Q1 2026 Earnings Call — May 6, 2026
Kristen Owen (Oppenheimer): Hi, good morning, and thank you for the question. Nice start to the year, guys. It sounds like things are kind of all rolling in the same direction. You lifted your guidance for ACO and field systems. You beat by seven cents. You lifted the guide by four. So I'm just kind of wondering what are the back half scenarios or how should we think about the level of conservatism that you're baking into the guide given the strong start to the year?
Phil (Executive): So let me start with we're in line with our previous guide from earlier this year. Actually, in fact, we raised the guide for the year, and we're on track to be – to be at or ahead of our 3-4-30 model that we put out in Investor Day. I'd say we have the most visibility we've ever had at the company level with the transformation and the ARR mix. But we do have less visibility on the hardware business. And in light of the conflict we see in the Middle East and uncertainty around tariff policies, along with upper comps in the back half, we've incorporated those puts and takes into our guide. And we'll update you in a few months as we get more visibility on the ARR.
That's very helpful. And then I wanted to dive into some of the consumption model changes that you talked about, Rob, in your prepared remarks. You know, I'm hoping to understand any early indications of how your customers are utilizing tokens for the AI tools that are currently embedded in your products. Just any sort of qualitative or quantitative data that you can provide on utilization trends or where you're seeing tokens being purchased. How are those early learnings informing your commercialization of AI across the platform? Thank you.
Rob (Executive): Good morning, Kristen. I'll start by discreetly answering the token question. Quantitatively, what we can see is that the usage is growing and that almost all of those credits that are associated with those named user licenses are being consumed. And that's good because it tells us they're actually being used. Qualitatively, what I really like are the learnings we're getting from doing this because the development, the deployment, and the monetization motions are all different. Now, if we up-level the conversation, I think the real conversation to have is around the commercialization of AI across the platform because the tokens themselves are a tactic of commercialization. And, of course, we're going to expect to see more of them going forward, and we're building the capabilities in order to do that. But at the same time, we'll deploy many additional commercial tactics.
So I'll give you two examples. First one was discrete consumption and transactions. So if you take autonomous procurement and autonomous quotation within transportation, I think that's a great example of that because what we're monetizing through those particular product motions is happening at a higher rate than the traditional non-AI transactions capabilities that we have. And we can charge more because we're demonstrating a higher ROI over our customers when we do that. A second example is we'll create monetization through the good, better, best product motions where we put AI into those better and best upsell motions. And I highlighted four examples. I think it was on slide five of the presentation that give examples of this. And one of those examples would be automated feature extraction out of the large point clouds that we deliver to our customers. So in that example, that automation of the feature extraction, which turns hours and days of work into minutes of work, we're monetizing that through that better and the best product sets that we deliver to our customers. And in fact, in that example, we're actually also enabling our customers to create their own proprietary data sets for their own unique work on feature extraction. So many different motions and tactics that we'll apply to achieve and reach that vision of commercializing the value that we're delivering to our customers through AI.
Rob Wertheimer (Mellius Research): Thank you. I had two questions on trend at ACO and then on monetization along the line to what you were just talking about. On trend line, obviously ARR growth was strong. The comp on core is a little bit abnormal. And so I wonder if you could just talk about revenue trends of the quarter, just any sense of that. And then as we go through the year, there are questions on a competitor call yesterday about whether construction is improving or not. There's lots of mixed indicators. I wonder if you might weigh in there.
Phil (Executive): Let me start as we think about the year and the guide for ACO. So let me start with connecting this to some numbers. As I look at the net new ARR, that is growing and has grown in Q1, and we expect that to continue to grow throughout the year. Historically, we also benefited a little bit from a tailwind due to the conversion uplifts. So we moved from maintenance and support into subscriptions. There was a bit of an uplift. So if I look over history, again, that was a bit of a tailwind. Still a small amount of that left, but the impact is a bit less. But the Q1 results in the full-year guide are fully in line with our expectations and the model we put out in Investor Day with that mid-teens ARR growth and mid-teens revenue growth. So, again, I think we're in line with the prior guide and in line with our multi-year model that we put out there.
Perfect. And then, Rob, you were just touching on this, but I'm just thinking about how you monetize some of the capabilities you're bringing. You're maybe passing through tokens. I don't know if there's a margin there, but maybe you're hoping to win new logos from competitors, new people entering an ecosystem because the capabilities are bigger and easier. I wonder if you could just talk about what you see as the biggest opportunities as your capabilities expand.
Rob (Executive): The frame I have on Scrum on monetization starts with value delivery and value capture. So the extent to which we're creating positive outcomes and positive ROI for our customers, we backwards integrate from that into then what would be the fair share for our value capture out of that. So we're mostly focused on the AI capabilities we can create for ourselves on leveraging the Trimble platform and the unique data set and scope and breadth and depth that we have globally. In doing so, we believe, yes, that we can capture new addressable market. We think we can take market share over time. I mentioned three different types of motions, monetization motions in answering that last question. Another one would be if you think about the announcement we made with SketchUp and Claude a few days ago and the integration there is, you know, another motion we see where we can monetize is by creating new users, creating new customers, expanding that addressable market with Claude users who weren't already SketchUp users. So by creating models out of Claude, you need to bring those into a SketchUp model to be able to do more with that.
So we'll watch that to see if that's another avenue by which we can gain new customers. So we see opportunities to increase the size of the addressable market. We see opportunities to monetize through our fair share capture of the value of an ROI that we deliver to our customers. And we'll see over time how that plays out into market share.
Jason Salino (KeyBank Capital Markets): Hey, great. Thanks for taking my question. Rob, to that point, you know, on that SketchUp, Claude, you know, partnership that you have, you know, it sounds like the goal is to maybe try to convert, you know, Claude users to SketchUp users, because I imagine they'll need, you know, SketchUp seat. Is there any consumption, you know, credits, you know, you were talking about aligned with this partnership, or is it more, you know, on the license component? And then it wasn't lost on me that, you know, you were one of the only, you know, initial partners with this initial announcement. You know, there's one other, but, you know, could this, is this a table stakes kind of feature? You know, how do you think the, you know, partnerships with the frontier models kind of evolve for you and kind of the markets?
Rob (Executive): Good morning, Jason. Thanks for the questions. You know, I think that this is going to be more table stakes to have different motions and way to reach the market. And we embrace that. So expect to see more from us across the portfolio. You know, that's one example where you can start with the modeling in Claude. I flipped that around the inverse, you know, what we launched in Q4 was SketchUp AI, where you can do that, what we call vibe modeling, natural language prompts, within SketchUp itself to do the modeling. So you want to offer it in multiple avenues, and we'll see going more, I call it atomic level, at the capabilities. We want to be able to do that in Trimble Connect, for example, off of our own agentic AI platform. So multiple paths to market. We're learning a lot. We're learning a lot internally. We'll learn a lot by following our customers and how they use it. We'll learn the motions and, I'd say, optimize the motions of how to convert users and then to bring them into the Trimble ecosystem.
And once you're in that ecosystem, let's say if you've done a model through Cloud, and then I talked about in the prepared remarks, if you want to do rendering or daylight analysis on that, you know, that creates capabilities for us to upsell and deliver more value to the customers once they're coming into SketchUp. So coming at it from multiple angles, I do think it's table stakes that we're engaged on a number of levels. And I'm really proud of the team for the entrepreneurial spirit they're displaying. They're really, really going after it.
And then I might have missed it, but, you know, the field services strength in the quarter, I'm curious if any of this was, you know, demand that was pulled, pulled forward might not be the right word, but maybe deals had closed, you know, earlier than expected. It's just I look at, you know, high oil prices, high memory prices. I wonder, you know, if clients are trying to maybe get ahead of some of those things.
Rob (Executive): So within field systems, the demand was strong intrinsically in the quarter, so we saw no pull forward in the quarter whatsoever. The two pillars of strength in the quarter, first ones in civil construction, that really has just been continuing the trend of the last few years. I know you were at Klan Expo. You saw our booth. Trumbull was on 24 other OEM partner booths at ConExpo. The level of innovation the team continues to deliver extensibility for swing booms on excavators, ground penetrating radar integrated into machine control is impressive to see reaching the machine types like compact track loaders, new OEM partnerships, new go-to-market partnerships with their Trimble technology outlets. The sum of activity is creating the demand from the product innovation side as well as the go-to-market reach. The survey team also had and delivered a strong quarter. I'd say also off the back of new platforms, data collector platforms, they've built and continue to go to market. Excellent. So really strong execution in the quarter. Really just a terrific grant for the team.
Neso Nang (Barenburg): Hi, good morning. Thanks for taking my question too, if I may. The first one, if I could start with the ACO. You've talked about the strength in your Trimble Connection, Trimble Construction 1 and Trimble Connect outside of the US. I was wondering if any highlights that you could call out that's really driving that up for cross-field motion as well. And then in the regions outside of North America, if you could maybe talk a little bit about the competitive dynamics that you were seeing as well, that would be really helpful. Thank you.
Rob (Executive): Hey, good morning. This is Rob. I'll take the question. So with respect to terminal construction one, we launched the capabilities in Asia Pacific in the quarter. Still, it's obviously still early as a result of that, but that to me is a real highlight because we've seen the positive benefits of that through North America and Europe. Within Europe, we brought project site to Europe in the last few, in the last couple of quarters. The team is doing a really nice job starting to take that to market. In fact, I think the European growth was even faster than the North American growth in the quarter, and that would be indicative of the cross-sell and up-sell motion. Competitively, this is a unique set of capabilities we have at Trimble inside of that TC1 offering the breadth and depth of what we can bring to our customers, much less when we now intersect what we can do with field systems and AECO. So uniquely positioned at a competitive standpoint, strong highlights that, to me, with the cross-sell and up-sell that translated into the strength, not only at the ARR and revenue beat, but also the bookings that support that ongoing growth here for the rest of the year. That's really helpful. Thank you.
My second question is about around the SketchUp to cloud connector. Really exciting. I think someone's already flagged it as well. Only a few software vendors follow this approach in this design software space. I guess I was just thinking more in terms of risk. I was wondering, you know, how would it work in terms of the data created? in SketchUp through one of the users coming through Claude. Does Anthropic, does it have access to that data? And is it any possibility that they might be able to replicate some of the SketchUp features through the data access that they might have going forward? Or is it something that maybe we shouldn't worry about it at all?
Rob (Executive): I don't see a near-term concern on that relative to what Claude or another LLM provider could do in that respect. What we like about it is, in fact, we see more opportunity to expand the addressable market for people who are not Trimble customers today. What they have to do to be able to use the service is to create a Trimble identity. So that's important so we can actually know who the user is. So we believe we can capture customers and users who haven't used the tool before. So we've seen that opportunity to expand the size of the addressable market. And it becomes relatively easy to do that modeling because you're doing so through text prompts in order to create that model. So then our opportunity then from a downstream monetization play is to create new SketchUp users and then to upsell those SketchUp users into inside, excuse me, the terminal construction one offering.
Jerry Revich (Wells Fargo): Yes, hi. Good morning, everyone. Rob, I wonder if we could just talk about just a minute on all of the data that you folks have and the value of bringing that together using the AI tools. Is there a way to quantify in terms of the number of projects that you folks have in the system, et cetera, just to build comfort around the ability to essentially leverage AI to drive incremental ARR as opposed to the risk factors that everybody's looking at?
Phil (Executive): Hey, good morning, Jerry. You know, you've heard me talk before about trillions, billions, millions, and thousands, trillions of dollars of construction run through Trimble today, tens of billions of freight run through Trimble. We have millions of users of our software and hundreds of thousands of instruments, machines in the real physical world operate on Trimble. That is singularly unique. If we talk about, I'll double click within that and we take Trimble Connect, which provides that single source of truth, create that digital twin between the physical and digital. Today, inside of Trimble Connect, more than 30 million projects have been created. There's been over 50 million users in Trimble Connect since inception. We have thousands of integrations, third-party integrations, into the individual applications we have across Trimble. We have over 130 extensions, integrations that have been created inside our Trimble marketplace, which is part of Trimble Connect. In fact, at the mentions at our user conference in November, which we'd love to see you and the community attend, we're actually going to hold our first developer conference as part of that.
So you take this unique set of proprietary data, the density of that data, this is singularly unique, creating the ecosystem and the partner network to build upon this is why we see such an opportunity for AI to be a logical extension of our Connect and Scale strategy, really not even a separate initiative. So we really think there's a lot of compelling aspects here for us and for our customers.
Super. And then from a margin standpoint, I was really impressed with transportation and logistics performance in the quarter. I don't know if the margin's exceeded your internal plan, but if you could just unpack the drivers of margins in the quarter, and I think typically you do see a step up in margins in the business 2Q versus 1Q, and I just want to make sure there's nothing in the base that's extraordinary as we think about the bridge in that business from here.
Phil (Executive): Yeah, thanks for the question. I'm really pleased with the team. As we lap ourselves, we had the mobility divestiture last year, and so there were some stranded costs within that business that the team had worked on throughout the year. And so really, really happy with the performance. We're guiding to about the same rate at the end of the year, throughout the year, 24%. So I think you can view this as structural as we go throughout the year.
Tammy Zakaria (JP Morgan): Hi, good morning. Very nice results. Congrats on that. So this is a question from me who's not a designer and I don't use SketchUp or Claude to draw 3D models. So I apologize for the simplistic nature of the question. But about the Claude partnership, it sounds very interesting and I appreciate the TAM increased potential, but could you sort of explain how do you have confidence that cloud users would eventually migrate to using SketchUp instead of just staying on cloud that probably keeps getting better at giving customized designs on the platform? Or maybe a better way to ask is what's there in SketchUp now that cloud doesn't and will not be able to help with?
Rob (Executive): Hey, Tammy. Good morning. Thanks for the question. And I will be your personal sales rep to sell you a license of SketchUp and make you a user. Until then, imagine going to Claude and through natural language prompting, you don't have to be a user of the underlying modeling technology. So you're new to the software and you want to create a model. You can do so through just typing the prompt of what you want. If you want a new patio for the backyard and it's of a certain size and, let's say, dimensionality and style that you want to put in there. OK, so the squad's going to deliver you a model. We believe that that's not enough. You need to do something with that model. If you just wanted a picture of the model, you could create that in Cloud, but that's not actually going to translate into the workflow. What you then do is if you've created that design of that model in Cloud, you bring it into the SketchUp ecosystem in order to iterate on it. Because the one thing we know with the design is it's not static. You don't just do a prompt and then you're done. You want to iterate on that. You want to collaborate on that.
Like one of the real powers of SketchUp is the ability to have multi-user collaboration. And think about the coordination that an architect has with an engineer, much less a contractor or the owner. You're not going to do that through the LLM. You're doing that through SketchUp and then leveraging Trimble Connect to drive that collaboration. And when you want to perform that professional grade analysis and you want to do the energy modeling of that or the rendering on that model, you're going to come into the authoring application or the authoring tool, which is SketchUp, to do that.
So I go back to the ability to have started, and Claude, in this example, is we're lowering the barrier to entry to create that next generation of AI-first professionals who can then bring those models into SketchUp for the next iterations of that. So I hope that helps you a little bit understand that, is that it's insufficient to complete a workflow with that initial model that you've created in an LLM. I agree with, I think, the assertion you're making is that it's going to get better over time. And you can imagine then we'll put more capabilities into those engines up front over time. And we want to bring more Trimble capabilities throughout our ecosystem that direction as well. And so much of that, again, I see as an ability to create new users for our tools. And remember that within the tools we have themselves, whether it's SketchUp or every other software application we're delivering at Trimble, we also have AI inside of those tools. So think of Claude inside AI, Claude inside of SketchUp as opposed to SketchUp inside of Claude. We work it from multiple angles.
That is extremely helpful. Thank you so much and my second question. I wanted to double click on fill systems. The year started off really strong, but you're still targeting low to mid single digit organic growth. Can you remind us what you're expecting for two Q and to get to your full year guide, we need to see a lot of slow down versus the first quarter number you had so. Is it conservatism? Are you seeing an impact from the Iran war in 2Q and you expect that to stay for the rest of the year? So any color on fuel systems?
Phil (Executive): I'd say, you know, the first quarter obviously reflected what we saw last year, particularly in civil construction. So the market continues to be strong, particularly in that business. Rob mentioned geospatial performed well in the first quarter. As we start to think about the rest of the year in that business, this is the one that has the least visibility with the hardware particularly. And we start to get into last year, we had really strong second half of the year. So part of this is the year-over-year, the comps. And part of this is the Middle East, getting around the tariff policy, just some of the macros. I'd say, you know, so we've incorporated the risk, but we also incorporate the opportunities as we think about the guide and where the strength of the market is. At this point, again, we started the year very well, but we'll continue to keep an eye on it on market and update you in a few months.
Joshua Tilton (Wolf Research): Hey guys, thanks for sneaking me in. Congrats on a good quarter and just two quick ones for me. The first one is kind of a follow up question. So I think the question a lot of my peers have been trying to ask you on the call so far, and I think that's around the Claude integration announcement. And I think what a lot of people are trying to understand is just as you, you know, as you integrate more and more with Claude, you are increasing your users productivity. And I think people are trying to understand how are you guys setting up yourselves to capture that increase in productivity that the cloud connector will provide your average SketchUp user and I think the second question that I have just a quick follow-up is on that last field system comment that you mentioned is it fair to assume that there is more conservatism in the field systems outlook today than there was 90 days ago given everything that's going on in the world and the visibility that you just spoke?
Rob (Executive): With respect to field systems, I'd say what I want you to assume is that we've actually increased the guide for the year. So I want you to see that we don't see that anything has fundamentally changed in the market. We're three months, from a reporting standpoint, we're three months into the year. We've got nine more to go. Let's see where things are, how they're shaking out in three months from now. So no fundamental change in view in the field systems business. In fact, if anything, you could say it's better because of the raise, some of the raise we put through. That's what you need to hear on that one.
With respect to Claude and as we integrate Trimble capabilities with LLMs and increase our users' productivity, what I want you to hear there is we start by increasing our users' productivity within the tools they already use from us today. That's the primary place we start. When I think about going the other way and when we're working with Claude with this SketchUp example or other examples that I think you'll see in time to come, we think of those as opportunities to create new users. We think of that as opportunities for our existing users to start, if that's where they want to start, and then bring those models into SketchUp. I just can't stress enough that for the professional user, let's separate maybe the professional user from the consumer user of SketchUp. At that professional user level, you need to bring those files into our ecosystem. If you're going to iterate, if you're going to collaborate, and if you're going to perform professional grade analysis. That's the difference between the professional user and, let's say, the maker, the consumer user of SketchUp. I totally embrace SketchUp consumers. That is the bulk of the user count that we have in that community, and it creates that brand and the content that we have in it. We really monetize at the professional grade level. That is a fundamentally different set of workflow, and hopefully that helps answer the question.
Chad Dillard (Bernstein): Hey, good morning, guys. I'm going to continue on the SketchUp and Claude line of questioning. So a few for me. So I guess, first of all, from an economic standpoint, assuming you guys price for this ad feature, how do you guys think about the split up between what Trimble gets versus what Claude gets? Who owns the data? And I'm just trying to understand, like, how does this compress the learning curve going to more of an agentic approach? And maybe lastly, you know, this is, you know, SketchUp was kind of like the first deployment, but where else do you see this sort of, you know, relationship evolving across your different product sets?
Rob (Executive): Okay, there's a few topics in there. Hopefully I can capture them here. The data is the customer's data. So I always want to orient starting there. And that customer is creating a model, an example that we talked about today. That model is downloadable, and you can bring it into SketchUp. From an economic standpoint, let me highlight two different motions we have. One motion is the announcement we had in Q4 of last year where we have SketchUp AI. It's an add-on subscription to the SketchUp license you already have. And with that SketchUp AI license, it's only $11.99 a month for that add-on license. You get a set of credits for it or tokens, but think of it as credits that you get. So from that economic standpoint, that is directly to Trimble. It's all Trimble, and obviously there's a variable cost when we're on the consumption side of that. But we built that into the pricing model.
What we are asking about with Claude, if you start in Claude and you create that model that's downloadable, what we really see is the economic model there is to create users downstream. That's the way I would think about that. And how can we create those users downstream? Well, at least today, we start by requiring them to have a Trimble ID. And when you have that Trimble ID, that's how you're able to download that SketchUp model and then bring it into and to SketchUp as the authoring tool. So there's multiple paths to monetization. I think about in one of the first, I think it was the second question we got this morning. When we talk about tokens, I see that as a tactic. That's one of multiple tactics that we have. We'll have tactics of monetization where we bundle AI capabilities into the good, better, best offerings. Clearly, we want to upsell customers into the better and the best. We'll provide a higher value. We'll monetize there. We'll monetize purely as standalone transaction or consumption. And one of the reasons we were attracted to the Transporian acquisition when we did it is there's well over $100 million of transactional revenue that comes from that business.
We don't have to imagine a world with transactional revenue. We have a world with transactional or consumption-based revenue. And inside of that, we've got autonomous, which in other words, those are AI-first products that we're monetizing on a consumption-based level. So we're open to multiple doors and avenues as the tactics to monetize the capabilities that we're bringing to market. And we think we can do so in a way that expands the size of the addressable market while we're doing it. And all of this is early days, and we see it as virtue that we're out there in the market, that we're testing, that we're learning, and that we're leading.