Episode Details

Veeva Systems (VEEV) Q2 FY2027 — Q2 FY2027 (three months to 31 July 2026): revenue $928.0M, +17.6% YoY; adjusted operating profit $415.9M at a 44.8% margin; adjusted EPS $2.35 against a $2.21-$2.22 guide. The shares closed +15.2% on the print. Veeva raised its full-year revenue guide by $44.5M at the midpoint - but $24.5M of that is simply the July quarter beating its own guide and flowing through. The forward raise is $20.0M, or 0.54% of the year, and 2.5 cents of adjusted EPS. The market has added $5.15B of value since the release. THE CALL: HOLD (3/5, AN EXCELLENT BUSINESS AT A PRICE THAT ALREADY ASSUMES IT) — base-case value ~$250 vs ~$276.69 today. KEY METRICS: - CALL: HOLD 3/5, fair value $250 vs the $276.69 close of 28 August (-9.8%). One owner-earnings DCF run three times on growth: bear $188.45, base $251.03, bull $320.24, weighted 30/45/25 at a 9.0% discount and 3.0% terminal. - THE RAISE, DECOMPOSED: the FY27 revenue guide went from $3,640.0M to $3,684.5M at the midpoint, a $44.5M raise. But the July quarter was guided to $903.5M and printed $928.0M, so $24.5M of that raise is the quarter itself. The raise BEYOND the beat is $20.0M (0.54% of the year) and 2.5 cents of adjusted EPS. - REVENUE $928.0M, +17.6% YoY. Subscription $766.8M (+16.3%), professional services $161.2M (+24.1%). Services is 17.4% of revenue against 16.5% a year ago and a 15.3% low in January: the Vault CRM migration, paid for in services dollars. - MARGIN: adjusted operating margin 44.8% (44.7% a year ago). But gross margin FELL to 75.0% from 75.3%, because services carry a 31.5% adjusted gross margin against subscription's 86.6%. - CASH: quarterly operating cash flow $238.7M against $238.4M a year ago, flat, but that is an artefact of the prior-year base (a ~$47M deferred-tax add-back, a ~$43M litigation accrual), not deterioration. Half-year OCF $1.37B, +22.4%. - BALANCE SHEET: $7.24B net cash (16.2% of market value, $44.73 a share) and NO debt. H1 buyback $467M at an average $175.28 against $256M of stock compensation: 1.82x cover, in cash. Filed share count 161.91M, -1.2% YoY. - VALUATION: enterprise value $37.56B = 10.9x trailing revenue and 32.7x owner earnings ($1.15B). 45.4x trailing reported EPS of $6.10; 30.0x the $9.21 FY27 adjusted guide. - WHAT THE PRICE ASSUMES: a reverse run says $276.69 needs owner earnings to compound 17.2% in year one, fading to 4.8% by year ten, against a company guiding FY27 revenue to +15.3%. - THE STREET: 15 dated targets, all published 27 August, all above the tape. Median $300, range $250 to $330. Across the 13 carrying a prior number the average went $240 to $295 in one day, +22.6%. What to watch: UP: services growing SLOWER than subscription for two straight quarters; gross margin back above the 75.3% of a year ago. DOWN: services past 18% of revenue with gross margin still falling. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.