Procore (PCOR) Q3 2026 earnings review
Procore's core sales speed up, while AI revenue stays undisclosed
Procore, the maker of construction management software, sped up its core sales growth while expanding profit margins after closing its purchase of DroneDeploy. Chief executive Ajei Gopal and finance chief Rachel Pyles reported 19% revenue growth, or 17% by our math excluding DroneDeploy, and lifted the underlying full-year outlook above what the prior plan pointed to. Operating margin excluding one-offs reached 23.5% as sales and marketing costs stayed flat in dollars.
| Sales from businesses owned a year ago | +17.3% 18.7% total revenue growth including DroneDeploy |
|---|---|
| Operating margin, excluding one-offs | 23.5% outlook was 19.0–19.5% |
| Contracted revenue for the next 12 months (cRPO) | $1.17B +29% from a year ago |
| Full-year revenue outlook | Raised $46M +$22M excluding DroneDeploy, to 16% underlying growth |
⚖️ Verdict: 🟢 Bullish
The story got better because underlying sales accelerated rather than slowing into year-end, and Procore replaced its temporary acquisition loan with $950 million in convertible debt while buying back $175 million of stock. One caution: the company has spent $949 million on acquisitions this year to build out its artificial intelligence tools, yet it still discloses no revenue from them and will take a $23 million cash hit from deal costs.
The question now is whether the jump in contracted backlog to 29% growth comes from real demand for Procore's new AI and 3D tools or just acquired DroneDeploy contracts and longer multi-year deals. The quarterly filing's backlog breakdown and next quarter's initial 2027 revenue outlook will settle it.
🐂 Bull Case
Lower Sales Costs Drove Operating Margin to 23.5%
Procore's profit margin expanded past its own plan without help from last quarter's one-time rent gain. Chief executive Ajei Gopal said "Q3 was another outstanding quarter, with revenue and margins above the high end of our guidance." Operating margin excluding one-offs reached 23.5%, up 6.2 percentage points from a year ago and 4.2 points above the middle of the outlook.
Advertising and sales overhead drove the gain. Sales and marketing spending excluding one-offs barely moved in dollars, so it fell to 31.1% of revenue from 36.5% a year ago, a drop of 5.4 percentage points. Because Procore also raised its full-year margin plan while absorbing DroneDeploy, a newly acquired 3D job-site imaging business, the cost savings are holding.
What to watch: fourth-quarter operating margin excluding one-offs against the 15.5% to 16.0% outlook. A result above 16% would show that DroneDeploy's operating losses are smaller than the seasonal step-down in the plan.
Underlying Sales Accelerated and Lifted the Year-End Plan
Growth in Procore's existing construction software sped up this quarter, easing fears of a late-year slowdown. Finance chief Rachel Pyles said third-quarter sales rose "with revenue up 19%, including 2 percentage points from DroneDeploy." By our math, DroneDeploy contributed $5 million in the third quarter, so sales from businesses owned a year ago grew 17.3%, up from 15.8% in the second quarter.
- Underlying third-quarter revenue: $397.3 million, up 17.3% from a year ago by our math
- Underlying fourth-quarter revenue outlook: $401 million to $403 million, up 15.2% at the middle of the range by our math
- Customers paying over $100,000 in annual recurring revenue (ARR, the yearly value of subscription contracts): 2,968, up 14% from a year ago
- Gross revenue retention (the share of existing contract value kept over the past year): 95%, unchanged from last quarter
Three months ago, the full-year outlook pointed to fourth-quarter growth slowing to about 13% by our math. The new fourth-quarter plan excluding DroneDeploy's $19 million contribution sits at 15.2% growth, beating that prior implied target by $7.5 million. Because Procore has beaten its quarterly revenue outlook four times in a row, the prior year-end slowdown was a cautious forecast rather than weaker demand.
What to watch: fourth-quarter revenue excluding DroneDeploy when full-year results arrive. A reading above $403 million would keep underlying growth near 16% heading into 2027.
Resumed Buybacks Cut the Share Count as Convertibles Replace the Bridge
Procore replaced its temporary acquisition loan with long-term convertible notes (debt that can turn into shares) and resumed buying back stock. Pyles emphasized "compounding free cash flow per share" as a core goal. During the third quarter, the software maker issued $950 million in convertible notes and spent $59.1 million on capped calls, which are options that limit share dilution if the debt converts.
After buying back no stock in the second quarter, management spent $175 million on buybacks in the third quarter and authorized a new $300 million program for the next twelve months. Because of those purchases, the diluted share count excluding one-offs fell 1.2% from a year ago to 151.7 million, helping profit per share excluding one-offs rise 21.4%.
What to watch: the interest rate and conversion price of the $950 million notes in the quarterly filing. Those terms will show how much annual interest cash Procore will pay and where share dilution begins.
🐻 Bear Case
A Billion-Dollar AI Bet Still Has No Revenue Number
Procore is spending heavily to buy and build artificial intelligence tools, which is also a key risk because the company gives no revenue figures for them. Supporters point to rapid product launches: Gopal said Procore "made Procore AI’s digital coworkers generally available" and announced collaborations with NVIDIA and IBM. The group also closed its purchase of DroneDeploy "to expand Procore's visual intelligence and AI capabilities", launching Ground Pro to "turn everyday mobile site captures into actionable, measurable 3D records" and Asset Register to "streamline contractor-to-owner project handovers".
The numbers show the bill for this strategy, not the return. Over the first nine months of 2026, Procore spent $949.4 million in cash on acquisitions, including $790.5 million in the third quarter, shifting its balance sheet from $811 million in cash and securities at year-end to $314.1 million in net debt by our math. One-time deal expenses jumped to $26.6 million this quarter and will take $23 million out of full-year free cash flow, yet the release discloses zero AI revenue or pricing.
What to watch: management's initial 2027 revenue outlook next quarter. It will show whether DroneDeploy and the new AI coworkers lift underlying growth above the mid-teens.
Risks this quarter didn't answer
Four standing concerns around contract backlog quality, construction demand, computing costs, and legal disputes received no update or breakdown in the earnings release.
- Current remaining performance obligations (cRPO, contracted revenue expected over the next 12 months): rose 28.9% from a year ago to $1.17 billion, up from 21.9% growth in the second quarter, but the release does not separate DroneDeploy's acquired backlog from longer contract lengths.
- US commercial and apartment construction demand: no commentary in the release; the conference call will show whether core building activity is still shrinking outside of data centers.
- AI computing costs: gross margin excluding one-offs held at 84.4%, up 0.6 percentage points from a year ago, but management has not sized the server cost of running AI coworkers at scale.
- Oracle trade-secret lawsuit over Procore Pay (its construction payment software): not mentioned in the release; the quarterly filing's legal note will show any trial schedule or legal fee changes.
What to watch: the organic cRPO growth rate and contract duration commentary on the conference call and in the quarterly filing. If DroneDeploy and longer multi-year contracts drove the jump from 22% to 29% cRPO growth, underlying bookings did not accelerate.
💲 Other KPIs
Capital spending plus capitalized software development costs rose 9.5% from a year ago to $22.7 million, or 5.6% of revenue by our math. Capitalized software — developer pay recorded as an asset rather than an immediate expense — made up $18.6 million of the total, up 20.9% from a year ago, reducing free cash flow.
Deferred revenue — cash customers have paid upfront for software service not yet delivered — rose 25.0% from a year ago to $721.7 million by our math, outpacing the 18.7% rise in reported sales. The balance added $43.0 million from the second quarter, lifted in part by the DroneDeploy acquisition closing.
🔮 Guidance
New. The plan calls for 20.3% to 20.9% total growth, including $19 million from DroneDeploy. By our math, sales excluding DroneDeploy will grow 15.2% at the middle of the range, down from 17.3% in the third quarter. Procore has beaten its quarterly revenue midpoint by an average of 3.2% over the past four quarters; if the pattern holds, fourth-quarter revenue would reach about $434 million.
New. Management expects operating margin excluding one-offs to step down to 15.75% at the middle of the range from 23.5% in the third quarter. The drop reflects fourth-quarter seasonal expenses — including the company's Groundbreak user conference — and the first full quarter of DroneDeploy's operating costs.
Raised. The middle of the full-year range moved up $46 million to 17.8% growth, including $24 million from DroneDeploy. Excluding DroneDeploy, the US software group raised its underlying full-year outlook by $22 million to 16.0% growth by our math. It is the third raise this year: +$9.5M, +$11.0M, and now +$46.0M (+$22.0M excluding DroneDeploy).
Raised. The company lifted its full-year margin target by 0.5 percentage points for a third straight quarter, up from 17.5%–18.0% at the start of the year. The raise carries the third-quarter profit beat through to the full year while absorbing DroneDeploy's fourth-quarter cost base.
Cut on a headline basis, held excluding deal costs. Reported free cash flow margin steps down 1.5 percentage points to 18.0% because of $23 million in one-time cash payments for the DroneDeploy purchase. Excluding those deal payments, the target stays at 19.5%.
Unchanged. Procore kept its 2027 operating margin target at 25%, which represents a 5.75 percentage point jump from the middle of the 2026 outlook. Management still has not issued a 2027 revenue outlook to pair with this margin goal.
❓ Key Questions
How much did DroneDeploy add to third-quarter contracted backlog?
Current remaining performance obligations jumped 28.9% from a year ago, up from 21.9% last quarter. Without knowing how much backlog DroneDeploy brought at close, investors cannot tell if Procore's own bookings accelerated.
How are Procore AI coworkers priced, and what revenue do they bring?
Procore made its AI digital coworkers generally available and spent $949 million on acquisitions this year to build its AI platform, but it still has not shared a pricing model or revenue figure.
What are the interest rate and conversion terms on the $950 million notes?
The company replaced its acquisition bridge loan with $950 million of convertible debt and $59.1 million of capped calls. The interest rate and conversion price will determine future cash interest and potential share count dilution.
What revenue growth rate sits behind the 25% margin goal for 2027?
Procore reaffirmed its 25% operating margin plan for 2027 while absorbing DroneDeploy, which is expected to bring fourth-quarter margin down to 15.5%–16.0%. Investors need to know whether the 2027 margin jump relies on faster revenue growth or deeper cost cuts.