Why We Think Veeva Systems Is Still Built to Last After the Stock’s Selloff

On the April 13, 2026, episode of The Morning Filter podcast, David Sekera and Susan Dziubinski discuss a viewer question on Veeva Systems VEEV stock’s economic moat. Here is an excerpt from the show.

Why Why Think Veeva Systems Has a Wide Economic Moat

Susan Dziubinski: Well, it’s time for our question of the week. Now, as a reminder, the best way to get your question answered is to email us at themorningfilter@morningstar.com. This week’s question is from Eric, and it’s about Veeva Systems. Now, I’m going to paraphrase here, but at the crux of the question, Eric wants to know how secure Morningstar thinks the company’s wide economic moat is in the face of increased competition and the threat of artificial intelligence.

David Sekera: Strap in, this is kind of a long answer here. For those of you who don’t know Veeva, it is a software company, and it’s focused specifically on the life sciences industry. There are really two main product lines. 55% of the revenue comes from what they call their R&D, or research and development solutions. The software there is used to manage clinical trials, regulatory submissions, quality control, safety, and documentation—things that are very specific to the life sciences industry and also very heavily regulated by a lot of different government organizations. The other portion of the business, the other 45% of revenue, is going to be their commercial services. That’s their customer relationship management system, their CRM, and a couple of other miscellaneous businesses in there as well. So, we do rate the company with a wide economic moat based on its switching costs.

This is one that we recently took back to the economic moat committee, as we did a major reevaluation of economic moats in light of how we see AI impacting a lot of the companies, and specifically software companies, going forward. In this case, we reiterated the wide economic moat. Now, our analysts did note we are seeing some increase in competition, but that increase is really coming from that CRM business. We did incorporate into our model some customer losses, but that’s not necessarily all that concerning. In our view, that’s not where the growth is coming; that’s not where the margin increases are coming. Those are really coming from the R&D business, which we expect to continue to keep growing pretty rapidly. From our point of view, the stock selloff that we’ve seen here really has nothing to do with either the change in the structural dynamics of the economic moat or with the company’s individual fundamentals.

To some degree, I think a lot of the stock selloff here is because it’s just gotten caught up with the bloodbath that we’ve seen among all the software companies. Almost all of these software stocks are down pretty close to 50% from their highs last fall. So what’s going on here is, I think the market is really just pricing in how much concern they have about how artificial intelligence may or may not disrupt or displace the business model. It seems like people are falling into two camps. Either you have the people who are looking at the fundamentals and are comfortable with it, and they’re the ones who are buying the stock, and the people who are selling the stock are really just puking this stock out. They think that AI is really going to displace a lot of that software going forward, and that a lot of these companies are going to either shrink or maybe just end up going away altogether over time.

Why Will Think This Software Company Will Benefit From AI

Just to put this in context, a quick synopsis of our investment thesis for the software sector overall: We think that software companies will use artificial intelligence to make their products and services better, that they will improve or add more economic value to their clients. We don’t see clients really trying to vibe code or recreate entire software platforms on their own. I think what’s going to occur here in the next year or two is that there will be a disruption, but the disruption in the software companies is that they need to figure out how to change how they charge for the economic value that they provide to their customers. For example, a lot of the models right now are seat-based licenses. We think that going forward, you’ll probably have some combination of not just charging for the individual seats, but also charging for the amount of consumption that you use for the artificial intelligence. For example, maybe paying for the amount of AI tokens that you consume as you use their products.

Just to wrap things up here, taking a look at the company’s forecast in our model, our base case for revenue over the next five years on a compound, the annual growth rate, and in fact for earnings as well, are both pretty close to 13%. So, pretty strong earnings growth, the company’s trading at a little under 18 times our 2026 earnings forecast. They’ve got a $2 billion stock buyback authorization in place. I think that probably should help cushion the downside here. With that authorization, in our view, when you’re buying back stock that’s trading at as large a discount as it is trading at today, that adds economic value to those shareholders over time as you are able to capture that discount in your fair value. The takeaway here: It trades at almost a 50% discount to our fair value. That’s enough to put it well into 4-star territory.

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