# 5 Interesting Learnings from Procore at $1.5 Billion in ARR: 16% Growth, Its First GAAP Operating Profit, and $845M for DroneDeploy > Source: > Published: 2026-07-31 14:36:01+00:00 Procore’s one of the great pre-AI vertical software leaders. Construction software, 3 million projects, 150+ countries, roughly $1.5B in ARR. But growth slowed as for many the past 24 months. They’ve finally turned it around a bit. And then spent $845 million on a drone leader in the space to keep the momentum going. $375M in revenue, up 16%, against a guide of $364M to $366M. That’s a 3% beat and 3 full points above the 12.9% growth the street modeled. GAAP operating income was positive for the first time in company history. And alongside it, Procore announced an all-cash acquisition of DroneDeploy, funded largely with a committed bridge facility. It’s also six months into a full leadership swap. Ajei Gopal took over as CEO in November 2025 from founder Tooey Courtemanche, who remains Chairman. Rachel Pyles is CFO and Walt Hearn is CRO, both from Ansys, where Gopal was CEO from 2017 to 2025 and led the company through its $35B sale to Synopsys. Q2 FY26: **Revenue: $375M, up 16%**(guide was 12% to 13%)** GAAP operating margin: 1%, up 1,080 bps, first ever positive****Non-GAAP operating margin: 21%, up 800 bps****Free cash flow: $65M, up 507%****Gross revenue retention: 95%. Net revenue retention: 106%****$100K+ ARR customers: 2,871, up 14%, now 68% of total ARR****FY27 non-GAAP operating margin guided to 25%****Trading at roughly 4.3x ARR**, or about $6.5B enterprise value on a $1.5B ARR run rate ### 5 Interesting Learnings: ## 1. They paid ~11x revenue for DroneDeploy while the market pays them 4x This is the biggest thing in the release and it’s only in the deck, not the press release. $845 million in cash for DroneDeploy, subject to purchase price adjustments, expected to close later this year pending regulatory review. DroneDeploy has TTM revenue of roughly $78 million, gross margins above 80%, and is cash flow breakeven. That’s about **10.8x TTM revenue**. Procore’s own enterprise value is roughly 4.3x forward revenue. The category leader in construction software is paying more than twice its own multiple for a reality-capture and robotics company one-twentieth its size. The financing is the other notable part. Procore has about $656M in cash and marketable securities, but they’ve arranged a committed bridge facility to fund a majority of the purchase price while they evaluate a permanent capital structure, stated explicitly as being done in the most EPS-accretive manner. Procore is taking on real leverage for the first time. They say it’s accretive to organic growth with no material impact to operating margin guidance. The strategic argument is the clearest articulation of an AI thesis I’ve seen from a vertical incumbent. Their framing: move from the system of collaboration and record to **the system of intelligence** for construction. DroneDeploy supplies what they’re calling visual intelligence, bridging the physical jobsite to the digital record. Combined with the reasoning layer from Datagrid, which they bought for about $159M earlier this year, the goal is what Procore calls **digital coworkers**: real-time perception as the eyes and ears, advanced reasoning as the brain, and an auditable platform where actions get taken as the arms and legs. And then the actual value proposition, stated plainly in the deck: it offsets labor shortages and saves time and money. For founders, two takeaways. First, incumbents with slow-growth multiples will pay AI-native multiples for the perception layer, because owning the data of record is worthless if you can’t see what’s physically happening. If you have a sensing or capture business in a vertical, the incumbent platform is your buyer and they will stretch. Second, watch what Procore is buying rather than building. Two acquisitions in six months for roughly $1B combined, at a company that just told you it’s holding R&D roughly flat. That’s a deliberate build-versus-buy stance on AI. ## 2. Total operating expenses grew 3% while revenue grew 16% This is the story of the P&L, and it’s more dramatic than the margin headline. Total GAAP operating expenses were $295.5M versus $286.5M a year ago, up 3.1% against 15.8% revenue growth. Procore added $51M of quarterly revenue on $9M of incremental opex. Sales and marketing did the heaviest lifting. GAAP S&M dollars were $145.8M versus $141.9M, up 2.7%, and actually *declined* sequentially from $149.2M in Q1. GAAP S&M went from 44% of revenue to 39%. R&D deserves an honest note, because I flagged it as the headline last quarter. Q1 R&D dollars declined year over year in absolute terms. That did not repeat: GAAP R&D was $93.3M, up 5%, and non-GAAP R&D was $67.4M, up 3.4%. Part of the GAAP increase is Datagrid acquisition expense. The right way to state it is that non-GAAP R&D fell from 20% of revenue to 18%, and from 23% in FY23, while dollars grew at roughly a fifth of the revenue growth rate. Non-GAAP G&A actually declined in dollars, from $41.3M to $40.5M, and from 14% of revenue in Q1 to 11%. Q1 was inflated by the executive transition; Q2 normalized. Sit with the GAAP milestone for a second. GAAP income from operations was $4.3M against a $30.3M loss a year ago, and GAAP net income was $16.9M, or $0.11 per share. That absorbs $60.6M of stock comp, $9.4M of intangible amortization, and $4.5M of acquisition expense. And SBC is now 16% of revenue, down from 18%, with non-GAAP operating income ($80.5M) finally exceeding it. A quarter ago those two numbers were identical. ## 3. Net revenue retention is 106%, down from 114%, and flat for two years Procore disclosed net retention in the deck, and it’s the most important number in it. Meanwhile gross retention has been 95% for five straight quarters, dead flat, zero basis points of change year over year. Put those together and you have the actual explanation for decelerating growth, and it isn’t churn. Churn is stable and good. **Expansion is the constraint.** 95% gross plus 106% net means roughly 11 points of net expansion from the installed base, down from 19 points in FY23. For a company priced on construction volume rather than seats, that’s a macro readthrough as much as a product one. Existing customers aren’t putting dramatically more project volume through the platform, because there isn’t dramatically more project volume. It also explains the DroneDeploy logic. If you can’t expand on volume, you have to expand on new product surface, and consumption-priced AI agents plus visual intelligence is a different expansion vector than more construction dollars. One more concentration data point: $100K+ ARR customers now represent **68% of total ARR**, up from 64% a year ago. Customer count in that cohort grew 14%, decelerating from 16% last quarter. The base is getting more top-heavy while the top is growing slower. By stakeholder, ARR mix is 59% general contractors, 26% owners, 15% specialty contractors. Owners went from 25% to 26% over the past year, which is why the new portfolio management and capital planning product aimed at owners matters. ## 4. Backlog says the 13.3% Q3 guide is too low, and Procore changed its own story Two forward indicators both accelerated. Current RPO reached $1,073M, up 22%, with non-current RPO up 29% and total RPO at $1,670M. Current deferred revenue was $673M, up 20%, and the trend is unmistakable: 13%, 14%, 17%, 17%, 20% over the last five quarters. Then management changed its explanation. Last quarter management attributed the cRPO premium over revenue growth mostly to lengthening contract duration, and said the two would converge in three to four quarters. This quarter the deck says duration increased only slightly and that **the primary driver of the Q2 acceleration was stronger underlying bookings performance**. That’s a real change in the explanation, and it’s the more bullish one. They beat their own Q2 guide by 3 points. Deferred revenue is accelerating. Bookings are reportedly the driver of backlog growth. And they’re guiding Q3 to 13.3%. Treat that as a floor. International is the quiet bright spot: 16% of revenue, and international constant currency growth accelerated to 19% from 15% in each of the prior four quarters. ## 5. FY27 operating margin guided to 25%, two years out Procore initiated FY27 non-GAAP operating margin guidance of 25%. Rule of 40+. The full arc: That’s 2,300 basis points in four years at a company still growing mid-teens. Free cash flow tells the same story: FY23 5% margin, FY24 11%, FY25 16%, FY26 guided at 19.5%. What it implies about growth is the tougher part. You don’t guide margin two years out if you believe growth is about to reaccelerate, because the fastest way to miss a margin target is finding something worth investing in. This is a company telling you which variable it optimizes when the two conflict. On valuation: at roughly $46.60 a share and 153M diluted shares, that’s about a $7.1B market cap. Net of $656M in cash and securities, roughly $6.5B enterprise value, or **4.3x** the raised $1,512M FY26 guide and about **22x forward free cash flow**. Post-DroneDeploy, adding $845M of purchase price against that cash, the effective multiple moves closer to 4.8x. The stock is down about 36% over 52 weeks and five-year total shareholder return is negative 56%. Sell-side consensus is a Buy with an average target near $66.55. Short interest is above 8% of shares out. Four more items from the numbers: **Diluted share count is completely flat.** 153M, 0% year over year, and down 1% in Q1. In an industry where dilution runs 2% to 4% a year, that’s disciplined.**They repurchased zero stock in Q2**, after $100M in Q1. Now we know why: they were funding Datagrid and lining up $845M.** Gross margin is stuck at 84% non-GAAP and 80% GAAP**across five straight quarters, down from 86% non-GAAP in FY24. Compute costs are the flagged headwind, with the offset coming from opex rather than cost of revenue.**DroneDeploy is cash flow breakeven at $78M of revenue**, so it’s roughly margin-neutral on the way in. But it adds $78M of ~5% growth-neutral revenue against Procore’s $1.5B, which is why they call it accretive to organic growth rather than transformative. ## Where To Find Vertical Growth in the Age of AI The efficiency question is answered. Procore added $51M of quarterly revenue on $9M of incremental opex, crossed into GAAP profitability with all the stock comp still in the numbers, held share count flat, and committed to a 25% operating margin two years out. Going from 2% to 25% non-GAAP operating margin in four years while growing mid-teens is the new proof that vertical B2B works at scale. The growth question is not answered, and net retention is where it lives. 106% net against 95% gross means the installed base is contributing about 11 points of expansion, down from 19 in FY23. Churn is fine. Expansion is the problem, and for a company priced on construction volume, expansion is partly a macro variable Procore doesn’t control. Which is what the $845M is actually for. Procore is buying its way to an expansion vector that doesn’t depend on construction spending going up: perception from DroneDeploy, reasoning from Datagrid, consumption-priced agents sold into the labor budget rather than the software budget. It’s the right diagnosis. The open question is whether an incumbent paying 11x for AI capability while trading at 4x itself can make that arbitrage work. Every vertical B2B company sitting on proprietary workflow data is about to face the same build-versus-buy decision. Procore just told you which side it picked, and how much it’s willing to borrow to do it.