Published
# Veeva Systems Inc. (VEEV): Business, Risks and Management's Discussion Veeva's fiscal year ends on January 31. The company calls the year ended January 31, 2026 "fiscal 2026" and the year ending January 31, 2027 "fiscal 2027". This page covers the annual report for fiscal 2026 and the second quarter of fiscal 2027, the three months ended July 31, 2026. ## Business *From the fiscal 2026 annual report on Form 10-K (accession 0001393052-26-000014), updated where noted from the second-quarter fiscal 2027 Form 10-Q (accession 0001393052-26-000036).* Veeva sells industry-specific cloud software, data and consulting to the life sciences industry: pharmaceutical, biotechnology and medical device companies, contract research and contract sales organizations, and clinical research sites. Most of its revenue is recurring subscription fees. In fiscal 2026, subscriptions brought in $2,684.2 million of total revenue of $3,195.3 million (84%). Professional services and other (implementation, configuration, managed services, speakers-bureau logistics and Veeva Business Consulting) brought in the remaining $511.1 million (16%). Veeva reports one operating segment, but splits revenue into two product areas: - **R&D and Quality Solutions** (Veeva Development Cloud and Veeva Quality Cloud) produced 55% of fiscal 2026 total revenue and 53% of subscription revenue. Development Cloud covers clinical trials (Veeva EDC, CDB, eTMF, CTMS, RTSM and site and patient applications), drug safety (Veeva Safety) and regulatory information management (Veeva RIM). Quality Cloud covers quality management (QMS, QualityDocs), lab and training applications. All of it runs on Veeva's own Vault platform. Some of these applications are also sold outside life sciences, mainly in North America and Europe. Veeva expects this area to keep growing as a share of revenue. - **Commercial Solutions** (Veeva Commercial Cloud and Veeva Data Cloud) produced 45% of total revenue and 47% of subscription revenue. Commercial Cloud includes Vault CRM, the legacy Veeva CRM, Veeva Medical, PromoMats for commercial content and Crossix for marketing analytics and audience targeting. Data Cloud supplies reference, deep and transaction data: OpenData records on healthcare professionals, Veeva Link, Compass patient and prescriber data, and HCP Access. **Veeva AI** adds agentic AI to the Vault platform and builds industry-specific AI agents into Veeva applications. The 10-Q says the company now describes its offerings as "applications, agents, data, and consulting". The agents use large language models from third parties, including Anthropic and Amazon, hosted on Amazon Bedrock. The 10-Q also names **Aspen CRM**, a newly announced CRM product for companies outside life sciences. **Customers.** On January 31, 2026, Veeva had 1,552 customers, up from 1,477 a year earlier and 1,432 two years earlier. Of these, 767 bought Commercial Solutions and 1,196 bought R&D and Quality Solutions; some buy both. Customers range from the largest drug makers (the 10-K names Bayer, Boehringer Ingelheim, Eli Lilly, Gilead, Merck Sharp & Dohme and Novartis) to emerging biotechs. Revenue is concentrated: the top 10 customers accounted for 28% of total revenue in each of fiscal 2026, 2025 and 2024. Customers outside North America accounted for about 40% of fiscal 2026 revenue. CRM orders usually run for one year. Multi-year master subscription agreements generally let the customer terminate for convenience. **The CRM platform transition.** Veeva's original CRM product, Veeva CRM, runs on the Salesforce platform. Veeva is moving those customers to Vault CRM, which runs on its own Vault platform, and will support Veeva CRM until December 31, 2029. Veeva's agreement with Salesforce expired on September 1, 2025. During a wind-down period that ends September 1, 2030, Veeva may not sell Salesforce-based applications to new customers. Each customer that existed at September 1, 2025 may not grow beyond 150% of the seats it had in use on that date. After September 1, 2030, Veeva may not sell Salesforce-based applications to anyone. Salesforce is also Veeva's main CRM competitor. **Competition.** In CRM, Veeva competes mainly with Salesforce, which has built its own life sciences CRM application and licenses IQVIA's former CRM software. Data Cloud and Crossix compete with IQVIA, Ipsos, Definitive Health and smaller data providers. Development Cloud and Quality Cloud compete with IQVIA, Dassault Systèmes, OpenText, Oracle, Honeywell and smaller vendors, and also replace older client-server systems from Oracle and Microsoft. IQVIA, long both a rival and a litigant, settled all of its disputes with Veeva in August 2025. **Operations.** Vault applications, including Vault CRM, are hosted on Amazon Web Services. Veeva CRM runs on Salesforce's infrastructure. Data centers are in the United States, the European Union, Japan, South Korea, Singapore, Australia and Brazil, with separate hosting for products used only in China. On January 31, 2026, Veeva had 7,928 employees, 637 more than a year earlier. It owns its headquarters in Pleasanton, California. Veeva is a Delaware public benefit corporation. Its stated public benefit purpose is to make the industries it serves more productive and to create high-quality jobs in its communities, and its directors must weigh that purpose and other stakeholders' interests alongside stockholder returns. **Capital allocation.** Veeva has never paid a dividend and does not expect to. It returns cash to stockholders through a share repurchase program that its board authorized in January 2026. ## Risk factors *From the fiscal 2026 Form 10-K (accession 0001393052-26-000014), as updated in the second-quarter fiscal 2027 Form 10-Q (accession 0001393052-26-000036).* The risks most specific to Veeva come from its CRM transition, its dependence on a single industry, and the arrival of AI. - **Losing CRM customers during the platform transition.** Veeva says some customers have already chosen a competitor's CRM, and more may do so as it retires Veeva CRM. Salesforce has announced that certain large Veeva CRM customers have committed to buy its CRM, and a number of Veeva customers have said they intend to move to Salesforce. The migration to Vault CRM is complex and costly. It could cause outages if Vault has trouble handling the extra users, and failure would harm the business and the brand. - **Dependence on Salesforce until the wind-down ends.** If the Salesforce platform became unavailable before Veeva expects, its business would suffer. Salesforce can end the wind-down period early in some cases, including a material breach by Veeva or certain intellectual property claims. If Veeva is acquired by certain named companies, Salesforce can terminate on at least 12 months' notice. - **Customer concentration and industry consolidation.** With the top 10 customers at 28% of revenue, losing a large customer, or a large customer failing to renew or expand, would weigh on growth. Mergers between drug makers have led to cuts in user subscriptions and to non-renewals in the past. Veeva also expects closer scrutiny at renewal, and more pressure on price, as customers spend more with it. - **Exposure to the life sciences industry.** Nearly all revenue comes from life sciences. The 10-Q names these pressures on customers: - drug pricing measures, including the Inflation Reduction Act, administration proposals to tie U.S. drug prices to prices abroad, and direct price negotiations with manufacturers; - possible limits on direct-to-consumer drug advertising, which would hit Crossix; - cuts to funding and staffing at the FDA and NIH, and changes to Medicaid; - harder funding conditions and bankruptcies among early-stage biotechs; - fewer sales representatives as companies shift to digital channels, which has already reduced demand for Veeva CRM and other Commercial Solutions; - tariffs on the industry's products and inputs. - **New products and AI.** Growth depends on new products catching on, including Veeva AI and Aspen CRM. AI raises its own risks: accuracy, bias, privacy and controversy, plus fast-changing rules such as the EU AI Act. Veeva AI depends on third-party large language models, including Anthropic's. The 10-Q warns that providers or governments could suddenly suspend or restrict access to frontier models. Rivals that use AI better could take share. - **Security, privacy and regulation.** Veeva handles sensitive data, including patient health data in Crossix and Compass. It operates under the EU and UK GDPR, China's PIPL, HIPAA and U.S. state privacy laws. A 2025 U.S. Department of Justice rule limits transfers of certain personal data to China and other designated countries. The EU Data Act, in force since September 12, 2025, lets EU customers cancel subscriptions without cause after giving notice and a transition period. - **Slower growth and pressure on margins.** Total revenue grew 16%, 16% and 10% in fiscal 2026, 2025 and 2024, and subscription revenue grew 17%, 20% and 10%. Veeva warns that growth may slow. Costs that could squeeze profitability include large language model costs for Veeva AI, data purchases for Data Cloud, a larger sales force, and acquisitions. - **International operations and geopolitics.** About 40% of revenue comes from outside North America. Veeva has an office, vendors and customers in Israel, and the 10-Q cites the conflict in the Middle East as a source of cyber and operating risk. - **Other risks.** Professional services revenue and margins swing from quarter to quarter. Deferred revenue and billings are poor guides to future revenue because of billing timing and changes to renewal dates. A non-practicing entity has alleged that Veeva infringed its patents. The OECD's Pillar Two global minimum tax could raise tax costs. The company depends heavily on founder and CEO Peter P. Gassner. Its public benefit corporation status lets directors make decisions that do not maximize short-term stockholder value, including in a sale of the company. ## Management's discussion: fiscal 2026 (year ended January 31, 2026) *From the fiscal 2026 Form 10-K (accession 0001393052-26-000014).* Fiscal 2026 combined mid-teens revenue growth with operating income that grew faster. Total revenue rose $449 million, or 16%, to $3,195.3 million. Subscription revenue rose 17% to $2,684.2 million. Of the $400 million subscription increase, $247 million came from R&D and Quality Solutions and $153 million from Commercial Solutions. Management attributed growth in both areas mainly to existing customers using more products, and to a lesser extent to the annual inflation price increase. Professional services and other revenue rose $49 million (11%) to $511.1 million, led by business consulting and implementation services. Subscription revenue by region was 60% North America, 28% Europe and 12% other, mainly Asia Pacific. Gross margin rose to 76% from 75%. Subscription gross margin was 87% and professional services margin 18%. Cost of revenue rose $82 million: $42 million from services staff costs, plus $40 million in subscription costs, most of it ($36 million) for computing infrastructure and data. Operating expenses: - **Research and development** rose 11% to $767.4 million, including $64 million more in employee compensation. - **Sales and marketing** rose 8% to $428.8 million, including $29 million more in compensation. - **General and administrative** rose 13% to $300.7 million, mainly because litigation settlement-related charges rose by a net $26 million. The fiscal 2026 charge, $30.6 million, matches the roughly $31 million in success fees Veeva paid to law firms after the IQVIA settlement. Management expected G&A to fall in fiscal 2027 as a result. Operating income rose 33% to $916.4 million from $691.4 million. Other income, mostly interest, rose 22% to $278.1 million on higher cash and investment balances. The effective tax rate rose to 23.9% from 22.3%. The main reason was the indirect effect of the One Big Beautiful Bill Act: restoring immediate expensing of domestic R&D cut taxable income and with it the foreign-derived intangible income deduction. Net income was $908.9 million against $714.1 million, and diluted EPS was $5.44 against $4.32. Stock-based compensation was $472.7 million. On the company's non-GAAP basis, which excludes stock-based compensation, amortization of purchased intangibles and litigation settlement-related charges, operating income was $1,433.8 million against $1,152.3 million. Operating cash flow was $1,415 million against $1,090 million, helped by the tax law change. The first fiscal quarter is seasonally the strongest for cash because that is when Veeva collects its annual subscription billings. Investing activities used $1,104 million, mostly purchases of short-term investments. Financing used $9 million. Cash, cash equivalents and short-term investments totaled $6.6 billion at year end. In January 2026, the first month of the buyback, Veeva repurchased 801,735 shares for about $180 million at an average price of $224.43. ## Current quarter: second quarter of fiscal 2027 (three months ended July 31, 2026) *From the second-quarter fiscal 2027 Form 10-Q (accession 0001393052-26-000036) and the results release furnished on Form 8-K (accession 0001393052-26-000032).* Revenue grew faster than in fiscal 2026, and operating income rose 40%. Part of that rise is because the prior-year quarter carried the IQVIA litigation charges. Total revenue was $928.0 million, up 18% from $789.1 million, and above the company's guidance of $902–905 million. Subscription revenue rose 16% to $766.8 million. Of the $108 million subscription increase, $68 million came from R&D and Quality Solutions and $40 million from Commercial Solutions. R&D and Quality subscription revenue was $419.4 million against $351.7 million; Commercial subscription revenue was $347.4 million against $307.5 million. Management attributed the growth to existing customers using more products and to the annual inflation price increase. Professional services and other revenue jumped 24% to $161.2 million on higher implementation and business consulting work. Subscription revenue by region was 60% North America, 29% Europe and 11% other. Gross margin held at 75%: subscription at 86% and services at 22%. Operating expenses in the quarter: - **Research and development** rose 16% to $222.9 million, including $24 million more in compensation. - **Sales and marketing** rose 16% to $126.7 million, including $11 million more in compensation and $5 million more for marketing events. - **General and administrative** fell 26% to $71.3 million because the year-earlier quarter included $31 million of litigation settlement-related charges. Operating income rose 40% to $275.0 million from $195.9 million. Non-GAAP operating income rose 18% to $415.9 million from $352.6 million. Other income was $74.5 million. The effective tax rate fell to 21.8% from 24.5%, mainly because of a larger foreign-derived deduction-eligible income (FDDEI) deduction under the One Big Beautiful Bill Act, partly offset by tax shortfalls on equity compensation. Net income rose 37% to $273.4 million, and diluted EPS was $1.66 against $1.19. For the first six months, revenue rose 17% to $1,810.9 million and net income was $534.4 million against $428.5 million. Operating cash flow for the six months was $1,366 million against $1,116 million. The company credited higher collections and lower income tax payments under the new tax law. It expects that law to keep reducing cash taxes for the rest of the year but cannot yet estimate by how much. Investing activities used $452 million, including the Ostro acquisition described below. Financing activities used $522 million, against $136 million provided a year earlier, mainly because of share repurchases and smaller proceeds from option exercises. Cash, cash equivalents and short-term investments reached $7.2 billion on July 31, 2026, and the balance sheet shows no borrowings. Deferred revenue was $1,310.5 million, against $1,488.8 million at January 31, 2026, reflecting the seasonal billing pattern described above. Shares outstanding were 161,834,760. **Change to employee equity.** In April 2026, Veeva stopped making annual stock option grants to employees other than the CEO. Instead it grants restricted stock units that generally vest in full after four years of service. These grants are not expected to recur each year, and employees will generally hold only one at a time. **Acquisitions.** Veeva has made two acquisitions this fiscal year. In March 2026 it bought Ostro (Rise Healthcare Tech, Inc.), whose AI chat platform gives patients and doctors immediate, compliant answers. According to the first-quarter results release, Ostro was already delivering conversational AI for more than 50 brands. Veeva also acquired Copli during the second quarter. The second-quarter results release mentions the deal in its AI highlights but does not describe Copli's business, and the 10-Q's acquisitions note does not mention it. **Product momentum.** The second-quarter results release reported progress across the product lines. Veeva launched Veeva Falcon MLR to automate content reviews. Veeva Safety passed 100 customers, and Quality Cloud added more than 30 new customers. In clinical trials, a large enterprise biopharma added Veeva EDC to the eTMF, CTMS and Study Startup applications it already used. **Outlook.** Management said second-quarter results beat guidance on every metric, and it raised its full-year fiscal 2027 outlook at both the first-quarter and second-quarter results. The operating income and EPS guidance is on the company's non-GAAP basis; the revenue guidance is total revenues. Veeva does not give GAAP targets for operating income or EPS because it cannot reasonably predict excluded items such as stock-based compensation. ## Subsequent events *From the second-quarter fiscal 2027 Form 10-Q (accession 0001393052-26-000036), the second-quarter results release (accession 0001393052-26-000032) and the fiscal 2026 Form 10-K (accession 0001393052-26-000014).* The 10-Q for the quarter ended July 31, 2026 has no subsequent-events note. It discloses no acquisition, divestiture, borrowing or litigation outcome after the quarter end, and it says Veeva is not party to any legal proceeding expected to have a material adverse effect. The main business development after the quarter was in CRM. Two top-20 biopharmas and one large enterprise biopharma committed to Vault CRM in August 2026, according to the results release. That moves Veeva closer to the goal it set at the end of fiscal 2026: it then had 10 top-20 commitments and expected about 14 of the top 20 to commit. The fiscal 2026 10-K's subsequent-events note covered the Ostro acquisition. It said the deal closed on March 10, 2026 for about $100 million in cash and long-term equity retention grants, and that the accounting was still being assessed. The 10-Q later gave the closing date as March 9, 2026. It put the purchase consideration at $90 million ($70 million net of cash acquired), excluding equity awards to Ostro employees that are accounted for separately. The 10-Q figures are the later and more detailed ones.