Veeva Systems

Veeva delivered 18% revenue growth (15% in commercial growth and 20% in research and development growth) and 18% adjusted EPS growth during the second fiscal quarter. Both figures landed ahead of guidance. Shares are up 9% after hours Aug. 27.

Why it matters: Veeva puts aside the artificial intelligence-concerned naysayers and touts continued business strength, delivering the highest revenue growth in the past nine quarters. This was another strong quarter for new customers. Major Vault CRM wins, including Eli Lilly, Biogen, and Regeneron, demonstrate customers' continued reliance on and trust in Veeva. Development Cloud also saw many new users adopt products across clinical, safety, and quality, demonstrating a continued need for Veeva's products even in the age of AI. Veeva Falcon, agentic labor announced last quarter, is working with early adopters, and execution among other AI agentic solutions is progressing nicely. While it is still early for these products to contribute financially, we appreciate the continued momentum in Veeva's AI solutions.

The bottom line: We maintain our $287 per share fair value estimate for wide-moat Veeva—shares are mildly undervalued. Strong performance so far in the year underpins our view that Veeva can weather threats of AI and instead use it to build upon its industry-leading portfolio. The market's perspective on the firm's position and strength against AI threats appears to be converging with our thesis, with shares recovering from the early 2026 AI-scare selloff and now outperforming both Morningstar software and healthcare indices for the year following the Aug. 26 results. We think Veeva's deeply embedded customer relationships and growing AI offerings should help it compete in an increasingly crowded AI marketplace. Customers may have many options, from large AI firms to smaller providers, but Veeva's existing relationships and industry expertise make it an attractive choice for customers looking to adopt AI solutions.

We maintain our $287 fair value estimate for wide-moat Veeva. We expect a 12.5% revenue growth and a 10% adjusted EPS growth for fiscal 2027. Both figures are in line with guidance.

Veeva continues to win new customers in its CRM or Vault commercial solutions and further penetrates its existing userbase, shown by the consistently increasing number of average commercial products per user. We expect the commercial business to grow at a modest to high single-digit rate over the next five years. For R&D solutions, we expect revenue growth to soften but we still expect a very strong growth over the next five years with a double-digit revenue CAGR. This business targets any life sciences companies that are developing drugs or supplying to those that are developing drugs, so the impact of rep reduction is not felt as much compared with commercial solutions. Also, as Veeva covers more functions within life sciences and enters different verticals, we expect the company to enjoy strong growth.

We do not expect material competition or churn as Veeva’s customer penetration should continue to deepen into mission-critical operations as customers subscribe to an increasing number of add-on modules. We anticipate non-GAAP operating margins to expand as the company improves scale and a richer mix of CRM add-ons and higher-margin R&D revenue.

We assign Veeva a wide moat rating because we believe the firm’s high retention rate and its customers’ unlikelihood of moving to a different product (switching costs) should continue to support economic profits for at least the next 20 years. Veeva is the leading provider of cloud-based software solutions specific to the life sciences industry. Instead of focusing on a general, one-size-fits-all system, Veeva has created a platform that is purely designed to serve one industry. With over 15 years of experience, Veeva has built industry-specific knowledge that it uses to tailor its products to specific customers. Veeva is well penetrated in its addressable market, and its continued expanding portfolio of applications presents itself as one of the most attractive offerings in the space.

Veeva CRM is Veeva’s cloud-based customer relationship management platform. It markets to pharmaceutical and biotech companies that have already undergone drug development processes and have a sales force for their products. Prior to Veeva, life sciences companies with commercial needs relied on either generic one-size-fits-all cloud offerings or client- or server-specific systems. Generic CRMs couldn’t react quickly to business and regulatory changes, and aging client- or server-specific systems were slow to update because each new application had to be compatible with each individual server. This made upkeep costly and time-consuming.

Veeva CRM solves these issues by offering a cloud-based server that is specifically tailored to the life sciences industry. Customers are able to always run the latest version while avoiding high upfront costs, lengthy installations, and painful upgrade cycles. And since Veeva is focused in one specific industry, its depth of knowledge and experience in the space is very difficult to replicate for any generic CRM provider. This is supported by the lion’s share of the CRM market that Veeva has attained over the years. In 2013, about a third of the global pharmaceutical sales representatives were using Veeva CRM, but that number has increased to over 80% today.

Once users fully acclimate to Veeva’s CRM and the system is fully integrated into a company’s operating activities, the direct time and expense of switching to a competing software solution is high and comes with substantial operating risks. The downside risk of switching is expansive and could result in loss of data in the migration process, temporary disruption to sales activities, or even ultimately delay product launches. This is especially damaging for life sciences industry where time to market is more important than other industries because it is very time-intensive to develop drugs and patent duration is limited.

Furthermore, users get stickier and switching costs rise as more add-ons are purchased. Beyond the core CRM, Veeva offers many complementary applications to existing customers, growing value per contract while keeping customer acquisition costs manageable. In aggregate, but this figure has grown to 50-60%. So Veeva has been very successful at initially winning over customers with its core CRM offerings, then upgrading them to multichannel users with its suite of applications. Thus, the increased adoption of complementary Veeva products, some of which house critical drug data, creates even stickier customer relationships. As a firm’s salesforce becomes accustomed to using Veeva’s software, switching costs rise, especially given the centrality of the platform to a firm’s sales and marketing efforts.

Started in 2011, Veeva Vault is Veeva’s content management system that is built on the company’s own platform. It tackles five key functions within a life sciences company: commercial, clinical trials, quality and manufacturing, regulatory, and pharmacovigilance (safety). And within each functional area, Veeva offers a suite of applications that helps its customers to be more efficient. Since Vault is a unified system, every application is fully integrated into the main platform and transitioning from one channel to another is seamless. No one in the industry has previously offered all of the applications that Vault offers on a unified platform, so Veeva was able to enter the market and penetrate it without much competition. Similar to Veeva CRM, Vault has also been able to catch on with its users effectively and turn them from single-application users to multichannel users.

Overall, Veeva has become the leading global standard in cloud-service offerings for the life sciences industry. And Veeva not only dominates the top players, but it dominates the entire industry, including major pharmaceutical, biotech, and medical companies as well as emerging growth companies. Veeva’s continued investments into other areas within the organization, and product launches with success, have helped materialize this win for the company. This shows the tremendous growth trajectory that Veeva has been able to maintain. And this level of brand reputation and trust within the industry could not have been achieved without a consistent track record of success and a history of delivering market-leading innovation.

Veeva continues to introduce new applications in areas such as safety and clinical operations to service unmet needs, which support our double-digit growth assumptions.

Investing in its AI capabilities allows Veeva to provide additional services, deploy advanced technologies, and bolster switching costs.

Venturing outside of life sciences and into new segments expands Veeva’s end markets and opens up new opportunities.

Moving its CRM from Salesforce’s platform to its Vault Platform could raise concerns for customers and lower its retention rate.

The Iqvia/Salesforce partnership to introduce its own version of life sciences CRM could take away potential new customers from Veeva.

New modules or add-ons could show low penetration rate and win less customers compared with previously launched products.