were first out to marketplace was in the commercial content area, and we have more than 10 customers live, and it's going really well in our quick check agents, and we're learning a lot there. At Commercial Summit, we had a number of customers live on some of our agents in CRM, actually generating commercial evidence in these agentic call reports. So pretty happy with that. I think this is the year where we'll scale that more. So the -- I would say, Craig, early adopters -- or Stan, early adopters live. But now we have to scale it in both of the commercial areas.

Brian Van Wagener: Yes, and this is Brian on the second part. So picking up the Stan's second question was around AI revenue, which I think for this year, our overall expectation had been for AI to be fairly immaterial outside of Ostro. And we're really focused on getting AI live in all of our customer areas, getting the product excellence, getting to customer success. It starts with that deep value creation for customers. So on the margin side, you also don't see a material impact, Craig. And in Vault AI, where its usage based on tokens. I think we have a pretty good understanding of what that dynamic looks like, and it's factored into our guidance.

But I don't expect there to be a material impact on margins driven by AI this year.

Operator: Your next question comes from the line of Adam Hotchkiss with Goldman Sachs.

Adam Hotchkiss: Peter, I wanted to ask another one on Ostro. I thought it was interesting in the prepared remarks that you characterized this as a start-up within Veeva. Just curious what the innovation framework looks like in that type of environment? And how it compares to how you've innovated historically? And then Brian, just on AI driving efficiencies within your operating expense base. Maybe talk a little bit more about the progress in the R&D or again where else in the cost structure we might see some of that start to show up?

Peter Gassner: Adam, in terms of operating as a start-up, we -- in an operating model for Veeva, we have a notion of the start-up models in the core models. And in the core models, we're organized functionally like the central sales team, engineering team, things like that. In the startup model, it's all fully contained under CEO, and we use that either when the market is very different or when the product really needs to evolve. So Ostro is in the start-up model. Everybody who works on Ostro is fully reporting to the CEO of Ostro.

There's guidance and help from other functional areas of Veeva, but it's -- and they're certainly inroads like, okay, Ostro doesn't have to use their own master subscription agreement anymore and all that type of stuff. So it operates as a start-up, they can retain its speed, but it has a really smooth ramp up. And that's been a key to our success.

If you look at how does Veeva keep having good products all the way from manufacturing to drug safety, to CRM, to clinical operations and everything else in between, we have a good model for knowing when something needs to be a start-up, but we also -- we build great pieces of the puzzle, but we know how the puzzle fits together. So if you look at Ostro, so partnership with OpenEvidence, doctors on OpenEvidence, hand over to Ostro, can't answer that question, hands over to CRM to a human.

So Ostro knows where they have the autonomy to function but they're part of a bigger picture and they know where they need to function and where they don't need to function so that we provide great value for the customer. That's our structural advantage, right? That's what -- why we're confident, we're on track for our $6 billion of revenue and double that amount of value for our customers in 2030 because we're building a bigger picture that fits together. You have to be able to be have a startup model to do that, and you have to be a very attractive place for start-ups of the right type to want to come to Veeva to create excellent value.

We don't do that many start-ups acquisitions, but when we do, we figure out how to operate them and then they succeed. We bought Crossix in 2019, Crossix is, I don't know, how many times bigger than it was since then. And it spawned the whole Compass as well. That was the plan for how to operate Crossix inside of Veeva. So that's something I'm very proud of. And then Brian, over to you.

Brian Van Wagener: Yes. On your second question around the use of AI internally. We use AI throughout the company, we've got general-purpose tools and then also specific tools and major functional areas. Probably the most significant place for using it is around the product because that's where we spend the most. And so you heard Peter mention earlier, in product engineering, we use Claude Code, and it's come a long way. So we're seeing great efficiency from that tool. And I think in general, that means we'll hire a little less than we would have and accomplish more than we would have and go a little bit faster.

But for us, it's more about productivity and the combination of hiring a little less, accomplishing a little more, we think easily outweighs the token cost, and that's all factored into our guidance.

Operator: [Operator Instructions] Your next question comes from the line of David Larsen with BTIG.

David Larsen: Congratulations on another great quarter. Can you talk a little bit about your ability to take share from the broader ecosystem? In particular, like for CROs, for example, it sounds like you're expanding pretty deep and pretty fast into more R&D efforts, like are you taking some of the long sort of expensive labor efforts that the CROs would do and enabling your biopharma clients to do that in-house with your AI? And then also on the commercial side, like, what is your vision for what the AI could actually do? Could they make calls to doctors? Could they send text messages to doctors? And would you potentially take share from Doximity, for example, or others like Doximity, like LinkedIn?

Just are you taking share from the ecosystem and enabling your clients to do that work internally?

Peter Gassner: Yes, I'll take that one. In terms of where can agentic labor play and what can agents do. The best places to do are high-volume repetitive work that actually gets outsourced. So that type of work actually it's not so much the CROs, it's other specialized labor providers that do that. So I think this could actually be beneficial for the CROs because that -- we can do that lower volume work, which is generally done by the pharma company or a specialized outsourcer. We can do that cheaper, faster, better. That will hopefully allow pharma companies to run more trials, and that's where the higher margin work is for the CROs.

Then in commercial, that won't be -- agentic labor there will not be -- you're not going -- you're going to have helper agents that help the field teams do things, but I don't think you'll have -- you will -- you're not going to replace a field person. That's about managing relationships, things like that. There may be some things in commercial for example, there's a medical legal regulatory process that is burdensome and expensive and occupies many parts of people's time in Life Sciences. I think that can largely be automated, 70% or more with the right agents over time. But the actual field person, I think, it's going to augment them.

Yes, and the agent might send and it might help him draft an email, it might send a text reminder on their own behalf. But they -- and in commercial, mainly though, it's going to enable the field to be more productive and enable the pharma companies to do things they could never do before, which is have a conversation of a certain type with a health care provider at midnight when they wanted it. Ostro can do that. And they never had anything that could do that before. So it's not one size fits all with these agents.

Operator: Your next question comes from the line of Steven Valiquette with Mizuho Securities.

Steven Valiquette: So I think just for us, it's good to see the positive Crossix results and outlook for the rest of this year, which is pretty consistent with what you communicated previously. But I guess, if you can just remind us maybe at a high level without giving any specific numbers, just on the current level of customer concentration within Crossix. For example, if one single biopharma customer were to pull back, would that theoretically change the full year outlook? Or the Crossix revenue streams pretty diversified such that one customer is not really going to make a material difference in your outlook?

Brian Van Wagener: Steven, this is Brian. I'll pick this one up. So overall, as Paul touched on earlier, I think really pleased with the progress in Crossix and it's selling into a really healthy and growing end market. For us, that means it's now quite a diversified business and that comes in a couple of different forms. One is between measurements and audiences, which are both very large businesses and growing well individually as well as within each of those, we have a number of clients. So we don't see that kind of major concentration risk that would impact the business over time.

So there are some areas like GLP-1s that maybe are a little bit larger as a proportion of revenues tied to overall industry spending patterns. But even as that trend has shifted, for example, you haven't seen that impact the trajectory of Crossix overall because there are so many customers across so many indications.

Operator: Our last question comes from the line of Sean Dodge with BMO Capital Markets.

Sean Dodge: Peter, earlier, when you were talking about Veeva Basics, I think you mentioned those would be some of the first users of Falcon. And I'm just curious why that would be, why wouldn't it be some of the more sophisticated kind of longer-term Veeva users like large pharma that would be kind of positioned better to be initial Falcon adoptees?

Peter Gassner: Well, Basics are smaller companies, very nimble. Also, they're running not only our products, but they're running our processes. So they have an absolute standard configuration of Veeva, where they're running our processes. So we don't have to wonder how they have configured Vault or MAAP Vault or done this Vault or with that Vault. They're running absolute -- let's say, we have over 100 Basics customers in the clinical area, their configuration is exactly the same. How they're using product is exactly the same. And we operate those systems in a way for the customers. So that's -- if we have our agent working on for one Basics customers, it will work for them all.

With the enterprises, the larger companies, our agents have to be a little more adaptive. They have to first go through a phase of, okay, understanding how that customer is using that Vault, testing it out. Okay, I'm going to classify these documents that they've previously classified. Do I get the same of what they got. And if so, that's good. If not, what happened there? Basics is just going to be smoother, very, very smooth. It's the next step, obvious step for Basics, hey, we got the system and the processes from you, okay, let's just have it do the standard labor that goes along with that.

I would hope that all of our customers are in the clinical area, I would hope they're all using Falcon 3 years from now. But now whether that's going to be true or not, I don't know, but I can't see why they wouldn't.

Operator: We have reached the end of the Q&A session. I will now turn the call back to Peter for closing remarks.

Peter Gassner: Thank you, everyone, for joining the call today, and thank you to our customers for your continued partnership and to the Veeva team for your outstanding work in the quarter. Thank you.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.