Procore Technologies (PCOR)

Construction management software provider Procore Technologies (NYSE:PCOR) reported Q3 CY2025 results topping the market’s revenue expectations, with sales up 14.5% year on year to $338.9 million. The company expects next quarter’s revenue to be around $340 million, close to analysts’ estimates. Its non-GAAP profit of $0.42 per share was 29.9% above analysts’ consensus estimates.

Company Overview

With a mission to build software for the people that build the world, Procore Technologies (NYSE:PCOR) provides cloud-based software that enables owners, contractors, and other stakeholders to collaborate and manage construction projects from any device.

The demand for rich, interactive 2D, 3D, VR and AR experiences is growing, and while the ubiquitous metaverse might still be more of a buzzword than a real thing, what is real is the demand for the tools to create these experiences, whether they are games, 3D tours or interactive movies.

Procore's main competitors include Autodesk Construction Cloud (NASDAQ:ADSK), Oracle Construction and Engineering (NYSE:ORCL), Trimble (NASDAQ:TRMB), and privately-held companies like Fieldwire, PlanGrid (acquired by Autodesk), and Buildertrend.

A company’s long-term performance is an indicator of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Thankfully, Procore Technologies’s 27.7% annualized revenue growth over the last five years was impressive. Its growth beat the average software company and shows its offerings resonate with customers.

Long-term growth is the most important, but within software, a half-decade historical view may miss new innovations or demand cycles. Procore Technologies’s annualized revenue growth of 19.6% over the last two years is below its five-year trend, but we still think the results suggest healthy demand.

This quarter, Procore Technologies reported year-on-year revenue growth of 14.5%, and its $338.9 million of revenue exceeded Wall Street’s estimates by 3.3%. Company management is currently guiding for a 12.6% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 11.3% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and implies its products and services will see some demand headwinds.

Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.

Procore Technologies’s billings came in at $351.8 million in Q3, and over the last four quarters, its growth slightly lagged the sector as it averaged 13.6% year-on-year increases. This performance mirrored its total sales and suggests that increasing competition is causing challenges in acquiring/retaining customers.

Procore Technologies reported 17,623 customers at the end of the quarter, a sequential increase of 122. That’s worse than what we’ve observed previously, and we’ve no doubt shareholders would like to see the company accelerate its sales momentum.

The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.

It’s relatively expensive for Procore Technologies to acquire new customers as its CAC payback period checked in at 57.5 months this quarter. The company’s slow recovery of its sales and marketing expenses indicates it operates in a highly competitive market and must invest to stand out, even if the return on that investment is low.

For software companies like Procore Technologies, gross profit tells us how much money remains after paying for the base cost of products and services (typically servers, licenses, and certain personnel). These costs are usually low as a percentage of revenue, explaining why software is more lucrative than other sectors.

Procore Technologies’s robust unit economics are better than the broader software industry, an output of its asset-lite business model and pricing power. They also enable the company to fund large investments in new products and sales during periods of rapid growth to achieve outsized profits at scale. As you can see below, it averaged an excellent 79.8% gross margin over the last year. Said differently, roughly $79.80 was left to spend on selling, marketing, and R&D for every $100 in revenue.

The market not only cares about gross margin levels but also how they change over time because expansion creates firepower for profitability and free cash generation. Procore Technologies has seen gross margins decline by 1.5 percentage points over the last 2 year, which is poor compared to software peers.

In Q3, Procore Technologies produced a 79.7% gross profit margin, marking a 1.8 percentage point decrease from 81.5% in the same quarter last year. Procore Technologies’s full-year margin has also been trending down over the past 12 months, decreasing by 2.6 percentage points. If this move continues, it could suggest a more competitive environment with some pressure to lower prices and higher input costs.

Many software businesses adjust their profits for stock-based compensation (SBC), but we prioritize GAAP operating margin because SBC is a real expense used to attract and retain engineering and sales talent. This metric shows how much revenue remains after accounting for all core expenses – everything from the cost of goods sold to sales and R&D.

Procore Technologies’s expensive cost structure has contributed to an average operating margin of negative 11.6% over the last year. Unprofitable, high-growth software companies require extra attention because they spend heaps of money to capture market share. As seen in its fast historical revenue growth, this strategy seems to have worked so far, but it’s unclear what would happen if Procore Technologies reeled back its investments. Wall Street seems to think it will face some obstacles, and we tend to agree.

Looking at the trend in its profitability, Procore Technologies’s operating margin decreased by 1.9 percentage points over the last two years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Procore Technologies’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

Procore Technologies’s operating margin was negative 4.4% this quarter.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Procore Technologies has shown weak cash profitability over the last year, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 9.8%, subpar for a software business.

Procore Technologies’s free cash flow clocked in at $67.74 million in Q3, equivalent to a 20% margin. This result was good as its margin was 12.2 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, leading to temporary swings. Long-term trends trump fluctuations.

Over the next year, analysts predict Procore Technologies’s cash conversion will improve. Their consensus estimates imply its free cash flow margin of 9.8% for the last 12 months will increase to 15.7%, it options for capital deployment (investments, share buybacks, etc.).

Companies with more cash than debt have lower bankruptcy risk.

Procore Technologies is a well-capitalized company with $684 million of cash and $63.04 million of debt on its balance sheet. This $620.9 million net cash position is 5.2% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

We enjoyed seeing Procore Technologies beat analysts’ billings expectations this quarter. We were also happy its revenue outperformed Wall Street’s estimates. On the other hand, its customer growth slowed. Overall, this print had some key positives. The stock traded up 4.7% to $74.88 immediately after reporting.

Updated: December 4, 2025 at 9:30 PM EST

Before investing in or passing on Procore Technologies, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

Procore Technologies isn’t a terrible business, but it isn’t one of our picks. Although its revenue growth was strong over the last five years, it’s expected to deteriorate over the next 12 months and its declining operating margin shows it’s becoming less efficient at building and selling its software. And while the company’s admirable gross margin indicates excellent unit economics, the downside is its operating margins reveal poor profitability compared to other software companies.

Procore Technologies’s price-to-sales ratio based on the next 12 months is 8x. Beauty is in the eye of the beholder, but we don’t really see a big opportunity at the moment. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $86.44 on the company (compared to the current share price of $76.82).