Earnings call transcript: Trimble beats Q2 2025 forecasts, stock rises

Trimble Inc. (Market cap: $20.58 billion) reported strong second-quarter 2025 financial results, surpassing both earnings and revenue forecasts. The company’s earnings per share (EPS) were $0.71, beating the forecast of $0.63 by 12.7%. Revenue reached $876 million, exceeding expectations of $835.81 million. Trading at a P/E ratio of 13.48, Trimble’s stock price rose 5.2% in pre-market trading, reflecting investor confidence in the company’s performance and outlook. InvestingPro analysis indicates the stock is currently fairly valued based on its proprietary Fair Value model.

Key Takeaways

• Trimble’s EPS of $0.71 surpassed expectations by 12.7%.
• Revenue grew 9% year-over-year to $876 million.
• Stock price increased 5.2% in pre-market trading.
• Annual Recurring Revenue (ARR) increased by 14% organically.
• Raised full-year revenue guidance to $3.52 billion.

Company Performance

Trimble demonstrated solid growth in Q2 2025, with a 9% organic increase in revenue compared to the same quarter last year. The company continues to benefit from its strong position in the construction and transportation markets, supported by its expanding software and services offerings. The focus on recurring revenue streams, which accounted for 63% of Q2 revenue, has bolstered stability and growth prospects. InvestingPro data reveals impressive returns, with the stock up 17.04% year-to-date and 60.49% over the past year. Two key InvestingPro Tips highlight management’s aggressive share buybacks and the company’s high shareholder yield, with 13 additional exclusive insights available to subscribers.

Financial Highlights

• Revenue: $876 million, up 9% year-over-year.
• Earnings per share: $0.71, up 15% year-over-year.
• Gross margins: Expanded 210 basis points to 70.6%.
• EBITDA margins: 27.4%, a 170 basis points expansion.

Earnings vs. Forecast

Trimble’s actual EPS of $0.71 exceeded the forecasted $0.63, representing a 12.7% positive surprise. Revenue also beat expectations by 4.77%, with actual figures at $876 million against a forecast of $835.81 million. This performance highlights Trimble’s ability to effectively manage costs and drive growth in key market segments.

Market Reaction

Trimble’s stock price rose 5.2% in pre-market trading, reaching $87, near its 52-week high of $87.5. The positive market reaction reflects investor confidence in Trimble’s robust financial performance and optimistic guidance. The stock’s movement aligns with broader market trends, where tech and industrial sectors have shown resilience.

Outlook & Guidance

Trimble has raised its full-year revenue guidance to $3.52 billion and increased the EPS guidance midpoint to $2.98. For Q3, the company expects revenue between $850 million and $890 million, with EPS guidance ranging from $0.67 to $0.75. Trimble is targeting $3 billion in Annual Recurring Revenue and $4 billion in total revenue by 2027, with a 30% EBITDA margin. While the company trades at relatively high EBIT and EBITDA multiples according to InvestingPro analysis, these valuations reflect strong growth expectations. Discover comprehensive valuation metrics and access the detailed Pro Research Report, available for Trimble and 1,400+ other US stocks on InvestingPro.

Executive Commentary

CEO Rob Painter emphasized the importance of data quality in AI strategy, stating, "We have a belief set that the quality of the AI is going to correlate to the quantity and quality of the underlying data." He also highlighted the company’s focus on productivity and efficiency, noting, "We sell productivity and efficiency." Painter expressed optimism about future opportunities, saying, "Opportunities continue to outweigh the uncertainties."

Risks and Challenges

• Supply Chain Issues: Potential disruptions could impact production and delivery.
• Market Saturation: Increased competition in key markets may pressure margins.
• Macroeconomic Pressures: Economic downturns could affect customer spending.
• Technological Changes: Rapid advancements require continuous innovation.
• Regulatory Changes: New regulations could impact operations and costs.

Q&A

During the earnings call, analysts inquired about Trimble’s AI strategy, particularly regarding data quality and industry-specific solutions. The company also addressed questions about the performance of its AECO (Architecture, Engineering, Construction, and Operations) segment and the positive reception of the Trimble Construction One platform. Additionally, analysts were interested in the ongoing success of model transitions in field systems.

Full transcript - Trimble Inc (TRMB) Q2 2025:

Greg, Conference Operator: Thank you for standing by. My name is Greg, and I will be your conference operator today. At this time, I would like to welcome everyone to today’s Trimble Second Quarter twenty twenty five Financial Results Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session.

: Thank you. I’d now like

Greg, Conference Operator: to turn the call over to Rob Painter, Chief Executive Officer. Rob?

Rob Painter, Chief Executive Officer, Trimble: Welcome, everyone. Before I get started, our presentation and safe harbor statements are available on our website. Our financial review will focus on year over year non GAAP performance metrics on an organic basis. In addition, we will focus on adjusted numbers that we believe more accurately portray the underlying performance of our business. This means we will exclude the divested agriculture and mobility businesses as well as the fifty third week of fiscal twenty twenty four.

As reported numbers along with the reconciliation are provided in the appendix. Our second quarter results outperformed top and bottom line expectations, reflecting continued strong strategic execution and momentum with our Connect and Scale strategy. My congratulations and gratitude to the Trimble team and our global partners. We are raising our guidance for the full year and Phil will walk you through the details. Starting on Slide four, the foundation of our Connect and Scale strategy begins with our best in class solutions, which are generally core to the day to day operations of our customers, delivering productivity and sustainability outcomes.

Our strategy compels us to do what we can uniquely do, that is connecting people, connecting data, connecting workflows and connecting ecosystems across the construction and transportation and logistics industry lifecycles. Our product leaders are increasingly bundling our solutions together into prepackaged product suites, making it easier for customers to access our technology and making it easier for our sellers to reach our customers. They are also progressing our efforts towards subscription offerings, expanding our user base and the size of our addressable markets, while simultaneously delivering us increased visibility into our business. Strategically, these business model transformations are connecting workflows as we move data from on premise and on machine to the cloud. We are enabling our customers to generate better insights into their own data while enabling us to build a unique dataset to power our AI ambitions.

For example, in our project site project management system with AI, we have processed over 1,500,000 drawings with AI at a rate of over 200,000 drawings per month since our Dimensions user conference in November 2024. This AI capability saves significant time that our customers would otherwise spend manually adding attribute data to a model. Finally, our go to market motions are modernizing, enabled by better underlying technology stacks and process excellence. AI assisted motions are increasing bookings visibility and unlocking cross sell opportunities as well as new logo expansion. The sum of these activities plays a strong role in our current results.

Turning to Slide five. Dollars $876,000,000 in revenue in the quarter, up 9% organically. Dollars 2,210,000,000.00 of ARR, up 14% organically and $0.71 of EPS, up 15% year over year and higher still on an organic basis. Software and services accounted for 79% of second quarter revenue. Recurring revenue accounted for 63% of second quarter revenue.

We run negative working capital and CapEx is less than 1% of revenue on a trailing twelve month basis. Our value creation algorithm is working. Looking forward over the next couple of years, the continued rollout and maturation of our strategy gives us conviction to deliver on our three, four, 30 commitment by 2027, dollars 3,000,000,000 in ARR, 4,000,000,000 in revenue and 30% EBITDA margin. Looking beyond the next couple of years, we are optimistic about what an AI forward future will mean to Trimble. I like to characterize our right to win in this space in the form of trillions, billions, millions and thousands.

Trillions of dollars of construction run through Trimble, tens of billions of freight run through Trimble. We have millions of users of our software and we have hundreds of thousands of instruments and machine in the field that operate on Trimble technology. The transformation we’ve been making in our business over the last few years has prepared us for this moment. In the last weeks and months, we have taken thousands of Trimble colleagues through AI training sessions and we are deploying AI across most every function of the company. While it’s very early in the AI adoption cycle, we believe we are heading the right direction and making the right decisions to unlock the efficiency and customer value creation opportunity.

In June, we held our biannual technology conference where 300 of our top engineering and product leaders came together to share and collaborate on our next waves of innovation. Not surprisingly, AI made up about half of the content of the conference. With that context, let’s talk about each of our segments starting with AECO and a quote from a steel fabricator and erector customer who said the following, we’re always three steps ahead of everyone else because of the technology we use. With Trimble Connect, we can visualize the entire project before it starts. We track every piece of steel in real time and stay ahead of any potential delays.

This sentiment is indicative of the success we are having with connecting people and connecting data. In the quarter, ARR at $1,360,000,000 and revenue at $350,000,000 were both up 16%. ACV bookings remained strong and in line with our long term model growing in the mid teens with a healthy gross and net retention. At the point solution level, we continue to innovate. SketchUp won best in show in the BIM category at AIA twenty twenty five and with over 4,400,000 models created in the quarter, SketchUp remains core to the workflow of architects and designers around the world.

Project Site added features such as daily reporting and ERP integration, which contributed to strong growth in the quarter. At a connected workflow level, we are now delivering an office to field to office workflow and civil construction that enables project managers to send quantity requests for earthmoving in our B2W track applications to cruise in the field using our site work solution and employing that data back to the office for progress tracking, which informs decision making and ensures accurate billing. No guesswork, no phone calls, no manual data transfer, only Trimble. This workflow example is just one example that validates our strategy of driving growth through Trimble Construction One bundles as well as running cross selling motions that serve existing customers with more solutions. Once we have a customer using our ecosystem with a core solution, our strategy of adding connected solutions multiplies the value a customer gets and makes us an indispensable partner for a company’s entire operation.

The investments we have made into our business over the last few years are unlocking insights that drive sales enablement and targeted marketing campaigns to reach this market opportunity. In combination with our transformation to operate as one sales organization and AECO focused on named accounts, we remain optimistic about our ongoing growth potential. Moving to field systems, I’ll start with a quote from a customer in Scotland talking about machine control. This is our largest investment in advanced construction technology to date and the effect on productivity has been eye opening with one project already being eight weeks ahead of schedule and on track to be completed in half the estimated time. The business outperformed in the quarter with particular strength in Civil Construction.

Revenue at $393,000,000 was up 3% despite the 200 basis point headwind based from model conversions. ARR at $358,000,000 was up 17% driven by strength in our Works Plus machine control offering, our Catalyst positioning as a service offering and Trimble Business Center. At a product innovation level, we expanded SiteWorks machine guidance to be available for tilt bucket attachments. We expanded Trimble Ready options with a number of OEMs and we introduced the NAV960 guidance controller for our PTX joint venture. In the end markets, we saw strength in drilling and piling applications for renewable projects as well as site pad preparation for data centers and warehouses.

This business is the most global business at Trimble and it is inspiring to see our work in action. In the quarter, we had wins with customers in U. S. State Departments of Transportation with mobile mapping, at the Panama Canal with optical solutions, Rwanda with Statistics Department, the Dubai Municipality and the Bureau of Water Management in The Philippines buying Trimble GNSS. With customers in Ukraine, Tanzania and Turkey buying Trimble reference stations and with customers in China and Australia buying our monitoring solutions.

Trimble is everywhere. Moving to transportation, I’ll start by quoting a customer who said, Autonomous procurement has transformed our spot bid management by using AI to predict prices, enabling us to set realistic walk away prices and align with market conditions, especially during peak seasons. While our end market remains in a stubborn freight recession, we continue to grow the business with innovation coming from products such as our AI based autonomous procurement solution. Revenue at $133,000,000 and ARR at $492,000,000 were both up 8% in the quarter. ACV bookings were up double digit.

At a product level, we have ongoing integration efforts to connect key Transporium products such as visibility and autonomous procurement with our TMS offerings, which enhances user experience and further enables cross selling efforts. We are accelerating our rollout of The U. S. In The U. S.

Of our freight marketplace, which enables real time capacity sourcing for shippers, carriers and brokers. We are building confidence at every turn. With respect to the macro environment across our business, there was no discernible shift in sentiment or end market performance in the quarter. Various indices inevitably point one way or the other. Opportunities continue to outweigh the uncertainties.

In meeting with customers in The UK and Europe, Energy and Defense look healthy. In The United States, the puts and takes of the One Big Beautiful bill look to be net positive, including deductions on capital equipment. Globally, we remain bullish on India and The Middle East. At an end market level, our construction customers generally have healthy backlogs and they continue to hire for their project work. In the transportation market, we are hopeful that the market has stabilized with more upward catalysts than downward catalysts.

Phil, over to you.

Greg, Conference Operator: Thanks, Rob. First, I’d like to

Phil, Chief Financial Officer, Trimble: give an update regarding impacts from policy. Regarding tariffs, our operations team has done an outstanding job creating a flexible and global supply network. With the latest information to date, there is no change to the tariff impact on our cost of goods at approximately $10,000,000 per quarter in the Field Systems segment. We’ve implemented surcharges to offset this, thus we expect no impact to profitability. Related to the repeal of Section 174 from the One Big Beautiful Bill, we anticipate a cash flow benefit of approximately $50,000,000 in 2025 and a total additional benefit of approximately $80,000,000 which will be realized over subsequent years.

With regards to capital allocation, we bought back $50,000,000 of shares in the second quarter and have approximately $323,000,000 of authorization available. Longer term, we continue to expect at least a third of our free cash flow to be used for repurchasing shares. On the M and A front, we continue with the small tuck ins and in the second quarter, we acquired capabilities that we have branded Trimble Materials, which which serves contractors by connecting the field, office, warehouse teams and suppliers to streamline the entire purchasing and materials management process. The tuck in playbook is working, and we are accelerating our ability to integrate, which yields a rapid return on investment by putting additional functionality in the hands of our sales teams to cross sell and upsell and continue the flywheel of ARR growth. Let’s review the 2025 starting on Slide six.

Organic revenue growth exceeded our outlook at 9%, driven by outperformance in all three segments, and ARR was in line with our outlook at 14% to a record 2,210,000,000.00 Gross margins expanded two ten basis points to 70.6, which shows our continued model progression. We achieved EBITDA margins of 27.4%, which is a 170 basis points expansion year over year. Reported earnings per share was $0.71 for the quarter, dollars $0.09 better than our guidance. Moving to the balance sheet and cash flow items on Slide seven. Our year to date reported free cash flow was strong at $90,000,000 despite a $277,000,000 tax payment related to the agriculture divestiture.

Our balance sheet continues to be strong with two sixty six million dollars of cash and a leverage ratio of 1.4 times, which is well below our long term target rate of 2.5 times. Shifting to a segment review of the numbers before we close with guidance and starting with AECO on Slide eight. AECO delivered a record $1,360,000,000 of ARR posting 16% ARR and revenue growth for the quarter. Operating income at 30.4% increased 400 basis points year over year. This business continues to operate above the rule of 45.

Next, Field Systems on Slide nine. Revenue was up 3% in the second quarter despite approximately 200 basis points of model conversion headwinds and a difficult comp with the large government order in the prior year. Field Systems posted ARR growth in line with our expectations at 17% for the quarter, where we continue to successfully execute our business model conversions. Our Civil Construction business continues to be particularly strong and ARR growth was driven by our model conversions and sales of subscription offerings. Field Systems operating income at 30.8% increased 190 basis points driven by a greater mix of higher margin recurring revenue.

Finally, Transportation and Logistics on Slide 10. Revenue and ARR were up 8% for the quarter. The segment is greater than 90% recurring revenue following the divestiture of the mobility business. We continue to make good progress bringing the global transportation teams, processes and systems together as we execute our connect and scale strategy, which allows us to access the approximately $400,000,000 of cross sell and upsell opportunities within the segment. Operating margins at 21.5% are expected to improve in the next two quarters as we continue to execute the strategy.

Let me turn to guidance on Slide 11. With the overperformance in the first half of the year, we are increasing the midpoint of our full year as reported 2025 revenue guidance by $100,000,000 to $3,520,000,000 We’re also increasing our full year EPS midpoint outlook by $0.11 to $2.98 and are maintaining our organic ARR growth as adjusted guidance midpoint of 14%. While the business is performing well and ahead of plan, given the lingering uncertainty with tariffs, foreign exchange rates and other macro factors, we are updating our guidance with a similar approach we took in the first quarter, which we see as prudent given the unknowns of the macro environment. From a cash flow perspective, we are increasing our full year view to be approximately one times net income after adjusting for the $277,000,000 cash tax payment for gain of sale in the agriculture JV, the approximately $35,000,000 in M and A costs and $50,000,000 updated benefit from the repeal of Section 174. We continue to expect that we can deliver free cash flow greater than the non GAAP net income over the long term.

For the third quarter guidance on Slide 13, we expect revenue to be in the $850,000,000 to $890,000,000 range and EPS of $0.67 to $0.75 We expect organic revenue growth in the third quarter to be in the 4% to 9% range. For further details regarding our guidance, please see our earnings supplement document, which can be found on our investor website. With that, I’ll turn it back to Rob.

Rob Painter, Chief Executive Officer, Trimble: Thank you, Phil. The strength of the second quarter mirrored the strength of our first quarter, demonstrating confidence and momentum in our business. We remain on a strong footing strategically, operationally and financially. Thanks to all our global colleagues for their work and their dedication. We have a lot of work to do as a business to fulfill our potential and we are up to the task.

Operator, let’s open the line to questions.

Greg, Conference Operator: Okay. Looks like our first question today comes from the line of Jonathan Ho with William Blair. Jonathan, please go ahead.

Jonathan Ho, Analyst, William Blair: Hi, good morning and congratulations on the strong quarter. I was really intrigued by your AI commentary and sort of the data opportunity that you see ahead. Can you talk a little bit about how Trimble’s platform potentially benefits from adding more and more of these AI capabilities? And can you talk to maybe how customers are receiving or starting to adopt AI within the marketplace?

Rob Painter, Chief Executive Officer, Trimble: Jonathan, good morning, and thanks for the question. We have a belief set that the quality of the AI is going to correlate to the quantity and quality of the underlying data and in that respect quite bullish with that trillions, billions, millions and thousands coverage and commentary that we had. It’s a it’s a unique dataset that we have in the industry. And I can say from the time I spend with customers, increasingly, the conversations are around helping them unlock the data that they have so that they can make better decisions and and manage their risk in a better in a better fashion. So if you put all that together, it leaves me quite optimistic about a data forward future that that we can have as a company.

Now we’re quite early in this in this journey. I think all of us in this in this AI journey. So remain remain humble to continue to do the do the work and make sure we’ve got the underlying wiring and plumbing right, underlying data governance right. And all this, I’d say, to me is good news. And so far as we think about the work we’ve been doing over the last five and a half years to execute against our connect and scale strategy, it has us doing the work to be ready for this moment, unlocking that data from on prem and on machine to get it to the cloud, connecting the data, having better insights into our customers and what they’re using and what they’re and what they’re not using.

So I’m very thankful for the journey we started these last few years. It positions us well going forward.

Jonathan Ho, Analyst, William Blair: Got it. And then just as a quick follow-up. In terms of TC1, can you help us understand maybe where some of the traction is coming from in terms of bundling the products together? And particularly, I I guess, I’m interested in is is trying to understand how much of this is maybe expansionary. So it’s existing customers that are are adding new more capabilities, you know, maybe from a net retention perspective, or is it is it just brand new adoption of the TC1 platform?

Thank you.

Rob Painter, Chief Executive Officer, Trimble: Good question, Jonathan. If I up level it to AECO, when we look at the bookings, about two thirds of the bookings are to existing customers and about one third are our new logo. And so that probably provides hopefully, provides a little insight into, you know, into who’s doing the uptake, let’s say, on t c one as well as the cross sell the cross sell motions that we have. When we look at some of the packages that are doing better, we really like what we see around civil estimating and the ERP. That’s been a strong play for the team project management, but the ERP has also been strong strong play.

When we look at our field instruments and we connect that to the model based design, packages we have. That’s also, proving to be a nice workflow, as well. So we we would, for sure, look at, different, customer segments. And what makes sense for them. We can pull from the data that we have apropos of the first question you have to see where the customers have gaps and have opportunities to do their work better, faster, safer, cheaper, greener through a broader adoption of the technology.

So TC One becomes a commercial offering to help us reach those customers with the breadth and depth of what we do.

: Great. Thank you.

Rob Painter, Chief Executive Officer, Trimble: Thank you, Jonathan.

Greg, Conference Operator: Yes. Thank you, Jonathan. And our next question comes from the line of Kristen Owen with Oppenheimer. Kristen, please go ahead.

Kristen Owen, Analyst, Oppenheimer: Great. Good morning, everyone, and thank you for the question. Rob, Phil, strong results all around in the quarter. And last quarter, you talked about some of the elongated cycle times, just given some of that broader macro uncertainty. As you look out to the remainder of the year, can you just give us an update on customer sentiment?

Are you seeing those cycle times improve? And maybe building on that last question, are there areas where you’re seeing some changes in that selling motion just given some of those acute challenges for your customers around cost management, materials inflation, labor constraints, etcetera?

Rob Painter, Chief Executive Officer, Trimble: Morning, Kristen, and thanks for the question. I’d say the overall customer sentiment feels pretty similar from Q2 as it did in Q1. I wouldn’t say that there was a market shift plus or minus. And at any point in time, we’re always going to have puts and takes as much as many things as we do at Trimble and as many places around the world that we do business. It’s probably not totally a a surprise.

But okay. Let’s say within within that, you know, I was in I spent a couple weeks in Europe in July, and what I can hear and what I excuse me. What I did hear more of was work around energy infrastructure and defense. If I look at The US and with customer sentiment and where we see strength, it’s not surprisingly in data centers, in our civil infrastructure, as well as in the energy that we need to, you know, to feed the to the AI and the data center work that’s that’s happening. So seeing, you know, some positive pockets there.

I feel like there may be more reinforcement of pockets as opposed to opposed to new to as opposed to new pockets. And then in terms of the, you know, let’s say, to the extent customers are facing inflationary pressures, which is a real which is a real topic, Hey. We sell productivity and efficiency. That’s the fundamentals of Trimble. Adopt our machine control technology, and you’re doing your work 40% more productively.

Use our design engineering tools. You build it virtually before you build it physically, and you can eliminate the rework before it ever happens. You’re using our estimating tools and you’re built and you’re using those estimating tools off of highly accurate BIM models. You’re able to have a better handle on your underlying raw material cost to use our project management tools, and you’ve got a better handle on the labor that’s managing the work in those projects. So I think we’d say we feel like we’ve got the right tools at the right time in the world.

Kristen Owen, Analyst, Oppenheimer: Thank you for that. And then, I wanted to ask, on the field system strength there. That’s continued to outperform the last two quarters relative to expectations. And and in particular, of the the model transition that’s ongoing there. You know, we often hear that in some of these more traditional applications, users aren’t interested in paying recurring revenue fees for their hardware or for their system.

So maybe, help debunk that or or help us understand what’s working in that model transition, and, if you have any early indications on, renewal rates or anything like that that will help us understand what that motion could look like on a go forward basis for you?

Rob Painter, Chief Executive Officer, Trimble: Yeah. Hey, Kristen. Great question. I’ll back up to overall Trimble and then zoom back down into field systems. I think there’s nothing like math to answer your question about the customers have a willingness to adopt or inverse resistance to the adoption.

We stand today at over $2,200,000,000 in annualized recurring revenue that was up 14% organically in the quarter. That’s about the best proof point I can give. We were one third ARR as a company five years ago, two thirds today. Now, of course, the majority of that has been driven by the software businesses at Trimble. Within field systems, that math plays out as well, though, as the ARR was up 17% year over year at $358,000,000 So I’d say we’ve got three fifty eight million points of evidence that customers will adopt.

But hey, okay, so why will they adopt? And what we see is the following and then probably the exhaustive list, but a few things. It makes it more affordable. So when you move from CapEx to OpEx, and we’ve seen this across all our businesses when we converted models, we’ve seen that we’ve increased the size of the addressable market by virtue of that business model. We had a number of competitive wins and competitive swap outs on machine control, watching more than machine control and survey systems as well over the last couple of years and then the quarter as well.

And if you’re doing a swap of a fleet, that’s substantial purchase. And when you do it through the business model, excuse me, through the subscription business model, you make it more affordable. It’s more than a business model though from a customer standpoint. At our best, we’re selling technology assurance. And so when you’re able to keep the sensors and the software up to date and then when you can we have customers who will purposely buy on this model so that they can have every machine up to date with the latest technology and not have version control problems or multiple, you know, ages of of equipment.

The more we can link what we’re doing in AECO and that software to the work and to the field from a customer perspective, you know, they don’t care if you’re an AECO business or a field system segment of Trimble. They’re doing business with Trimble. And so it’s our opportunity to and our imperative to bring everything that that customer can benefit from together. And if we can do that in one the extent to which we can do that in one package, we think is good for the customers. If we do right by the customers, then I think we’ll do we’ll we’ll we’ll be able to take our fair share of that of that value creation.

Now there’s a lot more room to run, Kristen. So I think this will be a much slower adoption in the hardware business than we’ve seen in the software. But I’d say, we’re going to continue this push. We think it’s the right thing to do for the market and for our customers. And there are just there are, you know, a few, not many, other companies out there in the world that we pay attention to who we think we’ve been quite who have been quite successful with it.

And so we take opportunities to learn from others.

Kristen Owen, Analyst, Oppenheimer: Thank you so much.

Greg, Conference Operator: Great. Thanks, Kristin. And our next question comes from the line of Jason Celino with KeyBanc Capital Markets. Jason, please go ahead.

: Great. Thank you so much for taking our questions. This is Zane Meehan on for Jason this morning. Rob, I wanted to ask about The U. S.

Public sector. Maybe you could provide an update there. I know you called out a little bit of softness last quarter, and we’ve seen, you know, peers echo that sentiment. But, maybe any any changes that you’ve seen, in the second quarter and, you know, what your expectations are going into the second half of the year. I know you called out a couple of good wins, but just, hope for an update there.

Thanks.

Rob Painter, Chief Executive Officer, Trimble: Great. Thanks for the question. Yeah. On the public sector, let’s break it down at the from the federal level and the state level. At the federal level, we sell to defense agencies as well as really more the civilian side of the federal government.

And when we’re selling defense, it’s typically it could be a survey and machine control kit branches of the military. That’s typically what we’re selling at a federal level. And then civilian level, think about, say, national parks as an example. That federal business is down significantly year over year, year to date, and we would expect that for, the overall year. In fact, that makes us feel that much better about the results that we’re posting in the in the business as well as in field systems because it has to overcome that, that headwind.

How that’s gonna shape now that the reconciliation bill is, done and what that looks like going forward, I’d say let’s, let’s see. I would expect probably see more come back in the defense side than the civilian side, but stay tuned. These are multi year programs, by the way. They can take a long time for appropriations to happen before the programs exit. So in that respect, the echoing sentiment you’ve heard from others.

But let’s talk about the state level. At the state level, departments of transportation are actually quite strong at the moment. There’s a lot of construction happening. Of course, this does intersect the federal government because I’m talking about infrastructure bill. So and this is probably one of the best pockets we have in the company at the the moment as state budgets are strong and transportation work.

I don’t where I live here in Colorado. I can’t go to many places on the highway without some orange barrels. Love seeing those orange barrels and love seeing that Trimble Machine Control and SurveyKet that’s out on the roads. Here, we actually had a nice win with the State Department of Transportation to help them do that in Colorado to help them manage their overall assets in the state beyond the work that actually happens out in the field. So that’s a real bright spot at the state level with the DOTs.

And then where we sell other software to state and state and local governments, I’d say that’s about the same. That’s a little bit softer and elongated sales cycles we’ve seen there. Added altogether, and it’s been a net positive with those state budgets here in The U. S. At the DOT level.

: Got it. Very clear. Thank you. And then, follow ups on t c one’s rollout in Europe. I know that’s still early, but if you could just give an update on, you know, how how that rollout has been going, what adoption has looked like, and, you know, kind of puts and takes between Europe and North America.

Rob Painter, Chief Executive Officer, Trimble: Yeah. Good question. You’re right. It’s still early. I mean, t c one to be, let’s say, too definitive about it.

Other than to say when we look at the overall TC one bookings on a year over year basis for the business, you know, they’ve almost doubled on a on a yearly date or excuse me. On in the quarter, they’ve almost doubled. Actually, it’s the year to date as well doubled. So you’re in Europe as a part of that for that that math to play out. I’d say the early reception feels good to me.

What I one of the things I appreciate is the team we have in Europe has done a nice job of working together and collaborating from that field and the AECO side work, especially where I’ve seen it with large projects and some of our larger customers. So in absence of having, you know, t c one fully avail fully and elegantly available, have done a nice job of doing the right thing to bring the portfolio to customers. So I’d say I I remain optimistic about what t c one and how how it will do and how it will perform, especially as we continue to roll out the project management into Europe. We think that’ll be important for the t c one bundle to have that, and then if you overlay that on context of energy, infrastructure, defense spending, if it really does play through in places like UKI and Germany and elsewhere in Europe, that would be a positive setup for TC1.

: Makes sense. Appreciate the color. Thank you. Thanks, Zane.

Greg, Conference Operator: Thank you, Zane. And our next question comes from the line of Robert Mason with Baird. Robert, please go ahead.

Robert Mason, Analyst, Baird: Yes, good morning. Last quarter, Rob, you talked about kind of the SMB market was an area of relative strength in AECO. I was just curious how that held up during the second quarter and how you’re seeing that market for the rest of the year. And also curious just if just given maybe uptake there, if you’re tweaking your go to market to more broadly address it?

Rob Painter, Chief Executive Officer, Trimble: Hey, Rob. Good morning and good memory. You’re right. Last quarter SMB, we pointed out as a positive in ACO and I would say that played through again in the second quarter. There’s a lot of work on.

I’m talking overall, let’s say, and then, by the way, I’m talking The US, when I answer this question. There’s a lot of work on in The US, overall. Of course, there’s puts and takes depending where you are in the country and what type of work you do, but overall, the customers have backlog. And in many cases, those larger contractors, are working with, more of the SMB, side to execute and get all that work done. So not a total surprise, to us, of the the relative strength that’s in that part of the market.

It’s also a market that’s quite underserved and quite underpenetrated, which makes sense given the size of that addressable market and the low penetration overall. But that’s going to even be, let’s say, doubly so in the SMB side. One of the beauties of the work that we’ve done both on the systems process, organization side, our own internal transformation, is we can shift resources. And as we move to that named account model and go to market, that’s what enables it. We can shift more resources to find the more attractive pockets in the market quicker than we’ve ever been able to do.

I would I would say five years ago, we’ve we’ve been probably quite slow to be able to adapt to these kind of changes in the market. But when you’re organized around accounts, it is so much easier to change change those motions and in essence follow the money. Now what you have to do in an s SMB as opposed to, let’s say, enterprise is you have to be smart about how you approach those customers. Right? You have a bit more of a mix of some inside selling work.

You can’t put people on an airplane for, know, for every account as you move more and more down market. So the digital mark marketing motions matter more, inside selling mass motions matter more, that presales qualification, all of that matters more. We’re at a point now in this business in ACO, you know, is now $1,360,000,000 ARR business, and ACO was up 16% in the quarter on a year over year basis. Like, we’ve got scale to operate like this to be able to address multiple pockets in the market.

Robert Mason, Analyst, Baird: I see. I see. You know, a lot of discussion today in performance, also out of field systems, but a lot of discussion, you know, on civil. You mentioned surveying a number of times. You know, historically, you’ve framed surveying, I guess, broadly as as maybe more mature from a technology adoption adoption standpoint.

We keep hearing about a lot of, I just call them demographic labor availability challenges in that field. I’m just curious, is there an opportunity to maybe bend the growth profile upward in that part of the market for you?

Rob Painter, Chief Executive Officer, Trimble: Yes. Good question, Rob. Shout out to the field systems team. They had a great quarter. They’ve done really well year to date.

They’ve got a lot of transformation on in that business. I’m really proud of also what I see out of our global dealer partner network. We had them all together in Paris for a global dealer meeting a few months ago, and I’d say that level of energy, enthusiasm, belief, and momentum in our dealer channel is also gratifying to see. To keep them, let’s say, doing their job and doing their work, we have to continue to innovate and supply them the products and the solutions for them to take to market. And in that respect and surveying, you’re right.

We have a huge lack of surveyors around world. It is a constraint to work getting done. Now one of the areas of innovation we’ve had, if we take construction as an example, is we continue to make the technology easier to use for the non licensed surveyors to be able to go out and do the work, let’s say, a building construction context, for example. And so by innovating the software and the ease of use of the technology, in other words, you don’t have to understand all the underlying technical aspects of surveying to do the work. We’ve been able to expand the usage of the tools into market segments.

Forensics is another market segment. If you’re doing an accident reconstruction, folks are typically, you know, if you work in public safety and you’re coming out and you’re doing a three d laser scan to reconstruct that scene, you’re not a professional surveyor. You’re doing the instrumentation setup. You capture the survey, you bring it back to the software for the post processing work. And so it’s a form of innovation to expand the usage to other, let’s say, players in the ecosystem.

Now within the survey itself, think about think about what a surveyor does? A surveyor creates a digital model of the physical earth. And in so doing, they may do it in one of three ways. You you could have aerial, you could have mobile, and you could have terrestrial. At an area level, that’s, I think, drones and that data capture.

Mobile mapping systems have been one of the stronger growing segments we’ve had within survey for quite a few actually, a few years now. The team’s done a really nice job of creating mobile mapping systems, and that’s a nice workflow that we can create because if you’re doing a mobile excuse me, you’re doing asphalt profiling on a road construction and you’re using Trimble mobile mapping technology, then we can capture that dataset. You can see where the cracks are, do an asset inventory, bring that back to the office, run it through the office applications we have, and then you create, let’s say, a set of work orders back out to the field. And then for the surveyors in the field doing the terrestrial surveying, we think about new instruments beyond, let’s say, GNSS. Like, you know us for GNSS.

You know us for robotic total stations at optical. Think about reality capture devices. These three d laser scanners and an area of technology called SLAM, it means simultaneous location and mapping. That’s an area of reality capture we think will be a growth area that can bend that curve over time. And so that’s an area to look out for us in quarters and years to come.

That’s great. Very helpful. Thank you.

Greg, Conference Operator: Great. Thanks, Robert. And our next question comes from the line of Rob Wertheimer with Melius Research. Rob, please go ahead.

Rob Wertheimer, Analyst, Melius Research: Good morning. I know it’s early days, but the AI stuff is interesting. And I wanted to ask releases versus what you’ve got in the pipeline, A little bit about your philosophy around it where I don’t know if it’s, an investment, or the the the the cash flows out of it kind of are self funding. And then maybe, Rob, you touched on all the work you’ve done over the last the team has done over the last several years from connect and scale. How is development launching, etcetera, different now that you’ve done that for AI?

Thank you.

Rob Painter, Chief Executive Officer, Trimble: Hey, Rob. Good morning. Good question. I’ll see how I can do this. If I can do this in a pithy format.

I think I could talk for an hour about about your question. You know, in the quarter’s call, we had a slide in the in the deck of the two by two, and, you know, one axis is where we’re using AI internally, and then the other axis is where it shows up more externally. Or excuse me, the other side of that axis is where it shows up externally. And then the other axis is it’s more driven by cost efficiency or revenue generating activities. So there’s a set you’re asking more about I think what we’re doing with customers in those releases.

And in that respect I can give you a number of examples of what we’re doing there. This looks like natural language design and rendering of designs in our architecture and design systems. It’s in the ER construction ERP. It’s auto invoicing and field systems for that data collection, it’s point cloud semantic segmentation. In transportation, it’s autonomous procurement and autonomous quotation is a few examples of capabilities or products that we have.

And you’re correct, there’s much more in the pipeline than what has been released. At an internal level, I would say, gosh, it feels like every function in the company has work on just to drive our own levels of efficiency and productivity and quality of output. So from soft you know, our engineers and software development to our product managers creating rapid prototypes to our cloud teams using it to bring infrastructure costs down to cyber teams looking at it for threat detection, marketing teams for, you know, marketing copy and digital pipeline analysis, sales ops using it for cross sell and upsell analytics. I could just keep going through, you know, our own adoption of of the technology. And to your point about the work we’ve done over the last few years, it’s really made us have to rethink our own orientation to data and how we move data across our systems and how we have interoperability within Trimble, as well as interoperability outside of Trimble as well.

So I’m gonna pause there, Rob, and do you have a follow-up on that?

Rob Wertheimer, Analyst, Melius Research: No. I mean, it’s exciting, and it’s moving fast. So that’s very helpful. And then just just a related follow-up. You touched earlier on the quality of data that flows into AI models or features, whatever you wanna call it.

How does your data, and I can guess, but I’d like to hear from you, differentiate from other, you know, peers and especially ACO? Thank you. I’ll stop.

Rob Painter, Chief Executive Officer, Trimble: Yeah. There’s the well, I look at the breadth and depth, and the breadth and depth of what we do at Trimble. Right? We wanna connect construction. We wanna connect supply chain.

We wanna connect connected forests, connected utilities. Like, we we think about connecting the stakeholders across the industry life cycles we serve. You know, arguably, we’ve been on this path for a couple decades, and then we accelerated that with connect and scale over the last five years. So that breadth and depth, is to me the most unique thing. And then the second most unique thing is, that we’ve got data in the physical and the digital world.

Like, I’d say everyone I feel like everyone talks about connecting physical and digital. I feel like the difference is that we can actually do it, and that’s through the hardware and software and the work in the office and the work in the in the field. So to me, there’s a a density and a unique density of data we have. It’s a unique quality defined quality and skills defined as that breadth that we have. You know, the more you you’re gonna think about creating an industry LLM, you’re gonna need and you if you have an industry LLM and the big opportunity is to to really address system productivity as opposed to task productivity or system optimization as opposed to task optimization, you want that breadth and depth to be able to see the systemic connections within that industry.

And so in that respect, then we think we’ve got a unique access to a unique dataset. Now there’s a double click on the quality of that, Robert, is that there’s a lot of structured and unstructured data. There’s more unstructured data than there is, structured data, and we’ve gotta make sure we’ve got good data governance. Customers are for sure concerned about data sovereignty, and, and the protection of that. So I’d say there’s still a lot of work to be done in the underlying layer layers of making sure that we’ve got really good quality data.

Again, the the quality of the data is gonna correlate to the quality of the output.

Joshua Tilton, Analyst, Wolfe Research: A lot to think about. Thank you.

Greg, Conference Operator: Thanks, Rob. And our next question comes from the line of Joshua Tilton at Wolfe Research. Joshua, please go ahead.

Joshua Tilton, Analyst, Wolfe Research: Hey, guys. Thanks for sneaking me in here and congrats on a very strong quarter. Two questions for me, if I may. The first one, you guys had a lot of positive commentary on SketchUp in the prepared remarks. We did pick up, I believe, a price increase that went into effect in July.

Could you just maybe elaborate on that and talk to how that price increase has been received by customers?

Rob Painter, Chief Executive Officer, Trimble: Yes. Hey, Josh, thanks for the question. I think it’s early to give you, like, a definitive view on, how it’s how that’s going. What I can offer that might be more helpful is we offer a number of different subscriptions in SketchUp. We have we have monthly subscriptions.

We have annual subscriptions. We’ve SketchUp’s on the App Store. So there’s different flavors that we have of the model. And as you might be able to appreciate, there’s an optimization factor between monthly pricing and annual such that you wanna get that balance right so that we’re incenting what we think is the right outcome for for the customers and then for our own business model as well. And so some of that pricing change has been trying to get that what we think is that balance right between the monthly pricing and the annual pricing.

For for sure, we’d love to see customers on more of those annual contracts contracts with us. But we appreciate that there’s a role for the monthly to fill in for certain types of users, so we wanna get that balance right, and that pricing move we made was reflected we think to get that optimized correctly.

Joshua Tilton, Analyst, Wolfe Research: Very helpful. Then maybe just a quick follow-up for me. ACO has obviously been

Rob Painter, Chief Executive Officer, Trimble: a monster for you guys.

Joshua Tilton, Analyst, Wolfe Research: It continues to be a monster this quarter. There was a bit of a slowdown in the ARR growth compared to 1Q. Can you just maybe high level give us elaborate a little bit more on the conviction that you have in sustaining that mid teens ARR growth for the full year?

Phil, Chief Financial Officer, Trimble: Hey, Josh, it’s Phil. Let me take this one. So first of all, I’d say that the numbers we put out there are in line with the guide and the previous guide. So I don’t think there are any real surprises on that. A point maybe a couple of things just to point out specifically is when we do our ARR calculation, that’s based on a recognized revenue in a quarter.

That can vary a little bit and I’ll call it with timing on how we recognize that revenue. So any given quarter could move a little bit because of that. And so Q1 was a bit higher because of the term licenses we recognized. Q2 was a bit lower. I tend to look over, let’s say, trailing twelve month.

And I think we’ve been pretty consistent if you look over a multi quarter horizon on that one. Another piece of this is on pricing, price increases for this year. The last couple of years with inflation, we had some higher price increases, particularly in the SketchUp overall. And we knew coming into this year, we anticipated that our price increases were going to moderate coming on the backside of the inflation. And so that was always modeled in.

And so again, we anticipated that and that’s where you see a little bit of that moderating over the course of the year from Q1 to Q2 and then as we go forward as we think about the guide. I will say as we think about the guide going forward just I mentioned this in the prepared remarks that we are being prudent about this with the given macros and others. And Rob mentioned the SketchUp price change that being a little cautious on if there’s some additional churn or not with that change. And so being a little bit conservative on the back half of the year as I think about the carry forward on the ARR growth. But if the markets continue the way they are and we have low churn or consistent churn, should say, on the sketch of pricing changes, then I’d say that we’d be biased toward the upside of our guide on the ARR growth for the back half of the year.

Joshua Tilton, Analyst, Wolfe Research: Makes sense. And again, congrats on a great quarter.

Rob Painter, Chief Executive Officer, Trimble: Thanks, Josh.

Greg, Conference Operator: Thanks, Josh. And our next question comes from the line of Chad Dillard with Bernstein. Chad, please go ahead.

Chad Dillard, Analyst, Bernstein: Hi, good morning, everyone. So I was hoping you could unpack some of the trends in, the quarter for ACO across, you know, some of your key customer bases, enterprise, midsize, small. Where are you seeing the greatest traction in t c one? And, you know, if maybe longer term, you know, which of these customer groups has greatest penetration of growth potential over the next couple of years?

Rob Painter, Chief Executive Officer, Trimble: Chad, hey, good morning. With respect to the trends in AECO, let’s take it as AECO bookings to answer the question with with t c one. From a dollar perspective, the biggest motions tend to have a nucleus of the ERP, could have a nucleus of project management, then you see a nucleus of the modeling technologies we have. And then there’s so then think about it. Those are the and we have, you know, defined over 20 plus on different prepackaged offerings that we have.

But, you know, that’s where the centricity to those first three that really moved the needle and probably the biggest needle movers where there’s ERP in the mix, not surprisingly, really, if you think about if you think about that. And that’s gonna correlate more to the mid and large size of the market. So where TC one’s really moving the needles, where you hit one of those three motions or plays that we can we can run. From a customer count perspective, from a percentage growth perspective, that SMB is much less penetrated, and so it’s not surprising to us that we see, you know, growth percentages higher in those motions that are down market. Where we would expect to see going forward continued traction with TC1 as we continue to globally roll it out further in Europe and Asia Pacific.

That will give us more motions. Phil mentioned a tuck in acquisition we did with Trimble Materials. That’s a great motion for TC1. And then deeper linkages that we can make with the field systems and will make with the field systems side of the business as an additional addressable market opportunity for us to grow TC one bookings or or cross sell bookings for that matter. Know, we can have a cross sell booking that’s not technically t c t c one, and we’ll take that as well.

We just work backwards from how we best, can serve and reach the the customers, with the breadth and depth of, of what we’ve got.

Chad Dillard, Analyst, Bernstein: That’s helpful, Rob. And then just to continue pulling on thread on the AI opportunity, but I I recognize it’s little bit early, but any thoughts on, you know, any changes you may need to make on your your revenue model? You know, how are you approaching your your buy versus build decisions when we’re thinking about this technology? And then lastly, I guess, like, what’s, like, the lowest hanging fruit, right, you know, from, like, a a development standpoint on on your end and, you know, from an adoption standpoint or interest standpoint, you know, on on the customer side? Like, how does that intersect?

Rob Painter, Chief Executive Officer, Trimble: Yeah. So I mean, there’s our own usages of AI called the internal, and then there’s the external facing. If we talk about we’re a little more external facing and revenue models, you know, we right now, we’re predominantly pricing. We have these good, better, best tiers. And in the best tier, you could have AI capabilities.

That’s we found that to be the best way to monetize. Now in transportation, we’re monetizing discreetly with autonomous procurement and quotation as as stand alone AI products. I’d say we’re doing a lot less of very little of consumption only. Do think about consumption becoming more of a monetization path in the future more so than it is today. It’s one of the reasons we like having Transporion in the portfolio as it brings that kind of DNA in house and capabilities to sell on a consumption basis.

So I feel like we’ve got optionality for how we can monetize going forward. With respect to buy versus build tendencies, I tend to think about that in our own adoption of AI tools and where we can use capabilities that come from the vendors we work with. We buy a lot of software ourselves. If it’s already built in, I prefer that from a capital allocation perspective. Let me use what’s already in what we’re buying as opposed to building our own.

But hey, we’ll be mindful of what it costs because then we can sure at times look and say, actually, think we could do that do that ourselves. And the lowest hanging fruit, know, I could have you you asked about there. Certainly, there’s the lowest hanging fruit opportunities internally, but externally as well. So, you know, internally, you know, everyone talks about the r and d usages. I’m very optimistic about the intersection with product development because product development intersects product management and those developers.

And what that may not be the lowest hanging fruit, but I’ll tell you one of the things that I’m really mindful of is to unlock the most out of the AI opportunity. I think it’s also going to require companies, including ours, to think about how we even structure ourselves and how do we structure teams. How do we actually rethink how work is done given the tools that we have? So that’s on my mind. That’s not the lowest hanging fruit, I acknowledge, but I think it’s important that we’re mindful of that to unlock the opportunity.

Then with respect to the lowest hanging fruit with our customers, we should think about solving the customers’ problems. AI isn’t the thing in and of itself. It’s a tool. Think of it as a tool to unlock that efficiency. And if we do that and we’re thinking about working backwards from customer problems, I think we’ll head down the right path.

So thanks for the question, Chad.

: Thanks, Rob.

Greg, Conference Operator: Thank you, Chad. And our final question today comes from the line of Tami Zakaria with JPMorgan. Tami, please go ahead.

Kristen Owen, Analyst, Oppenheimer: Hi, good morning. Thank you for fitting me in. I’ll ask just one question. Excellent quarter, by the way. So on fuel systems, organic growth guide is now back to flat.

That’s great to see. But your first half performance is a lot stronger than flat. So was there any front loading by customers ahead of tariffs that will drive a weaker back half? Just curious how you’re thinking about the back half after a very nice first half.

Phil, Chief Financial Officer, Trimble: Tammy, it’s Phil. Thanks for the question. Yes, I’ll say there’s a couple of things as we think about the back half of the year. So one is we keep an eye on the inventories. The inventories are in great shape at the dealers.

So we haven’t seen any pre buying ahead of tariffs, things like that. As a matter of fact, we’ve seen some destocking in our particularly in our survey channel. So the dealer inventories look really good from a retail pull through standpoint and what’s necessary. So no concerns there. Two things on the back half of the year.

One, mentioned this again. With the macro uncertainty and there’s still some lingering tariff discussions out there, We’re still being prudent on the back half, particularly Field Systems since that’s a book and burn business. So we’re being a little bit cautious there on the guide. The other thing is we started to see an inflection last year on the growth in Field Systems. And so the comps on a year over year basis are a little bit tougher versus the first half of the year.

We haven’t really seen any change in the buying behavior so far. So this is more of us being prudent, than anything else as we think about it. But, again, the comps are a little bit a little bit tougher as we think about, the back half of the year as well.

Kristen Owen, Analyst, Oppenheimer: Great. Thank you.

Greg, Conference Operator: Thank you, Tammy. And ladies and gentlemen, that does conclude today’s call. Thank you so much for joining, and you may now disconnect. Have a great day, everyone.

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