PROCORE TECHNOLOGIES Q2 FY26 earnings call PCOR

Procore reported strong Q2 FY26 results, with total revenue reaching $375 million, a 15.8% year-over-year increase, surpassing the high end of guidance by approximately 2.5%. Non-GAAP operating margin expanded significantly by 800 basis points year-over-year to 21.5%, contributing to the company's first quarter of GAAP operating profitability. Free cash flow also saw substantial growth, increasing 507% year-over-year to $65 million, demonstrating robust operational performance and inherent operating leverage.

Procore is actively pursuing a strategy to become a leader in AI-native construction management, building on its extensive dataset and network effect. This quarter saw the acquisition of DroneDeploy for $845 million in cash, following the earlier acquisition of Datagrid. DroneDeploy, a leader in reality capture and robotic automation, brings visual intelligence capabilities and 20 trillion square feet of visual construction data, which will be integrated into Procore's platform to deliver AI-enabled multimodal capture and address labor shortages.

While the core U.S. residential and multifamily construction market has experienced significant deceleration, Procore has sustained mid-teens top-line growth, outperforming the market. The company is benefiting from unprecedented^🌐 strength in data center construction, driven by AI investments, with spending tripling over the last three years. Procore is a market leader in this segment, with 9 of the 10 largest North American data center sites using its solutions, and recently closed a nearly $7 million EMEA deal for hyperscale AI data centers.

Procore is seeing success in its international expansion efforts, particularly in the Middle East, evidenced by a contract for the King Salman International Airport project in Saudi Arabia. The company is also localizing its product offerings, suchs as the CDE (Common Data Environment) launched for European customers, which has received positive feedback and contributed to a large European hyperscale data center deal. This targeted approach, combined with a strengthened go-to-market motion, is driving international growth.

Building on the Datagrid acquisition, Procore has expanded its library of prebuilt digital coworkers to 20 AI agents, purpose-built for construction workflows like reviewing submittals and drafting RFIs. Initial customer interest has been very positive, with early adopters like Consigli deploying Procore AI across 50 projects after seeing significant time savings. The strategy focuses on integrating AI capabilities natively into the Procore environment, providing safe and convenient AI benefits within existing workflows.

Procore is committed to driving sustained efficiency and margin expansion, initiating FY27 guidance for non-GAAP operating margin at 25%, representing nearly 1,100 basis points of improvement versus FY25. This confidence stems from a deep dive into the cost structure and the growing inherent operating leverage in the business model, with expectations that AI efficiencies will provide further tailwinds. The company aims for best-in-class software margins over the long term^⏳.