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DATE

Wednesday, Aug. 26, 2026 at 5:00 p.m. ET

CALL PARTICIPANTS

• Senior Director, Investor Relations - Gunnar Hansen
• Chief Executive Officer - Peter Gassner
• EVP, Strategy - Paul Shawah
• Chief Financial Officer - Brian Van Wagener

TAKEAWAYS

• Total Revenues -- $928.0 million for Veeva Systems Inc. (VEEV +3.25%), representing 18% year-over-year growth driven by broad-based strength in commercial and R&D segments.
• Subscription Revenues -- $766.8 million, up 16% year over year and reflecting increased adoption of Development Cloud and Quality Cloud solutions.
• Non-GAAP Operating Income -- $415.9 million, resulting in a 44.8% operating margin due to continued operational efficiency and scaled growth.
• FY 2027 Revenue Guidance -- $3,682 million to $3,687 million, which management increased based on the strong first-half execution.
• FY 2027 Non-GAAP EPS Guidance -- Approximately $9.21, reflecting updated expectations for profitability and revenue growth.
• Commercial Subscription Revenue -- $347.4 million, representing approximately 13% year-over-year growth supported by the transition to Vault CRM and expanded Data Cloud usage.
• R&D and Quality Subscription Revenue -- $419.4 million, reflecting broad adoption of the Development Cloud across clinical, regulatory, and quality functions.
• Vault CRM Adoption -- More than 180 customers are live on Vault CRM, including five top 20 biopharmaceutical companies.
• Top 20 CRM Commitments -- 12 top 20 biopharmas have committed to Vault CRM globally, including two new commitments secured in August.
• Professional Services and Other Revenue -- $161.2 million, growing 24% year over year driven by implementation projects for clinical and quality solutions.
• Quality Solutions Customer Growth -- Added more than 30 new customers in the quarter, with 20 or more wins each across QualityDocs, QMS, and Training.
• Safety Solutions Customer Count -- Surpassed 100 total customers, including a second top 20 biopharma win for Safety Workbench.
• EDC Market Adoption -- Nine of the top 20 biopharmas now utilize Veeva EDC for clinical data management.
• Aspen Pricing -- $50 per user per month, reflecting a simplified pricing model for the company's horizontal CRM project.
• Copli Acquisition -- $81.8 million net of cash acquired, facilitating the launch of Veeva Falcon MLR for automated content reviews.
• Stock Repurchases -- $472.7 million spent on repurchasing common stock during the first six months of the fiscal year.
• Cash and Cash Equivalents -- $1.8 billion as of July 31, 2026, providing liquidity for ongoing strategic investments and acquisitions.
• Q3 Revenue Guidance -- $932 million to $935 million, representing continued sequential growth expectations.
• Non-GAAP EPS -- $2.35 for the quarter, compared to $1.99 in the prior year.
• Subscription Gross Margin (Non-GAAP) -- 86.6%, reflecting the high-margin profile of the company's core software business.
• Professional Services Gross Margin (Non-GAAP) -- 31.5%, which decreased slightly from 33.4% in the prior year.
• GAAP Operating Income -- $275.0 million, an increase of 40% year over year.
• Non-GAAP Net Income -- $387.4 million, up 16% year over year from $333.4 million.

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RISKS

• Peter Gassner stated, "We have to be very paranoid and pessimistic because we're going into something we haven't done before. Veeva has never done agentic labor and the whole motion is new," regarding the risks associated with the launch of the Falcon platform.
• Brian Van Wagener warned that "the S curves don't stack up exactly," noting that the timing of the transition between legacy R&D products and new growth areas like EDC and Safety is reflected in the current full-year guidance.

SUMMARY

Management reported a strategic transition from a software-only model to an integrated platform incorporating agentic labor through the new Veeva Falcon platform. The company increased its full-year financial guidance based on execution across the commercial and R&D segments, highlighting significant market share gains in the life sciences CRM sector. Strategic focus remains on migrating top-tier biopharmaceutical customers to Vault CRM and expanding the Data Cloud and Development Cloud offerings. The company also introduced the Aspen horizontal CRM project, utilizing a simplified pricing model to target a broader market beyond life sciences.

• CEO Peter Gassner stated, "AI is enabling the next big chapter for Veeva and the industry."
• Paul Shawah indicated that the company expects to maintain a dominant market position, stating, "we see Veeva maintaining over 70% share in the CRM space."
• Peter Gassner noted that Falcon offers a faster time-to-value than traditional systems because "there's not an extensive Falcon implementation."
• Management reported a high level of satisfaction with the IQVIA partnership, with Peter Gassner stating, "I feel 500% better about our IQVIA relationship now than I did two years ago."
• Paul Shawah reported that a top 20 biopharma successfully deployed Vault CRM and the Agentic Call Report across its full U.S. field force during the quarter.
• Peter Gassner indicated that the China CRM suite is written on a specialized China tech stack and is currently gaining market share in that region.

INDUSTRY GLOSSARY

• Vault CRM: Veeva's next-generation customer relationship management platform built on the Veeva Vault architecture.
• Veeva Falcon: An AI-driven platform designed to provide agentic labor for clinical, regulatory, and safety functions.
• Agentic Labor: Autonomous AI agents that perform specific business tasks, moving beyond standard software automation.
• Aspen: A horizontal CRM project developed by Veeva to provide a simplified, AI-integrated CRM for general business use.
• Crossix: Veeva's data and analytics platform used for measurement and optimization of pharmaceutical marketing.
• EDC (Electronic Data Capture): Software used to collect and manage clinical trial data.
• MLR (Medical, Legal, and Regulatory): The review process for marketing and medical content in the life sciences industry.
• eTMF (Electronic Trial Master File): An application used to manage the essential documents required for clinical trials.
• LIMS (Laboratory Information Management System): Software used to manage laboratory data and support quality control.

Full Conference Call Transcript

perator: Hello, everyone. Thank you for joining us, and welcome to the Veeva Systems Fiscal 2027 Second Quarter Results Conference Call. [Operator Instructions] I will now hand the conference over to Gunnar Hansen, Senior Director, Investor Relations. Gunnar, please go ahead.

Gunnar Hansen: Good afternoon, and welcome to Veeva's Fiscal 2027 Second Quarter Earnings Conference Call for the quarter ended July 31, 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've 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 used 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 being made as of today, August 26, 2026, based on the facts available to us today. If this call is replayed or reviewed 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 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: Thank you, Gunnar, and welcome, everyone, to the call. Q2 was another strong quarter, delivering results ahead of our guidance. Total revenue in the quarter was $928 million with non-GAAP operating income of $416 million. Execution was exceptional this quarter as we made strong progress in many key areas. It was our best CRM quarter ever. We also are accelerating rapidly in AI overall and especially with Veeva Falcon. And our focused acquisition strategy is working, bringing great people and capabilities to Veeva. It's an exciting time. AI is enabling the next big chapter for Veeva and the industry. 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: I think it's evident over the past few months that biopharma R&D spending is headed in a positive direction, and that also is showing up at Veeva. As pipelines move forward, what are you finding the mentality to be at customers around assessing and adopting something that's brand new with thinking about the Vault application agents or even Veeva Falcon. I'm interested in levels of early interest taking place amidst what seems like a busier environment and whether that's a reflection of the value customers are seeing pretty quickly when they start looking at the new Veeva offerings.

Peter Gassner: I'll take that one. Yes, there are a lot of things going on, right? The funding environment is relatively good. There's a lot of changes with AI and science is moving ahead. So there's a lot of priorities for the customers. And so when that happens, they can't do all things at once, and they generally try to pick some things that they can do and that are high priority. Your question was related to Falcon. I think Falcon, there is a lot of interest right now because it's very clear that's high priority. Quick cost savings and compliance and efficiency, that's high on everybody's priority. So I think there's a lot of interest in Falcon.

We are the rate limiter right now. We have to get that product ready, start working with the early adopters, but interest in Falcon is very high.

Joseph Vruwink: That's great. And then maybe as you think about how customers can now engage with Veeva in an AI framework, you have the application agents, you have Falcon, you have a custom development framework that you've introduced. Are any of those modes of engagement maybe becoming larger or a bigger piece of the conversation? And do any of those modes matter more or less as you think about how your financial model evolves and what the impact might end up being to Veeva?

Peter Gassner: Yes, it is a major change for Veeva. So Falcon is agentic labor. That's something different than we've done before, right? We've done cloud software, data consulting. Now we have this fourth thing, agentic labor. So it is transforming the discussion. There are 2 different things you could do with Veeva. You can do some agentic labor; you can do core applications. That was never the case before. The important point is Veeva, it fits very well. It's a structural advantage for Veeva to both have the agentic labor across multiple areas in life sciences and have the core applications across multiple of those areas in life sciences.

So that's why I feel like we're very well positioned and the conversations are very rich. Gosh, I just hope we got to get that product going as soon as we can. If we had our early adopters live and successful right now, I don't want to be hyperbole, but Falcon would be flying off the shelf if that was the case because one thing to know is there's not an extensive Falcon implementation. There's not a data mapping from one system to the other. There's not a cutover process. There's not ETL to do.

So this implementation of full value is faster with Falcon, but the tech underneath it is newer, and we have to get our motion down there. If you can tell -- I hope you can tell, I'm pretty excited about Falcon. I really think we're on to something.

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

Brian Peterson: Congrats on a strong quarter. So the Commercial segment was really strong this quarter. I know you called out record results. Could you maybe unpack what drove that acceleration in the subscription line item? Would love to get some more color there.

Brian Van Wagener: Yes. This is Brian. I'll take that one. Commercial subs, yes, very strong quarter. I think the culmination of many quarters of execution, but you see them showing up in the results here, up about 13% year-over-year. Even when we back out Crossix, it's double digits in the rest of commercial. So it's quite a broad-based strength in the commercial offering across CRM, content, data, Crossix, Ostro most recently. So we feel very good about the execution. Crossix continues to be a strong performer with a lot of headroom for growth. We're continuing to see growth in CRM, which I think a lot of the conversation has been, is that going to go down? It's actually going up.

And we're continuing to see a lot of room to continue growing in a healthy market in Crossix as well as the other areas.

Brian Peterson: Great. I appreciate the color. I just want to follow up on Aspen. I know you guys are excited about that as well. How should we be thinking about that market opportunity and some of the investments that you're taking to kind of enable that revenue stream?

Peter Gassner: Aspen, I think it's very early, right? That's the thing to know. This is a start-up inside of Veeva. It's moving very rapidly. It's on 90-day plans. So we have a core market that we're going after, the horizontal CRM in a new way, in a new way that really enables AI and is built on modern technology. So the thing to know that it is very agile now. So we're -- what we're focused on is getting the product right, working with our early adopter customers. I'm 100% convinced that there's a market for what we're making in Aspen. Can we execute well enough? That's always the hard thing in a start-up. Can you do it?

Can you do it better than your competition? And what kind of luck do you have along the way? That plays into it. I've done the start-up thing before starting Veeva. I've done the start-up thing when we started Vault inside of Veeva. We're doing it again, and I have lots of friends that have done it. And it's just like that. Can you execute well, really, really well? And what kind of luck do you have on the way? But sometimes you're wondering whether the market is there or not. You could say maybe we were wondering that when we were getting new markets going 18 months ago, et cetera.

Right now, we have enough product, and we're working with some early customers. We're 100% clear that the market is there, 100% clear. It's just whether we can execute and we'll see. So your question was about how to size the investment as well. That's very small on the Veeva scale. It's not something that Brian, our CFO, notices really on the Veeva scale because you have to keep that very small when you're working with early customers and you're iterating an early product. And actually, these days, you keep it smaller than normal because the pace of the development is faster with AI. You actually need a smaller amount of developers, very, very, very skilled as well.

So it's not a financial drain on the company. It's not a focused drain, and it's certainly not any kind of revenue that's figured into our plans at this time.

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

Hoi-Fung Wong: I wanted to circle back on Falcon, Peter. It was great to hear the customer interest. Also great to hear it's not an extensive implementation process. But what I didn't get a sense for was as you're trying to introduce virtual labor to your customers, is that a different counterparty that you're selling to versus maybe the CMO or the CIO? And then secondarily, how difficult do you expect it to be to maybe work through the inner politics of shifting kind of the budgets from an IT wallet to maybe an HR labor wallet? Any help in helping us think through that?

Peter Gassner: Ken, great question. Now I'll be able to tell you this definitively now in a couple of years when we're selling lots of Falcon and I'll be able to give you the readout. So I'm going to gauge into the future and tell you what we know so far. First off, it's actually going to be an easier selling cycle because IT is really not involved in the agentic labor. That's not something they're involved in because it's not like that. If you're selling a solution to safety, this is about the budget of the safety team.

So it's really the head of the unit, the business unit and the head of the sort of the operations of that business unit. So that's super clear. And the other question is, yes, it is a very related buyer. This is actually -- we have not hit the case for Falcon where we're selling into a buyer that we are not selling into because we're always selling into the business side with our business applications, now sometimes more or less. For example, in the areas of Falcon where Falcon is playing, for example, safety, clinical regulatory, that's always been somewhat more of a business sell, IT involved, but somewhat more of a business sell.

CRM is the most IT heavy sale that we have in general. So the areas where we're doing Falcon, they were ready, I would say, on the average, 60% of business sell. And those are people that we've been selling into for 10 years.

Hoi-Fung Wong: Understood. And then, Brian, just a follow-up on some of the investments. It sounds like with Aspen, it might be sort of small upfront. But as we think about you guys ramping on Falcon, ramping on Aspen, ramping on some Vault agents, Vault AI, I mean, should we expect maybe an uptick in terms of sales investments, R&D investments? Anything we should be thinking about relative to how you guys are spending today.

Brian Van Wagener: As Peter talked about, Ken, we're very excited about Falcon and the path that it can be on. But you've also seen us over time consistently think about both growth and profitability. And so it's not different entering a new market like Falcon. Maybe the dynamics of the market are very slightly different. But it's the same overall approach that we're taking there. And so we scale investment as we scale revenue, there's certainly nothing material that I would call out for this fiscal year. It's all factored into the guidance that we've updated for FY '27.

And as we get another couple of quarters ahead and gain in the future of next year, we'll factor that into our guidance for next year.

Operator: Your next question comes from the line of Saket Kalia with Barclays.

Ryan Powderly-Gross: This is Ryan Powderly on for Saket tonight. Peter, maybe my first for you. From the customers that are planning to transition to Salesforce away from Veeva CRM, what do you hear from those customers? What are they saying right now about the decision? And do you think longer term; it could be possible for Veeva to win some of those back?

Peter Gassner: Yes, Ryan, I do -- there's a handful of customers, large customers that did select Salesforce, many of them even 2 years ago. Those projects are -- they're having troubles, right? They're not going smooth, and we have some project delays because it turns out you -- the product is very deep, and you need that. So yes, I think we can win back some of those customers, maybe some of them completely. Others have been in some certain regions and not others. I think the bulk of that win back would probably be in 2027 and 2028 because Veeva CRM, they have that backstop until the end of 2029.

So this is the time when it starts really to get real, right? Because during 2029, there's no more backstop of, oh, we can keep using Veeva CRM because they know they have to go to Vault CRM. Yes, we're very optimistic about that. And the best thing we can do there to help that is really focus on our existing customers that did decide to go with us for CRM and make them very successful and improve the product.

And for the customers that didn't choose Veeva, we have a good relationship with them, and they've told us that, hey -- we said, hey, we want to be your plan B, and they really embrace that, and that's the way they view that because these customers have businesses to run, right? They got to get their medicines to patients. It's great. They love having a backup option if their plan A doesn't work out.

Ryan Powderly-Gross: Really interesting. I appreciate that. Brian, maybe my follow-up for you. Could you just talk a little bit about what you're seeing on the R&D subscription line? And maybe specifically, where you see Veeva in the journey between some of the, let's call them, old guard products versus some of the newer growth areas that you're investing in, just as we think about that revenue mix shift and how it's evolving?

Brian Van Wagener: Yes. It's a great question, Ryan, because we're right in the middle of that transition that you pointed to. And I think very pleased with the progress and the execution that we're making. But the old guard that you're referring to would be things like, I guess, eTMF, and CTMS, and QDOC, and QMS and our regulatory suite that has fueled a lot of the growth in R&D to date. And a lot of the growth as you look out over the next few years to 2030 and beyond is being driven by a different set of products, EDC, eCOA, RTSM, Safety, and LIMS. And these are big, very strategic products with a ton of headroom, but they're very early.

So we're excited about that. We're executing really well against that. But there's a little bit of a changing of the guards that's happening there. And the S curves don't stack up exactly. So you see some of that factored into the guidance for the balance of the year. But we're very confident and excited about the long-term trajectory of the R&D business and obviously pleased to be raising the guide again here in Q2.

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

Alexei Gogolev: I wanted to go back to the Falcon discussion. So with 5 Falcon early adopters and first go-lives expected this year, what are the key readiness gates you must clear? And how do you expect the human in the loop requirement to evolve by workflow type?

Peter Gassner: I'm sorry, Alexei, there was a breakup and it said, what are the key you have to clear, and I didn't hear the word in the middle.

Alexei Gogolev: Peter, I was talking about the key readiness gates you must clear and how do you expect the human in the loop requirement to evolve by workflow type?

Peter Gassner: The key sort of regulatory hurdles, if I heard correctly. Yes. Agentic labor is like human labor in a way. It's nondeterministic. So you have to prove that you have the right training and guardrails around humans, and that's the same thing we have to do around our agents and the human -- we provide for that human in the loop with Falcon as well because you can see the outcome of what the agent did and does inside of the Vault application. So from what we can see, it's working very well. It's not. This approach is completely similar to what customers are doing today on certain internal projects.

The difference is they would like to be able to do it at scale in a very repeatable motion. So I would guess 3 years ago, we would probably have to be teaching the customers a lot about what is AI, what is the agentic labor, how do you do this? How do you do that? That's -- we really don't have to do that so much anymore. The customers know how to deal with it. They just want a partner that can scale it across multiple areas.

Alexei Gogolev: And also on the data cloud topic, so you added 14 Data Cloud customers. Where is Data Cloud proving most differentiated? And how are you positioning connected data as a prerequisite for AI outcomes in commercial workflows?

Peter Gassner: So we don't position Data Cloud as a prerequisite for AI. It's more of an accelerator. The cleaner your data is, the better your AI processes are going to work, especially in certain areas. What's working well for us in Data Cloud is OpenData, so clean reference data. Now that's a hard project to do because it involves changing a lot of things in downstream systems. But we have some momentum there, and I think that's going to continue. We have strong momentum in Compass for certain therapeutic areas of complex therapies, where our Compass products can see different things in the flow of complex products in the U.S. that other people -- other offerings can't see.

And then we're -- we have real market leadership with our Link product and Link Key People, and we're expanding there with the add-on products of Link. So Link Medical Insights, Link Key Accounts for the U.S., Link Workflow for Congresses. So overall, data is not a thing that can accelerate very, very fast. It's not like selling fast fashion on Instagram, right? That can accelerate fast and then disappear. Data is not like that. It's a long, slow grind, but we're certainly happy with our progress, and it's very synergistic with Veeva. If you look at what Veeva -- why is Veeva being successful? We have a very synergistic product plan.

We have software applications that work with our data and consulting that knows about our software and data. And we have agents that work with our applications that are known by our consulting and that leverage our data. So it's not a random set of products. It's -- we're building the industry cloud and the more our customers realize it, the more benefits they get because things fit together.

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

David Windley: I wanted to ask, Peter, on Falcon quickly, are your early adopters exclusively sponsors or OEMs? Or are you also seeing some service providers approach you to adopt Falcon capabilities?

Peter Gassner: Our early adopters are with sponsors. Now we have had some interest with service providers. And I say that carefully, interest, they're interested. But we really haven't engaged heavily there yet because you have to be focused when you start working with your first customers. Service providers will have similar needs to sponsors, but not the same. So we're focusing on the sponsors first, and I fully expect over time that this will be useful for outsourced service providers, but we have to work on the sponsors first.

David Windley: Great. And pivoting for my follow-up, a lot of moving parts in China over the course of this year, maybe over the course of the last several years, regulatorily, drug development-wise, et cetera. How do you see the China market as an opportunity for Veeva right now?

Peter Gassner: Yes, China is certainly moving fast. I mean when we look at my tech career standing, it's over 30 years here, it's just astounding the transformation in China and what it means for the global economy and what can be accomplished and the whole notion of a parallel tech stack in China. So yes, it's moved so fast and it continues. And it's great to see that from my perspective. It brings variety. So our opportunities there, we have quite a few products that are made by our Veeva China team in China for China. So we have our China CRM suite, and that's gaining market share that's written on the China tech stack, et cetera.

We have our data products made in China specific for the China market. And there's other things that we can do in China, there in China for China. But one of the big benefits is those products fit with our global products. For example, China CRM fits with our global PromoMats products. So there's a synergy there. China is good business for us, and we're proud to do that in China, and it's profitable for us there and it's growing, but it's also synergistic with our global business because our global customers when they have their headquarters in the U.S. or Japan or Europe, they want a team, a global Veeva team that can help them with China also.

So it's very synergistic. We really love our China business.

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

Rishi Jaluria: Nice to see continued strength in the business. I want to start with a question on Aspen and the pricing model. I think the publicly posted pricing model is really interesting and compelling as application software companies are, kind of, figure out, kind of, the pivot to more consumption, et cetera, and you're talking about charging per human or per agent. Can you maybe walk us through how you see that pricing model starting, how the puts and takes of that? And what lessons or learnings can, kind of, be picked up from that as you see more Falcon adoption, more AI adoption within the broader Veeva suite and trying to, kind of, price accordingly for this new AI world?

And then I've got a quick follow-up.

Peter Gassner: Yes. So cloud software, we've got to remember, it hasn't been around for 50 years, right? I was working on it in the early days of Salesforce.com, and that was not even 25 years ago, right? It was -- for me, it was 23 years ago. So very early. And the pricing model sort of arrived and the technology model arrived and the way we do things arrived. And you see that all in the first-generation big cloud companies, big cloud application companies. There's a way you do things, right? So Aspen is taking a different approach that may or may not prove effective.

It's to say, well, it's a different approach, a different technical stack, a different approach there and a different pricing approach. It's just much more simple. You get your productivity, $50, $50 a user a month. So it's not this crazy price and you can't -- you don't know what it is and you have to haggle with your sales rep for discounts. And if you're big companies this and that and 14 different editions, no. It's more like modeled off of Amazon Web Services. There's a price, okay? And it's a good product. You can buy it. You don't have to buy it. It's a good product. So we will lean into that.

And then there's, of course, usage overage, okay. Let's say you buy 5 users is $50 a month and you put a terabyte of data in there for some reason. Well, okay. Well, that's not anything that anybody thought about. So there are the overage charges that you will pay monthly on the overage. So you kind of -- it's a mix -- you get -- I would say we're shooting for mostly predictable because that's -- at the end of the day, large businesses would really want mostly predictable, but you have to have this escape hatch to say, yes, I can't use unlimited compute because that's kind of -- that doesn't make sense.

So now we're also going to listen to our early customers, and we're a very customer-friendly company and if there's a better way to do it, we'll certainly do that. We're after authentically customer success. You got to remember; we're a public benefit corporation. We're after success for our customers, the industries we serve and Veeva, and our investors. So the thing is make it simple, get rid of all this noise that has built up in the systems over time.

Rishi Jaluria: All right. No, that's really helpful. And then maybe just thinking through as Falcon and kind of your AI products grow, can you talk a little bit about under the hood, what, sort of, the AI stack looks like? And maybe more importantly, as these become a bigger portion of the business, drive greater usage and, obviously, as you pointed out, Peter, greater customer success, how should we be thinking about the impact on margins, both gross margins as well as free cash flow margins? And is there an opportunity over time to leverage more multimodality and even some of the open weight models as they improve to control some of that potential gross margin headwind?

Peter Gassner: Yes. Again, I don't really want to make predictions on Falcon because it's early. But in general, I don't think we're going to have a gross margin problem. I think the gross margins will be roughly similar to our software. And here's why when we really go deep into Falcon and we have what we call Falcon copies where we have the real customer data that we're testing the agents with and developing the agents with; we know what's going on. So more and more and more of that work goes into the deterministic software, and we use the nondeterministic models, the Anthropic models, et cetera, when we need to.

So it's not -- a lot of this value is going into the agent. And then I believe everybody knows that the cost of these models are going to go down versus whether they're with better hardware or open weight models or et cetera, et cetera. The current cost of the models is not sustainable, not based on what we're doing, but based on this notion of what software development is doing, eating up 50% of the tokens in the world and hundreds of billions of dollars. Somebody is going to build a better mousetrap for that over time, and that will compress the prices. That's our belief.

But even if that wouldn't happen, I think Falcon would be a great business because we're pushing a lot of things into the deterministic layer.

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

Tyler Radke: Brian, just going back to your comments on the R&D side of the business and talking about kind of the stacking of those S curves. I was wondering if you could just be a bit more precise in terms of the timing and when you see the kind of the growth inflection happening from those S curves. And if you were to just sort of stack rank those products you mentioned, what sort of have the biggest opportunity to be the next $500 million or $1 billion products within R&D?

Brian Van Wagener: Yes. Thanks for the question, Tyler. I think we are excited really about all of those products, all the 5 that I mentioned, EDC, eCOA, RTSM, Safety, LIMS, every one of those is very large and very strategic in their area. A few of them are around clinical, Safety is its own big space, LIMS is in quality. So each of these is very significant opportunities and at slightly different stages as you look across them, but all of them pretty early.

And so I think that's what gives us the confidence as we look out to 2030, for example, that we're on track for those goals is we're making great progress in the product, great progress in the execution, great progress getting customers live and happy and successful and reference selling. We don't put exact timing on that, right? We don't generally talk year-by-year, so I'm not going to give guidance out beyond this year. But I think we feel very confident in the trajectory that we're on with those products in R&D.

Tyler Radke: Got it. And then in terms of Aspen and sort of your broader ambitions across industries, outside of your traditional segments. Like, just can you just remind us of, sort of, the ICP there? Is it smaller organizations? Or how do you -- I mean, clearly, such a broad opportunity. So how do you start and prioritize that and staff it?

Peter Gassner: For clarity, ICP, what is ICP?

Tyler Radke: Like the ideal customer profile.

Peter Gassner: Okay. I'll take that one. Yes, the ideal customer profile when you're just starting out is really a nimble type of company that really wants to work with you. And I think in this area, we're going to probably get a lot of young tech start-ups, right? Because they're doing some really innovative in what they're doing, and they don't really want to do the same old thing in CRM for core account contact opportunity management. So I think we have early indications that there'll be great companies to work with. But we'll see. Again, I'll let you know a lot more in the year.

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

Jailendra Singh: I want to go back to Falcon discussion and the 5 early adopters there. It seems one of them is a top 20 pharma company. Based on your conversations with these top pharma companies around Falcon, do you believe that the work will be shifting to Falcon is something they were outsourcing to other partners with the CROs? Or should we think about something they were doing in-house and now they are leveraging Falcon for that? And related to that, any incremental color on the pricing of the Falcon product?

Peter Gassner: In terms of where the labor is done or where it will be displaced, I think there'll be a combination of internal and outsourced, although generally not the CROs. That's not what I see. It's a different type of outsourcing, some of it from the CROs, but not most of it. And then in terms of the pricing, it's very early for that. I know we've been in discussions with customers, and their desire is for predictability. That's for sure, right? They want predictability for that because for one thing, they get that predictability when they either hire or outsource labor. It's quite predictable, and it's better for them. It's actually better for us, too.

So -- but what gets in the way of that a little bit is, well, Falcon is quite early now. So it can do certain things, but it can't do the things that it will do 3 years from now. So how do you have a fixed price when your capabilities are rapidly improving? So I think with some of our customers, we'll end up having enterprise license agreements, enterprise subscription agreement for the labor based on the size of their company or their function, but it will probably escalate over time. It will be lower in the beginning when Falcon is less mature. So if you want a teenage Falcon, it costs you x.

And if you want a Falcon and it's 25-year-old, it costs you a bit more. I think it's going to be like that. But again, this is the type of thing you work out with the early adopters. The nice thing here and the structural advantage that we have is this is the same buyer facing the same business problems as our applications. These are people we know deeply. The trust is there. You will hear people say business moves at the speed of trust, and there's a lot to that. And we have the trust with these customers. So we'll get to the right story pretty quickly.

All this hinges on having a product that works well and that's really where our focus is. I would say our early signs are good. When I talk to the engineering and the product management people on Falcon, there's an optimism. You'll see even the pessimistic ones saying like, oh, my goodness, this could really work. And in some early test runs, it's like, wow, we tested this against the humans, what the humans did, and Falcon is already better than what the humans did. So there's a sense of optimism, but it's too early to declare success. We have to be very paranoid and pessimistic because we're going into something we haven't done before.

Veeva has never done agentic labor and the whole motion is new. That's why the leader of Falcon reports right to me. This is a complete new market and a new motion for Veeva. So we don't have all the answers yet.

Jailendra Singh: That makes sense. My quick follow-up on other point you raised in your prepared remarks, and somebody asked it earlier about the focus on CRM win backs among top 20 companies that did not select Vault CRM. I understand your point that you want to share success stories with them. But just curious, have there been any developments or conversations with customers who have picked Salesforce that is driving that confidence that these opportunities are more actionable? Or is it more around delays in rollout by Salesforce that's giving you confidence of opening up window? Just curious, like, it seems like you're a lot more exclusive this time around than in the past.

Paul Shawah: Yes. It's based on our execution and what we're seeing with Salesforce as well. I think Peter alluded to earlier how Salesforce has been struggling with some of the larger projects that they have, and they don't really have any customers live. And when you look at what Veeva is doing, it contrasts pretty significantly. We have over 180 customers live. We have customers that are turning AI on. We had a big milestone in CRM this quarter where one of our top 20 turned AI on in CRM for their entire field force. So really significant milestone. So the contrast between how Veeva is executing and what we're seeing on the other side is very significant.

As Peter mentioned, we're very close with these customers. They buy a lot of products from Veeva. We have deep relationships. We stay very close with them. And that's what gives us the confidence, our execution, our innovation, getting customers live, that trust. And that's why you hear the bullishness and the confidence in those win backs. Just more broadly in the overall market, we're executing very, very well in CRM. It's really clear that we are the market leader. We're going to maintain the market leadership position.

And just to kind of paint the kind of what we view as the end state, we see Veeva maintaining over 70% share in the CRM space, which means we'll continue to execute. We'll continue to drive innovation for our customers. We feel really good about how CRM is playing out.

Peter Gassner: You asked about our customer interactions there. Yes, we have customer interactions, lots of people at Veeva deal with these customers, and I personally do at times, too. And the common thing you might hear is from a customer is we're not ready to make that decision yet, right? So they're open to it, they're looking to it, they're not ready yet. So that's -- those types of things give us confidence.

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

Craig Hettenbach: Great discussion around all the AI developments. Peter, from a macro perspective, after a couple of volatile years, whether it was IRA, MFN, pricing, tariffs, the backdrop has steadied. So I'm curious, outside of agentic in your customer discussions, what are they most focused on? What areas in terms of they leaning into investments that you're seeing in the business?

Peter Gassner: Yes, Craig, it is interesting. We think things have steadied. It is an interesting comment on the world, right? We have 2 kinds of major wars going on. We've got a complete tech disruption in AI that's going on. And I think what happened is the life sciences industry has gotten used to, hey, the world is going to have a lot of moving parts. And they're just moving forward. So I think it's -- you're good to point this out. They're not being disrupted by the disruptions. If we would have something really catastrophic in the future, that can always disrupt things.

So for example, if we had a major, major shift in interest rates, well, life sciences is a capital-intensive industry that can do things. If major escalations in war, that can do things. But so far, the industry seems to be executing pretty well and focusing on the jobs to get done.

Craig Hettenbach: Got it. And then just on my follow-up for the EDC segment. Compared to 1 or 2 years ago, as that was ramping, that got a lot of attention. Can you just maybe give us an update on just how those ramping deals are progressing and then just the opportunity to capture additional top 20 over time?

Peter Gassner: Yes. EDC is one of the larger areas, and it's certainly a long implementation cycle. So some of our wins are still ramping. And we're working with the other ones. We have -- I believe it's 9 out of the top 20. Most of the other ones are with Medidata, not all. And we're working on those over time, but it's not the right time for all customers to change out all systems at one time, getting back to -- they have many other things to do. I would go back to the structural advantage we have.

In the Development Cloud, applications all on a common platform and then with Falcon as well, the structural advantage with Falcon is more things to bring to the same buyer. And especially in clinical, having the Clinical Operations, Clinical Data Management and our Site Solutions. The Site Solutions is very strategic to us, and we're introducing eSource there. So I think confident on EDC over time. It just takes a while, and that's something that I think you'll see progress in the couple of year -- in the next couple of years there.

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

Andrew DeGasperi: I just wanted to ask, one, first, I think you're coming up to the 1-year anniversary of your partnership with IQVIA and the settlement with them. So I just wanted to understand how is that going. Have you seen any momentum because we haven't heard much from that deal? And I wanted to know if you -- is it going ahead of expectations or in line or below?

Peter Gassner: We're really happy with that IQVIA partnership, gosh, that's -- and I discussed with the management team of IQVIA, and I can represent that they represent to me that they're very happy with the partnership as well. So yes, and customers are especially appreciative of it, right, much less hassle working with Veeva and IQVIA. I think great things are going to come out of that partnership. They're already starting to come, and I think there's more to come. When you look at it, IQVIA and Veeva, we are both major players to the life sciences industry. We are the 2 major players. I think it's fair to say, by far. And AI is transforming the industry.

And for AI, you need services, you need data, you need software. So the more Veeva and IQVIA can collaborate, the better it is for the industry, helps the industry grow, helps Veeva grow, helps IQVIA grow. So I couldn't be more happy with that. If you ask me, I feel 500% better about our IQVIA relationship now than I did 2 years ago. It's probably the best thing that happened to our company 12 months ago, and that was just outstanding. So super happy with that.

Andrew DeGasperi: And then I'm curious about the double-digit growth you mentioned in the Commercial Cloud business, even excluding Crossix. And I just want to unpack that, like, in terms of the -- did it come from PromoMats and some of the other marketing tools? Or was there something unique about the CRM side that gave you -- was giving you that acceleration?

Brian Van Wagener: Not really any one factor that I'd point to, Andrew. And I think that's part of what actually makes us feel so much excitement and the results is that it was CRM. It was add-ons and new customers and content. It was new customers and brands in Data Cloud. It was continued growth in Crossix on both the measurement and the audiences side. It really was broad-based growth around commercial. And I think -- I guess what I'd point to is some of what Peter and Paul have mentioned is that full commercial story and full capability of all those products on one platform from one provider really resonating in the market and driving growth.

So very strong quarter from commercial.

Operator: [Operator Instructions] Our next question comes from the line of Dylan Becker with William Blair.

Dylan Becker: Maybe, Peter, if we touch on the strength in consulting and services, I know that there's kind of several components to that. But how would you classify, kind of, the value of efficiency of, kind of, being able to do more with the same, kind of, amount of your existing resources versus the efficiency gains you're seeing there, enabling your customers to go faster and capitalize on, kind of, more of the AI opportunities, meet their, kind of, increasing willingness, if that makes sense? Because it does seem like that's another area. I know it's not perfectly correlated to the subscription side but continues to see healthy momentum in driving that change management for a lot of these enterprises.

Peter Gassner: I think that the big benefit for Veeva that we will hopefully see over time here is that by more tech enabling our consulting and our specialized services, our software will become more valuable. So for example, if somebody wanted to buy our EDC and if it took $1 billion to implement, nobody would buy it. But if it took $10 in a week, everybody would buy it. So the faster you can have your implementations go and the more accurate, the less cost, the more valuable your applications become. So that's the big driver. Yes, it probably means growth for us in services because people will buy more services.

But it's about customer success and the industry success and driving our application business. I overall think it will be a renaissance for services and consulting companies as we go forward because I think this notion of tech-enabled services, specialized tech-enabled services is really going to drive growth rather than going to generalists that say, hey, I have people that can do a lot of things. No, you have a job to get done. You'll probably go to the specialist that has a tech-enabled service that can get that done.

And I think that will actually lead many companies to do more with partners rather than doing it internally because they can get the outcome quicker and better with a tech-enabled service.

Operator: Your next question comes from the line of Tamjid Chowdhury with Guggenheim Securities.

Tamjid Md Moinuddin Chowdhury: I guess, Peter, I wanted to ask you a question on a recent management change. It was announced that Tom Schwenger will be leaving the company to go to a long-standing partner of yours. And we understand that he played a pivotal role in many of the company's top 20 biopharma wins. So how should we be thinking about the current transition of his responsibilities and maybe the impact of his exit on the relationship he has helped curate over the years, if any?

Peter Gassner: Yes. Tom, of course, sad to see Tom go. Tom was at Accenture before he came to Veeva many years ago and was a great Veeva partner at Accenture. And Tom is going to go on to be a CEO of a services type partner, and we think that he will be a great partner for us there now. So all good there. Those relationships don't go away that Tom has. So he will keep those. And in terms of Veeva, when a customer -- especially when you mention CRM, gosh, that's a business-critical decision that lasts for 10 years, that's involved. There's many, many people involved in that, and there's a product involved with that.

So I don't -- that won't -- Tom's departure won't have effect on our CRM business because that's more of a -- it's an enduring long-standing thing. It's different than maybe consulting type work or something like that. This is a product attachment. So that's not going to affect our business.

Operator: Your next question comes from the line of Billy Fitzsimmons with Piper Sandler.

William Fitzsimmons: Congrats on the 2 big top 20 biopharma wins for Vault CRM in the quarter. Could you give a little more color on how those deals played out? What ultimately drove them to Veeva over Salesforce? And for the top 20 vendors that have not decided yet, has your level of confidence changed in potentially winning those versus, say, 90 days ago?

Paul Shawah: Yes. So first, we're excited about the exceptional quarter that we had, and that was one of the headlines. You heard us talk about 3 large companies, 2 in the top 20, really selecting Vault CRM, Biogen selecting Vault CRM. And then, of course, we have Regeneron as well. The why is pretty simple, and I think we touched on it on this call, right? It goes back to trust, so they trust Veeva to be able to deliver. And then product, product excellence. The product is working. We are delivering on the promise of all the innovations that we've told the market we would execute on, and that's playing out in the marketplace.

So it's trust and it's great product. I mean it's really -- it simply comes down to those 2 things. In terms of the remaining top 20 commitments that are out there, there's only 2 left. So we have 12 of top 20, and there are 2 remaining, and they'll play out by the end of this year, but we feel good about both of them. They still need to be finalized, but we like our chances in both, and we'll update you as things play out.

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

Ryan MacDonald: Congrats on a nice quarter. Peter, an emerging trend that we've been seeing across large health care and life sciences organizations within the industry this year is one in which customers want to embrace AI, but they don't want to take the risk on a new and unproven entrant that offers AI for only a specific point solution or a niche use case as they don't have the time to evaluate hundreds of new vendors. It sounds like they'd rather consume AI from the incumbent platform vendors that they're already deeply embedded with. So one, are you getting this sort of same feedback from your customers?

And two, does this dynamic create an opportunity for you to perhaps ramp up the M&A activity, acquire similar types of AI point solutions like Copli and sell it into your existing base faster than what one of these smaller AI solutions could do on their own?

Peter Gassner: Sorry, I was giving a great answer on mute. The customers want to be out of the experimentation phase. They definitely want to be out of that. So some months ago, when we first introduced Falcon that had customers come up to me personally, we were at an event and they said, oh, thank goodness, you're announcing that because that's -- thank goodness you're announcing that because that's -- I didn't want to evaluate all these small vendors. So now that you have an offering that helps me not have to go and look at all these small vendors. So yes, it's absolutely what customers want.

In terms of acquisitions, we may find others that are a cultural fit, but we'll be very discerning. Copli was an excellent acquisition for us. And by the way, the Falcon M, which is now Falcon MLR, that is maybe -- our sales cycles there are probably more advanced than in any other part. That market is very ripe for things. But in these other areas, we're getting started, and we're making a lot of progress with Falcon. So if we're going to do an acquisition there, it would be more for talent acquisition and not for product because we've put a real good base in the Falcon product and Falcon platform.

I don't think we'll need acquisitions for products anymore. We did look at some when we were just starting Falcon. We looked at a number, I would say, in at least 20 companies to look at. We found one that was the right fit of culture, product and that of willingness to be acquired. And we found that in Copli. So it's sometimes like that. For Falcon, I don't actually expect us to find another acquisition that fits, and we're not dependent on any acquisition, but we'll see what happens.

Operator: Your next question comes from the line of Gabriela Borges with Goldman Sachs.

Gabriela Borges: This is Grayson on for Gabriela. Just one on Aspen. What are the specific customer problems that Aspen is aiming to solve that maybe the existing horizontal CRM platforms struggle with? And what are the milestones that you would point investors to watch for over the next year?

Peter Gassner: In terms of milestones, I think it's probably just the things that we say on our earnings calls and things like that, that would be -- there's not going to really be visible milestones, I would say. We'll probably give you updates when the time is there. And your other question was basically how will things be better? Is that what the question? If you could rephrase that again?

Gabriela Borges: Yes. Just what are the specific customer problems that you're aiming to solve with Aspen versus what some of the existing horizontal CRM platforms struggle with today?

Peter Gassner: Yes. A couple. One is price, price being unpredictable, getting out of control, that would be one. The other one would be just sort of dependability of the vendors, right, that you can really count on the vendor to be on your side. Scalability of the vendor, right? Sometimes they want something that really works for a small company but can scale up to a very large. Now in the market, you have to pick like, do I want something that works for a small company? Or do I get something that's too big for me now, but I can scale up. Other things are just like data entry.

The existing CRM systems really, if you get into them like, okay, they require a heck of a lot of data entry. Most of that with AI doesn't need to be done anymore. And then I just think there's just this other fundamental thing of better CRM system. And that's just the details of a fundamentally better data model, better business logic, better just details, like how do you handle multicurrency? How do you handle forecasting? How do you handle implementation so that you can get the CRM you want for your company in 3 months rather than getting half of what you want in 3 years.

So I was on the Board of Zoom for many, many years, and Zoom was a very small company when I joined and very few investors wanted to invest in Zoom because they thought, well, there's already Webex, there's all these other things. But Eric had an idea, but mine will be fundamentally better, better, better. And that's the same idea here. Now that's unusual that, that could be disruptive. But I think in this case, it will be better, nicer, less expensive, more predictable, faster. I think all those things add up.

Operator: Our last question comes from the line of Scott Schoenhaus with KeyBanc.

Scott Schoenhaus: I wanted to drill more into Crossix. From 90 days ago, are you seeing from your purview, from Crossix, are you seeing pharma marketing advertising budgets become better than they were 90 days ago? And do you think that AI is helping to act as a catalyst for pharma budgets, not only across Crossix, but the overall pharma digital advertising space?

Paul Shawah: Yes. We continue to see strength in the pharma marketing budgets and spend on digital, and that's playing out in Crossix. We had good -- another strong quarter of performance in Crossix. AI, what role is that playing? I think that's a nice long-term benefit and driver of what we're doing in Crossix as companies. You probably heard us talk a little bit about helping companies become an agentic commercial, engage with doctors via AI. They're turning more and more to AI. And as that becomes a more important channel, Crossix becomes more important in terms of measuring and understanding and optimizing against that spend.

So yes, absolutely, AI is a nice -- will be a nice tailwind for the foreseeable future for Crossix.

Operator: We have reached the end of the Q&A session. I will now turn the call back to Peter Gassner 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. I'm looking forward to speaking with you again on our upcoming Investor Day on November 5. Thank you.

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