Veeva Earnings: Solid Momentum in R&D Continues but Soft Outlook Remains

Wide-moat Veeva reported third-quarter earnings that were better than we expected. Total sales were up 11.6% year over year with both subscriptions and professional services providing a nice tailwind to the top line. A soft outlook for the rest of fiscal 2024, discussed during the firm’s investor day in November, was reiterated. This puts year-over-year growth for fourth-quarter subscription sales in double-digit territory but marks a flat growth for professional services. Many life sciences firms have called out cost-cutting measures to challenge difficult macroeconomic trends, such as limited funding in the biotech industry and high-interest rates, and we expect Veeva’s professional services segment to take a toll in the near term. We maintain our fair value estimate of $267 per share.