AI Adoption And Global Wins Will Redefine Construction Efficiency

Key Takeaways

• AI-driven platform enhancements and expanded product offerings are strengthening customer value, leading to higher pricing power, retention, and durable revenue growth.
  
• Global market expansion and regulatory wins are diversifying revenue sources, improving contract visibility, and positioning the company for prolonged growth momentum.
  
• Heavy reliance on North America, ongoing macroeconomic and industry headwinds, and rising competition threaten Procore's revenue growth, margins, and long-term earnings stability.

Catalysts

Provides a cloud-based construction management platform and related products and services in the United States and internationally.

• Accelerating adoption of AI-powered solutions in construction, particularly Procore Helix and Agent Builder, is driving increased customer automation, data unification, and workflow efficiency-this positions Procore as an indispensable platform and is likely to boost future revenue growth and support higher pricing, positively impacting both top-line and margins.
  
• The ongoing expansion of Procore's product suite and successful cross-selling initiatives, evidenced by the increasing attach rate of financial modules and broader adoption across diverse industry verticals, indicate greater average revenue per customer, higher net retention, and improved durability of revenue growth.
  
• Procore's continued penetration into global markets, demonstrated by significant new wins in Japan, UAE, and with multinational firms, is diversifying revenue streams and positioning the company to benefit from increased urbanization and global infrastructure investments, which are expected to be long-term drivers of revenue acceleration.
  
• Growing regulatory complexity and public sector digital transformation (e.g., FedRAMP in-process designation) are expanding Procore's addressable market among government agencies and large contractors, which supports robust long-term backlog growth and can drive multiyear contract expansion, enhancing recurring revenue visibility.
  
• The demonstrated operating leverage from recent go-to-market changes and increased sales efficiency is already delivering improved operating margins; management's commitment to further expand margins (targeting 25%-40% FCF margins long-term) suggests future earnings and cash flow growth may be underestimated in current valuations.

Procore Technologies Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Procore Technologies's revenue will grow by 14.3% annually over the next 3 years.
• Analysts are not forecasting that Procore Technologies will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Procore Technologies's profit margin will increase from -11.6% to the average US Software industry of 13.4% in 3 years.
• If Procore Technologies's profit margin were to converge on the industry average, you could expect earnings to reach $246.3 million (and earnings per share of $1.57) by about August 2028, up from $-142.8 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 66.8x on those 2028 earnings, up from -69.1x today. This future PE is greater than the current PE for the US Software industry at 36.3x.
• Analysts expect the number of shares outstanding to grow by 1.7% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.47%, as per the Simply Wall St company report.

Procore Technologies Future Earnings Per Share Growth

Risks

• Persistent macroeconomic uncertainty, including a pretty depressed macroeconomic environment cited by management and ongoing headwinds such as tariffs, currency impacts, and potentially higher interest rates, could constrain total construction activity globally, limiting Procore's addressable market and potential for long-term revenue growth.
  
• Procore's growth remains heavily concentrated in North America, and while there are some international wins, international expansion is still in early stages and exposed to FX headwinds (3 points of negative impact in Q2); high dependence on a single region increases cyclicality risk and may constrain revenue diversification and earnings stability.
  
• The transition to margin-driven, rather than revenue-driven, improvements in the Rule of 40 indicates that topline growth may not accelerate in the medium-term; if market expansion, cross-sell, and upsell opportunities in adjacent verticals or new products slow, this could cap revenue growth and longer-term earnings potential.
  
• Broad adoption of AI and automation within construction technology may lower the barrier to entry for new competitors or allow large incumbents or innovators to develop more attractive, integrated offerings, increasing competitive pressure and risking Procore's pricing power, retention, and revenue growth trajectory.
  
• Industry-wide challenges such as slow digital adoption among smaller construction firms, customer price sensitivity, and the emergence of low-cost or open-source alternatives may limit Procore's ability to fully penetrate its TAM and could compress margins or weaken long-term recurring revenues and profitability.
  (Each bullet concludes with reference to revenue, margins, earnings, or diversification as impacted.)

Valuation

• The analysts have a consensus price target of $82.118 for Procore Technologies based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $91.0, and the most bearish reporting a price target of just $70.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.8 billion, earnings will come to $246.3 million, and it would be trading on a PE ratio of 66.8x, assuming you use a discount rate of 8.5%.
• Given the current share price of $65.68, the analyst price target of $82.12 is 20.0% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.