Trimble (TRMB) Q3 2026 Earnings Call Transcript

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DATE

Wed, Nov. 4, 2026

CALL PARTICIPANTS

• President and Chief Executive Officer - Rob Painter
• Executive - Phil Sawarynski

TAKEAWAYS

• Revenue -- $966.8 million, representing 7% growth year over year and 7% growth on an organic basis.
• Non-GAAP EPS -- $0.86, exceeding the midpoint of the company's guidance range and up from $0.81 in the prior year.
• Annualized Recurring Revenue (ARR) -- $2.56 billion, increasing 10% on an organic basis despite headwinds in positioning services.
• AECO Segment ARR -- $1.636 billion, growing 13% year over year and accounting for approximately 65% of total company ARR.
• Full-Year Revenue Guidance -- $3.91 billion to $3.94 billion, representing greater than 9% organic growth for the full year.
• Full-Year Non-GAAP EPS Guidance -- $3.63 to $3.69, which management increased to reflect mid-to-high teens growth.
• Full-Year ARR Guidance Update -- Approximately 10%, revised from a previous range of 12% to 14% due to market impacts in transportation and positioning services.
• Non-GAAP Gross Margin -- 70.5%, a decrease of 70 basis points year over year due to a higher mix of hardware revenue.
• Adjusted EBITDA Margin -- 28.8% for the quarter, with management maintaining full-year guidance at approximately 30%.
• AECO Operating Margin -- 33.5%, an increase of 170 basis points year over year, with the full-year target raised to 36%.
• Free Cash Flow -- $643.6 million for the first three quarters of the year, representing approximately 0.9 times non-GAAP net income.
• Share Repurchases -- $231.7 million, with approximately 4 million shares repurchased during the third quarter.
• Backlog -- Up 13% year over year, with SaaS and subscription backlog growing at a higher rate.
• Trimble Connect Platform Activity -- Over 30 billion API calls in the quarter, representing growth of more than 25% year over year.
• Machine Control as a Service -- Bookings for ACV grew by more than 50% in the quarter, contributing to new customer logo growth.
• MEP AI Takeoff Adoption -- 19% of monthly active users, increasing from 6% as estimators utilized AI models to reduce manual takeoff time by more than 60%.
• Autonomous Freight Marketplace -- Revenue increased over 20% year-to-date, driven by growth in automated carrier selection and rate negotiation products.
• Goodwill Impairment -- $562.0 million, recorded in the Transportation segment due to a decline in market capitalization and software market multiples.
• Field Systems ARR -- Growing 5% year over year, impacted by a $20 million drag from the intentional exit of a low-margin white-labeled product line.
• Fiscal 2027 Calendar Headwind -- $90 million impact to revenue and operating income expected next year due to the absence of Jan. 1 in the 2027 fiscal year.

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RISKS

• Painter stated that "growth in our positioning services business... has slowed meaningfully in the agriculture market, particularly in South America," identifying a specific regional headwind for the Resource and Utilities sector.
• Painter warned that "ARR growth reflected lower-than-anticipated subscriptions on our bundled positioning services offerings across geospatial and civil construction as first-year attached cohorts came up for renewal," noting a challenge in conversion rates.
• Painter noted that the company faced "a tepid European market," which particularly impacted results in the Field Systems and Transportation segments.

SUMMARY

Trimble Inc. (NASDAQ:TRMB) reported third quarter results that met or exceeded guidance for revenue and earnings per share, supported by resilient demand in its AECO segment. Management reported that its Connect & Scale strategy is centering on AI-native innovation and the unification of field and office workflows through the Trimble Connect platform. The company stated that it is reorganizing its product development architecture to accelerate AI delivery while simultaneously implementing cost-efficiency measures. Management noted that while total ARR growth has moderated due to specific headwinds in agriculture and subscription renewals, the underlying core software and services business remains healthy with high retention rates. The company confirmed it is on track to reach EBITDA margin targets one year ahead of its original investor day model.

• Management is reorganizing product development teams around a new architecture to unlock delivery velocity and leverage AI-generated code efficiencies.
• Painter noted that credit usage for SketchUp AI capabilities grew 100% quarter over quarter, indicating early customer engagement with the company's consumption-based monetization model.
• The company reported that Trimble Connect has reached initial implementation status for FedRAMP Moderate and is pursuing official ISO 42001 certification for AI management systems later this month.
• Management estimated that its ERP AI assistants have saved customers over 200,000 hours of labor by automating 300,000 payroll runs and 750,000 invoices.
• The company announced its first-ever developer summit within the Trimble Dimensions user conference to expand its open and extensible ecosystem.

INDUSTRY GLOSSARY

• AECO: Architecture, Engineering, Construction, and Owners.
• ACV: Annual Contract Value, the annualized value of a customer's subscription.
• ARR: Annualized Recurring Revenue, a performance metric representing the estimated annual value of recurring revenue contracts.
• BIM: Building Information Modeling, a process for creating and managing information on a construction project throughout its life cycle.
• FedRAMP: Federal Risk and Authorization Management Program, a U.S. government-wide program that provides a standardized approach to security assessment for cloud products.
• GNSS: Global Navigation Satellite System, a general term for satellite navigation systems like GPS that provide autonomous geo-spatial positioning.
• ISO 42001: An international standard for artificial intelligence management systems.
• MEP: Mechanical, Electrical, and Plumbing, referring to these specific trades within the construction industry.
• TMS: Transportation Management System, software used to plan, execute, and optimize the physical movement of goods.

Full Conference Call Transcript

Operator: Hello, everyone. Thank you for joining us, and welcome to the Trimble third quarter 2026 financial results call. After today's prepared remarks, we will host a question-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Rob Painter, President and Chief Executive Officer. Please go ahead.

Rob Painter: Welcome, everyone, and thanks for joining today. 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. Let's start with our three key messages on slide five. First, financial performance. We are delivering short-term and long-term value creation for our customers and for our shareholders. For years, we've talked about our 3-4-3 operational cadence, where we embrace the and of managing to the short and the long term, with three months, four quarters, three years in mind. Second, our right to win. Strategy is the art of doing the things you can uniquely do to win in the market.

That manifests as our Connect & Scale strategy, which is a platform strategy. The opportunity is immense as we connect the physical and digital worlds in our served markets. Third, AI. On top of our right to win, the market opportunity compounds with the investment we are making in AI to deliver differential outcomes, thereby accelerating and reinforcing Connect & Scale. We're excited about our future. Today, we'll walk through progression on each of these three topics, starting with financial performance on slide six, where I will hit a few highlights.

In the quarter, we delivered both revenue and EPS in line and above the midpoint of our guidance range, against a backdrop of a challenging supply chain environment and a tepid European market, both offset by strength in the U.S. Kudos to our teams and partners as they continue to well outperform the global market. For the full year, we are holding our revenue guide and slightly increasing our EPS guide. Our full year guidance points to greater than 9% organic revenue growth, EBITDA margins expanding to approximately 30%, and EPS growth in the mid to high teens, all of which demonstrates the strength of our innovation and execution.

I want to emphasize that our EBITDA margin performance is one year ahead of our last investor day model. In addition, we initiated a set of efficiency and cost reduction measures that will enable us to expand margins while simultaneously increasing our investment in AI-native innovation. AI is inspiring us to redesign how we work across the company, from go-to-market to product development to customer success. ARR was modestly below our expectations, and we are updating our full year ARR outlook. AECO growth remains robust, and that is important because AECO represents approximately 65% of our ARR. AECO ARR organic growth was 13%, compared to 14% in the first half of the year.

We expect similar strength in the fourth quarter. This would result in net new ARR of greater than $200 million, an increase against 2025, and we are pleased with that consistent execution. In Field Systems, which is 15% of the company's ARR, we are experiencing headwinds in the second half of 2026 from three discrete items. First, as we discussed last quarter, the intentional shift of a white-labeled product line to our own solution is a $20 million drag to ARR growth for the year. Exiting the product line is the right decision, as we were reselling a third-party offering at very low margins, and we are confident in our ability to regain the margin and revenue.

Second, growth in our positioning services business, which provides high accuracy, reliable location data and real-time GNSS positioning across a number of industries, has slowed meaningfully in the agriculture market, particularly in South America. Third, ARR growth reflected lower-than-anticipated subscriptions on our bundled positioning services offerings across geospatial and civil construction as first-year attached cohorts came up for renewal. To put this into a broader perspective, our team has grown ARR by more than 40% over the last two and a half years, and we are growing our most strategic offerings. For example, our machine control as a service offering grew ACV bookings in the quarter by more than 50%, generating a significant share of new logos in the process.

Another example is Trimble Business Center, where we have more than doubled named account users through conversions of support and maintenance to subscription. In Transportation & Logistics, ARR growth was slightly below our first half, where the European freight market remains somewhat mixed. Our gross customer retention in Transporeon is close to 100%, and ARR grew approximately 9%, but volumes and spot price mix were below levels we saw earlier in the year, which impacts our ARR. Turning to slide seven, let's pivot to review how AI compounds the value of our Connect & Scale strategy and how we progressed and delivered in the quarter across three pillars: connect, scale, and AI.

Starting with the first pillar of connect, our strategy is anchored by connection, where ground truth forged in the field is connected to best-in-class capabilities in the office. To give an example of innovation delivered in the quarter in construction, the Field Systems team announced the launch of our ST30 smart target, a new generation surveying system. This system breaks new ground by integrating optical and subscription-based GNSS functionality into a single smart target solution. The ST30 integrates with our field, office, and cloud software solutions to provide trustworthy and traceable accuracy, while its tilt compensation adds both productivity and safety to enhance the overall integrity of collected data.

The integrated GNSS will be available next year as an upgrade and will streamline site operations and allow users to work beyond the constraints of optical line of sight. What that means for the strategy is we further extend the reach of capturing more ground truth with higher fidelity, and we connect it to our office software to enrich workflows, and we extend functionality for subscription upgrades. The team also launched the first of our next generation Maxwell 8-based GNSS receivers. These receivers were launched in response to the growing prevalence of intentional jamming and spoofed signals. Trimble continues to lead the way in delivering resilient, precise positioning solutions, demonstrating market leadership and providing ground truth to our global customers.

Within this pillar of Connect, we are connecting high-value workflows that solve higher-order customer problems. Take construction. We are unifying data across the broadest range of stakeholders in our industries, architects and designers, engineers, contractors, and owners, from concept to completion. Value grows as participants connect, as the network effects of our platform take hold. You can see an example of this on slide eight with our customer, MJ Church, in the U.K., where they ran the M27 Junction 10 project with Trimble Connect as its operational heartbeat, tying survey, design, machine control, and mixed reality into a federated model. Dozens of file formats were unified. Digital models for each phase moved from the office to the field instantly.

Every shift began with a virtual walkthrough, and the team finished one day ahead of a nine-day possession. They are repeating the approach on the A47 road. Only Trimble is delivering value like this. In Transportation & Logistics, we held user conferences in both Europe and the U.S., where we had the opportunity to showcase dozens of innovations to thousands of customers and partners, and where our customers were able to share how they are leveraging our technology to make their businesses better. A prime example is how we are connecting back office route planning directly to in-cab execution.

Processing over 5.5 billion routing requests monthly, we recently introduced advanced batch analytics and preferred route settings in PC*MILER Web Services platform for both shippers and carriers. This allows fleets to analyze lane profitability in the office and push that exact optimized route directly to the driver's CoPilot navigation app. Guaranteeing this level of execution consistency not only improves driver safety, but also significantly enhances our TMS offerings by ensuring those back office systems are powered by reliable ground truth execution data from the road. Another example is our latest expansion of Trimble Dock & Yard, which tackles the costly disconnects and manual guesswork that occur the moment a truck reaches a facility.

We are bringing the entire yard cycle into one connected flow, starting before the truck even arrives. Our real-time slot management and carrier portal align appointments with actual facility capacity, while our real-time yard management provides site teams with early visibility into changing ETAs to resolve disruptions before they become delays. Reductions in waiting time means customers need less trucks to move the same amount of freight, thus optimizing asset utilization and helping address the driver shortage problem. Let's move to the second pillar on slide seven and talk about scale, where we hold a structural data advantage at the intersection of the physical and digital worlds. Within Trimble Systems resides deep context and domain knowledge that cannot be replicated.

Trillions of dollars of construction projects, billions of dollars of freight spent, millions of users of our software, and millions of transactions running through our platforms, and hundreds of thousands of machines and instruments in the real physical world. The scale of this footprint is expanding, and the value of this data is compounding. One of the most important parts of my job is spending time with customers around the world. What I increasingly hear from them is a desire to unlock more from their data. I also hear them emphasizing the importance of trust in a world that is moving fast. Trust in data, trust in models, trust in security, trust at scale.

This is exactly what our customers expect when they buy from Trimble. Because our customers connect their most sensitive data only to a platform they trust, our approach to managing AI risk is anchored on recognized frameworks, standards, and regulations. In Construction, the Trimble Connect platform has long held compliance and risk management certifications, including ISO 27001 and SOC 2 Type 1, and I am proud to say that we have reached initial implementation status for FedRAMP Moderate. As we layer agentic AI into and throughout the platform's capabilities, our commitment to trust, safety, and security remain our number one priority. Trimble's approach to managing AI risk is anchored on recognized international standards, frameworks, and regulations.

The Trimble Connect platform has passed independent third-party audits for ISO 42001, with official certification expected later this month. If that sounds like a lot, it is. We take governance and resilience at global scale seriously, and we are confident it competitively distinguishes Trimble. Within this pillar of scale resides conviction that if you are going to be a platform company, you have to have an open and extensible ecosystem that others can build on, and upon which you can compound value for network participants. In Transportation & Logistics, this is at the very core of what Transporeon provides for the business, a multi-sided marketplace with thousands of third-party integration, running tens of millions of transactions per year.

In Construction, we hold our Trimble Dimensions user conference next week, where we expect over 7,000 attendees, both onsite at the conference and at our offsite demonstration test site. Onsite, we will hold our first-ever developer summit within the conference, where we have hundreds of registrants and dozens of sessions scheduled. At our offsite, we will showcase how we have expanded our partnerships with OEMs, as well as providers of automation and autonomy. These ecosystem extensions are built on top of our market-leading grade control engine, and all of this data is capable of flowing into Trimble Connect, where its impact can be amplified. Speaking of amplification, let's move to our third pillar, AI.

AI is not an abstract add-on at Trimble. It is directly grounded in physical site reality. By capturing spatial ground truth in the field and feeding it seamlessly into our industry platforms, our connected data becomes the trusted data layer for physical industries, where AI compounds its value by making that data uniquely actionable. With intention, our near-term focus is to broaden and deepen adoption, engagement, and customer productivity while building the foundation for monetization as usage patterns mature.

In Transportation & Logistics, we recently launched Arc Agent, a transportation industry AI platform that connects to live data sources and builds skills on top of them, such as connecting live vehicle GPS telemetry with remaining driver hours of service, and then correlating that with TMS dispatch and warehouse dock schedules to trigger automated exception resolutions. In the quarter, we launched in-cab AI-based driver intelligence, as well as Appian Fleet Assistant for real-time fleet optimization. Over the last few quarters, I have talked about our autonomous freight marketplace solutions for procurement and quotation.

Year-to-date revenue is up over 20% in this category, and our bookings growth shows significant potential for strong revenue growth next year, demonstrating the value behind automating spot market carrier selection and rate negotiation. In Construction, we are extending the Trimble Connect platform with a unified and deeply integrated agentic AI layer, so agents can be built and governed to take action with the same trust, security, and permissions as the rest of Trimble. Customers will increasingly reach those agents through a single front door, Trimble Assist, inside the products they already use.

I will give a number of examples of AI in action across our construction applications this quarter, starting with project management, where our 360 Capture solution automatically overlays site photos to 2D drawings, eliminating manual photo tagging for field teams. Paired with an AI-powered punch list capability for the closeout inspections that catch unfinished work, field staff can cut walk times from over two hours to about 20 minutes. Document controllers and project engineers can now set up drawings in a few seconds with AI title block processing, down from two minutes. In MEP, our expanded Live Count AI takeoff has processed more than 3 million symbols across more than 300,000 monthly drawings.

A feature released this quarter lets estimators train AI models on their own company symbol libraries, cutting manual takeoff time by more than 60%, and AI takeoff adoption among estimating users tripled from 6% to 19% of monthly active users. For surveyors, new AI feature extraction in Trimble Business Center detects pavement distress and checks curb and ADA ramp compliance without manual field review. In steel and concrete, monthly active users of the Tekla Model Assistant beta grew more than 50% in the quarter, with actions in Tekla Structures succeeding more than 95% of the time. In risk and compliance management, auto redlining sessions in Document Crunch more than tripled versus Q2.

Finally, in financials, customers using our ERP AI assistants have, by our estimate, saved more than 200,000 hours by automating 300,000 payroll runs, 750,000 invoices, and 150,000 expense receipts. This translates into millions of dollars of labor savings, which we view as crucial in an industry plagued by labor shortages. The innovation is exciting to witness, and it gets even more impressive when considering the potential to leverage this data at the platform level. Trimble Connect is our construction platform, and slide nine shows a visual of how we are connecting stakeholders across the construction continuum.

In the third quarter alone, the Trimble Connect platform handled more than 30 billion API calls, up more than 25%, representing the importance customers and developers place on integration with Trimble's ecosystem. Behind that, the platform added more than 1 million projects in the quarter. In the last 12 months, almost 5 million projects were added to Connect, and our reality capture platform service grew ingested data volume by 55%. With that application and platform progression in mind, we believe agents work at their best when deeply integrated into the products, data, and services our customers already use, customized to their full context, trustworthy, with privacy built in rather than bolted on, and easily created and shared across an organization.

Think of a customer interacting with a Trimble scheduling agent that inherits the user's permissions, the company's business rules, and the project context, all stored and managed within the Trimble Connect platform. With access to data and tools from across the platform, the agent can reason on ground truth data extracted from the contracts, BIM, estimates, submittals, ERP, field sensors, and more to monitor the project schedule and deliver actionable insights that are bespoke to the stakeholders whose ability to deliver outcomes is amplified by the intelligence that only Trimble can deliver.

To emphasize the point on our market approach, our near-term priority is to compound adoption and customer value, with monetization following through subscriptions, add-ons, consumption, and other models as usage patterns mature. We are exactly where we expected to be, which includes making our Trimble Connect platform capabilities accessible through a unified agentic AI layer, while we scale the ability for our customers to more effectively utilize credits as a consumption currency for AI and API usage at scale. I'll close my comments on this AI pillar with a comment on efficiencies within our own four walls. It should go without saying that the strong majority of committed code we produce is now AI-generated.

We see development teams working on greenfield activities, cutting development cycles down by months and quarters. To get the most of leveraging AI efficiencies is a human topic, not so much a technology topic. The key is not applying a new technology to an old architecture. Rather, it's applying a new technology to a new architecture. We are in flight around reorganizing more of our product development teams around a new architecture, one that we believe will unlock velocity at scale while doing so in a leaner fashion. Phil will now take you through what this means for the Trimble model. Phil, over to you.

Phil Sawarynski: Thanks, Rob. Let me start with reviewing our third quarter numbers on slide 11. We posted revenue of $967 million, up 7%, and earnings per share at $0.86, in line and above the midpoint of our guidance. We delivered record ARR of $2.564 billion, up 10%. Gross margins were lower by 70 basis points to 70.5% due to higher hardware mix. Finally, we achieved strong EBITDA margins of 28.8%, which was toward the high end of our guidance range. Moving to the balance sheet and cash flow items on slide 12, our reported free cash flow remains strong at $644 million through the first three quarters.

Our balance sheet provides financial flexibility with $215 million of cash and a leverage ratio of 1.2x, which is well below our long-term target ratio of 2.5x. We repurchased $224 million of shares in the quarter and have $768 million remaining on our repurchase authorization. Since the beginning of 2025, we have repurchased over $1.4 billion worth of stock. Next, let's review segment details on slide 13. AECO delivered another strong quarter with a record $1.636 billion of ARR, posting 13% ARR growth and 9% revenue growth for the quarter.

Operating margin increased 170 basis points to 33.5% and is on track to deliver approximately 36% operating margin for the year, which is 100 basis points ahead of our prior expectations and a terrific milestone. Field Systems ARR was up 5% and revenue was up 7% in the quarter, with continued strength in civil construction and geospatial. Operating margin was 29.5%. Transportation & Logistics delivered 5% ARR growth, 2% revenue growth, and 50 basis points of operating margin expansion to 26.3%. Turning to slide 15, let's review our updated outlook for the year. We are maintaining the midpoint of our 2026 full-year revenue guidance at $3.925 billion, despite headwinds from foreign exchange and, to a lesser extent, a small divestiture.

This represents greater than 9% organic growth. We are also slightly increasing the midpoint of our earnings per share guidance to $3.66, which represents approximately 17% growth. We expect ARR growth at approximately 10% compared to our prior outlook of 12%-14%, primarily due to the market impacts we discussed affecting the positioning services and transportation businesses. We maintain our EBITDA margin guidance of approximately 30%. We expect free cash flow to be approximately 0.9 times non-GAAP net income, and we continue to expect free cash flow to be greater than non-GAAP net income over the long term. Slide 16 breaks down the full-year metrics by segment.

AECO is a scaled, growing, and attractive margin business with over $1.6 billion of ARR. We are guiding revenue growth in the low teens and ARR growth of approximately 13%. Driven by the strong performance this year, we are raising our operating margin target for AECO by 100 basis points to 36%. In Field Systems, we expect revenue growth in the high single digit. ARR growth in the low single digits, and operating income of 30%. We expect Transportation & Logistics revenue and ARR to grow in the mid-single digits, and we increased the operating income margin expectation to 25%. With respect to discrete fourth quarter guidance, let's turn to slide 17.

We are setting the midpoints of our guidance at $1.046 billion for revenue, up 8%, earnings per share at $1.16, up 16%, and ARR growth at approximately 10%. We expect EBITDA margins between 34% and 35%, which at the midpoint is approximately 100 basis points expansion from the prior year. Before turning back to Rob, I would like to talk briefly about 2027 on three fronts, starting first with ARR. Our updated 2026 exit growth rate represents a good starting point, with no expected deceleration next year.

Our second is to point out the absence of a January 1st in our 2027 fiscal year, which will occur in fiscal 2028 rather than the fourth quarter of fiscal 2027, when a material amount of term license revenue is recognized due to renewals. This calendar impact means we will have a headwind to 2027 revenue and operating income growth of approximately $90 million. ARR and free cash flow will be unaffected. When adjusting for this dynamic, we expect revenue to be in line with our long-term plan. The third item relates to the efficiencies Rob mentioned earlier. We believe these operational moves will enable us to deliver strong earnings per share growth next year.

Excluding the $90 million operating income impact from the absence of January 1st, we expect EPS growth at the high end of our long-term algorithm of low to mid-teens growth. We will dial in the model further on our fourth quarter earnings call in February. Back to you, Rob.

Rob Painter: Thanks, Phil. Overall, I am pleased with our performance in the quarter, notwithstanding the near-term ARR headwinds. I am confident and energized by the progress we are making to accelerate our right to win, excited about the customer engagement we are building across our platform, and inspired by the momentum we are building with AI releases grounded in physical site reality. Next week, November 9th through 11th, we will showcase our latest construction innovations at our Trimble Dimensions User Conference at the Venetian in Las Vegas, including our first developer summit. Thank you to our Trimble team, our global partners, and our shareholders for your ongoing support. Operator, let's open the line to questions.

Operator: We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question from the line of Jason Celino with KeyBanc Capital Markets. Your line is now open. Please go ahead.

Jason Celino: Hey, gentlemen. Maybe an obvious question. I think you mentioned seeing some tepid European market trends. Was this comment more broad-based, or was it more specific to the AECO segment? It's just I saw the AECO ARR growth guide come down a little bit, so curious if that was the main driver for that.

Rob Painter: Jason, good morning. Hey, it's Rob. Hey, with respect to Europe, we saw it more in Field Systems and in the Transporeon side of the transportation business and the AECO business, very solid, and really, that's a hold of the view we have on the AECO, so all good there.

Jason Celino: Okay. All right. And then, Rob, I think you mentioned an interesting stat. You said that API calls were up 25%. I thought that was an interesting data point. I imagine the growth drivers of API calls are obviously new customer growth, product expansion, and then customers using their own agents or using your agents. Maybe can you give us a frame of reference on maybe how much this data point might have uptick versus past trends, and then remind us how you are monetizing API usage. Thanks.

Rob Painter: Hey, Jason. Good question. With respect to the API calls going up, I think that is a really good sign of Trimble Connect as a platform. I was specifically talking about Connect, which is our platform for construction at Trimble. It reflects the corpus of data that is inside of Connect. It reflects the scale of users that we have in Connect and the number of projects so I referenced 1 million projects added in the quarter. I mean, but over the life of Connect, since we started Connect over 10 years ago, we have had 50 million registered users in that timeframe.

I think we are about over 1 million monthly active user, around 1 million monthly active users today. There is a lot of work that happens inside of Connect, and that is where we see the intensity of the API call usage and that we see as a really good sign, especially as we put more and more of our applications into Connect, and now enter AI, the MCP connectivity, server connectivity, more data able to connect across the life cycle with the stakeholders in the industry.

That is a great sign for us of just how important Connect is proving to be for our customers, for them to be able to do their work and to be able to do it better, faster, safer, cheaper, and greener. With respect to monetization of those API call, you're going to see more and more of that from us over time and we talk about a hybrid model, where we believe we'll monetize AI usage at the intersection of the named user license with the ability to have credits on top of that.

Jason Celino: Okay. Wonderful. Thank you.

Operator: Your next question from the line of Jonathan Ho with William Blair. Your line is now open. Please go ahead.

Jonathan Ho: Hi. Good morning, and thank you for the additional color on the ARR portion of the business. Just regarding your revised outlook and guidance, can you give us maybe a little bit of color on maybe a waterfall of the relative impact from the three items that you mentioned, as well as help us understand what changed relative to the prior expectations? Thank you.

Phil Sawarynski: Hey, Jonathan. This is Phil. So let me talk about the couple of Let me go around the businesses first of all. So AECO, Rob mentioned this, but the business is strong. We see no change in the fundamentals of that business. The net retention, excluding SketchUp, is about 110%, which has been very consistent. Our gross retention's been stable there. Our net new ARR is actually growing throughout the year and will exit at the highest level the year. And in the AECO, there's also a bit of round up and round down, but with the strong performance of that business, we've increased the operating margin by 100 basis points to 36%. That's AECO.

So when I talk about the Field Systems, for context, Field Systems is about 15% of the company's ARR, and within that, there's the three businesses, the civil construction, geospatial, and advanced positioning. Advanced positioning is where we sell the satellite-based corrections, and that gives our users higher accuracy without needing a local infrastructure, and that also gives better performance. A significant portion of that business is actually selling the corrections into the ag market, and in particular, in South America, and that has gotten worse.

And then to a lesser extent, over a year ago, we started including the corrections as a standard one-year offering at the point of sale with our construction hardware and what we are seeing playing out is that the conversion rates which we modeled, which were based on our previous experience in the ag market, are actually lower than expected. They are still contributing to growth, but they are lower than what we modeled.

Jonathan Ho: Got it. Got it. And as a quick follow-up, you talked very favorably about some of the AI adoption that you are seeing. Is there any way for us to think about sort of quantification for what that looks like? Maybe not for the balance of the year, but into 2027, does it start to look a bit more material? Just trying to understand sort of the drivers and opportunities there. Thank you.

Rob Painter: Hey, Jonathan. Thanks. This is Rob. We went through a number of examples of innovations and progress we are making in AI on the call, and that was just a small slice of what the teams are producing right now and I see that both at an individual application level, at a workflow level, at an ecosystem level and we see it connecting physical and digital workflows in both construction and transportation. It is exciting to see what is happening, and it has been more interesting to get these in our customers' hands.

The frame we have is we want to drive adoption, we want to drive engagement, and monetization will follow as those usage patterns make themselves clear and mature a bit. I would not expect at a quantification, like an aggregate, for that to be a needle mover in the, call it, the first half of next year. I think as we progress through next year, somewhere in the second half of the year, I think it might be a little easier to start to have a little bit of a better sense of what it is doing in aggregate. I can tell you, we see pockets of evidence of growth.

So if we take, for example, the SketchUp business, specifically architecture design business, and we have a hybrid model for the AI capabilities that we are delivering, so you buy hybrid in the sense of you buy the named user license. We have a good, better, best tier. Inside that named user license, you get a package of credits and when you go beyond those credits, you then can buy more credits. We saw quarter-over-quarter 100% growth in those credits. That is a good sign for us that the technology is being used. If we look at transportation and autonomous procurement and autonomous quotation, those products have been in the market. We saw 20% growth year-over-year in that slice.

We have bookings that are strong year-to-date, which give us confidence that business will continue to grow next year. This is not just futures. There is revenue today in the business. The Document Crunch acquisition that we completed last quarter has project-based AI value delivery and that business is well on track with the deal underwrite model we had. So significant growth happening in that business on a percentage basis. Aggregate it up, and when you are talking over $2.5 billion of ARR, it does get a little hard to move those needles but I can tell you it is gaining traction.

Jonathan Ho: Thank you.

Operator: Your next question from the line of Jerry Revich with Wells Fargo. Your line is now open. Please go ahead.

Jerry Revich: Yes. Hi. Good morning, everyone. Rob, Phil, I am wondering if you could just talk about the pipeline that you have in AECO. I appreciate the ARR revision is pretty small dollar-wise off of a larger base. I am wondering, as you look at the pipeline, what does that tell you about the growth profile for ARR for AECO over the next 12-18 months? And separately, from a margin standpoint, as we think about the businesses using more AI credits, what are the implications for the margin profile for you folks when you do sell those credits? Can we just step through the economics there, if you do not mind?

Rob Painter: Great. Jerry, thanks for the question. So let's talk about AECO. Think about pipeline feeding bookings, which creates the revenue. At a pipeline level, when we look at the markets that we're serving, they're global, and the fundamentals remain large, global, underserved, under-penetrated, strong value proposition, unique offering at the intersection of the physical, digital, the hardware, software, the office, and the field. Asia Pacific pipeline and bookings, I think we're the strongest growers year-over-year in the quarter. I think that somewhat reflects bringing TC1 into the Asia Pacific market. That's creating pipeline for our sellers. What also is creating that pipeline is, I'll call it the modernization and upleveling of our marketing efforts.

It's just really impressive to see the full slate of tactics that the team has already been executing and has in store and this all gets better to create that pipeline through the investments we've made in our back office systems and unifying our CRM systems over the last year. Just getting more and more intelligent, and guess what? AI is helping feed that as well. The pipeline looks good as we look at the bookings and that flow through.

That's probably a good place to pause and comment that we continue to see strength in data centers, reshoring, onshoring of manufacturing, energy, whether that's renewables or oil and gas and so good pockets of strength on the bookings front as well as geographically. All that then feeds into the model that Phil took you through with the net retention and the gross retention, cross-sell, upsell efforts continue to work and drive bookings and revenue, ARR growth in the business and all of that then not only sets up for the second half of the year or this fourth quarter, as we laid out in guidance, and into 2027, our conviction, and that we'll continue to grow.

Phil Sawarynski: Hey, Jerry, just one other point to add as we think about that. Our backlog, as we have it right now, is actually up 13%, and the recurring backlog is also 13%. And if you actually double-click within there, the SaaS and subscription backlog is actually up a little bit higher than that. So that's another indicator of, as we think about going into 2027.

Jerry Revich: Super. Thank you. Can you just comment on the second question on margins, please? As you have more AI agent revenue, what does that mean for your unit profitability or margins?

Rob Painter: Oh, sorry. Yes. In the— I'd say, the short term, near term, on that one, we see the gross margins in the business holding. Obviously, there comes a cost associated with hitting the models. Right now, we're able to price that through. Remember, we're pricing it through a number of factors, whether it's in that good, better, best tiering, or if it's consumption-based or project-based for that matter. So, what we see in front of us, we see, at a minimum, neutral to the margins.

Jerry Revich: Super. Thank you, Rob. Thanks, Phil.

Rob Painter: You're welcome.

Operator: Your next question from the line of Quinn Fredrickson with Baird. Your line is now open. Please go ahead.

Quinn Fredrickson: Hey. Good morning, guys. Just wanted to start off within the field business and the two discrete headwinds you mentioned in positioning services. Do you see those continuing into 2027? I just ask because you mentioned you have visibility to sales growth in line with your long-term plan ex the January 1st impact. So does that presume these headwinds clear at some point in 2027, or is just the rest of the business strong enough to offset?

Rob Painter: I'll start, Quinn. This is Rob. And with respect to, let's say, the ag market, that one I don't know how to call the macro on ag, so I'm not going to attempt to do that, what I will do is talk about the growth that we have in the rest of the portfolio. So the machine control as a service business, as ACV bookings growth, actually ARR growth as well, was over 50%. And what we see as we've gone through to this model, excuse me, over the last few years, more than 1/3 of the customers that we win with this offering are new logos. What that tells us is we're expanding the addressable market.

That gives us conviction as we move into next year. We have a portfolio that we call building Construction Field Systems, where the survey instruments, instead of really thinking of them as outdoors, we take them indoors, more for layout inside of a building frame and that business continues to grow strong double digit. We see the bookings that we have there. That gives us visibility into next year, so we add that step and then software conversions, just to give you one more. And as we continue to move from subscription, excuse me, from on-prem to subscription, we see the bookings there, and we have the conviction that we'll continue to grow there.

And we learned, obviously, we can take the playbooks that we've had throughout the rest of the company here to learn for that. So that's the stack, Quinn, that adds up.

Quinn Fredrickson: Got it. Okay. Thanks, Rob. Then second question, I think in your commentary, you alluded to some restructuring or reorganization. Just any quantification of any benefits, how much the savings will be retained versus reinvested, as well as how to think about the cadence of those actions? Thanks.

Phil Sawarynski: Yeah. Hey, Quinn. This is Phil. Thanks for the question. Yes, so we did some work this year. There's puts and takes along this, but the easiest way to think about it going into 2027 is that we indicated about $90 million of a headwind on operating income from not having a January 1st in 2027. So, a lot of the changes and the puts and takes would be around that neighborhood. So around, call it $80 million-$90 million is what we would expect. Now, there's going to be other things that come back as we reinvest in the business as well, but that's about the quant.

Quinn Fredrickson: Got it. Thanks, Phil.

Operator: Your next question from the line of Alex Sklar with Raymond James. Your line is now open. Please go ahead.

Alex Sklar: Great. Thank you. Rob, maybe first one for you, just with Dimensions coming up next week. I want to dig into new product velocity after bringing that Document Crunch team. Where does that integration stand today, and how are you thinking about organic product expansion motion to kind of grow your share of customer wallet? How much more needs to be done there? Thanks.

Rob Painter: Good morning. Thanks. Great question. We are very excited for Trimble Dimensions next week. We are going to be leaning into the platform story that we have at Trimble, the unique one at the intersection of the physical and digital. As you can imagine, we will have a lot to say as it relates to AI. We have, I think it is 800 sessions that are scheduled and so not only that, is that us being able to talk about new products, our customers leading a lot of those sessions. We are running offsite in addition to the onsite.

The new product velocity will, our customers and folks like yourselves who can make it out there, will be able to see what we are doing both in the office and in the field and if we take Document Crunch specifically, this is a fantastic team and we have put more capital behind this team. They are actually, I think, kind of helping a lot of the rest of the business see what is possible as it relates to product velocity in an AI-native fashion. A lot of inspiration there.

We have actually given that business and the leader of that business additional responsibility for payments, as well as there is a couple new products that we are going to launch at Dimensions next week. One of them specifically, a year ago, we would have been looking at acquiring a business, and fast-forward in an AI world, and we have built it ourselves and are ready to take it out next week. So a lot of really just, I cannot say enough good things about the Document Crunch team, Josh, and everyone in that business and then more broadly, just at Dimensions, it is going to be a fun week.

Alex Sklar: Okay, great color. And then I am not sure who wants to take this one, but digging into the AECO segment, can you parse out some of the trends you are seeing from that core kind of TC1-enabled multi-product base versus the kind of one to two product customers? Is the divergence in trends related to retention across all that widening at all? Thanks.

Rob Painter: I will take that one. I would say it is quite consistent what we see. The upsell motion actually was where we had the most growth in this last quarter. Upsell growth outpaced cross-sell growth by a little bit. That means we are deepening the penetration within our existing customers. We are winning new seats and so that is a good sign of deepening adoption within our customers. What we tend to see is that a cross-sell motion at one time period creates the upsell motion in a future period. There is a certain logic to that to see that play out.

And what that means then is we continue to see steady growth of customers going from one to two to three to four, etc., products or applications that they are using from us. So, continue to feel really good about the fundamentals that we have there in the business. I also want to highlight beyond AECO, truth of the matter is the customer does not care about AECO or field. It is Trimble construction capabilities. And at that intersection point, we think there are really exciting things that we can continue to do to unlock that work in the field.

So think about the surveyors collecting data, machine control, streaming real-time positional awareness and linking that into the office with the systems that are managing those projects and those schedules and those financials, that BIM model meets the financial model, meets execution and progress in the field. That is special, that is unique, and something we think we can only do.

Alex Sklar: All right, great. Thank you for the color.

Rob Painter: You are welcome.

Operator: Your next question from the line of Rob Wertheimer with Melius Research. Your line is now open. Please go ahead.

Rob Wertheimer: Hi, good morning. You guys have unpacked the field system fairly well, and I do not suppose it is a surprise really that South American ag is weak. On the bundled offering in construction, was there a geographic overlay? Because it seems like North American construction is picking up pretty well. Just out of curiosity, it seems like you bundle it with new machine sales subscription, but was there anything else in there where you were wrapping other products from Trimble into that? I will stop there. Thank you.

Rob Painter: Hey, Rob. Good morning. And so on the bundled offerings, are you referring specifically with some machine control offerings out of field, or do you mean it more broadly?

Rob Wertheimer: Yeah. I just did not know if you were able to wrap the machine control/correction services in the field into anything else. I was not sure there. Thanks.

Rob Painter: Got it. Estimating— so from the B2W acquisition we did a few years ago, estimating and then in-field track capabilities has been the most natural place where we are bundling at either the point of sale or doing co-sell motions with the direct and the indirect teams, and we have got the referrals. If you are doing estimating for civil construction, earth moving specifically, it is logical that one who is buying our machine control systems also needs to create estimates for that earthworks. The next thing that is very logical to connect to that is project management and so you are right, you are managing the work and then project management in the office and the field.

So those become the bundles, Rob, and I would say those still, I think, are in their very early days. We think we have a lot of room to run there to perfect that motion and then you can imagine, once you do that, the next move on the board is connect that to the financial system and take a North America market, for example. We uniquely have density in that construction financials.

By the way, also within financials, and I do not just mean ERP, I also mean payments, because earth moving contractors generally get paid based on how much earth or how much dirt they are moving and then you can see how that would flow back into our ability to manage the projects and the financials and the payments.

Rob Wertheimer: All right, perfect. Thank you. That is interesting. Just in general, though, in the, "weakness" that you saw outside of Ag and Field Systems, was there any Europe or any geographic overlay on that would further explain? Thank you.

Rob Painter: Well, I call it Europe and Field Systems. I called that out in my opening remarks. I go back to the first quarter when we talked about the war in the Middle East and how that would play out, and that I had a degree of caution in the back half of the year if the war did not end, that is definitively not good. It is not good for our business in the Middle East, and we see the inflation that has rippled through Europe. So I would say that was modestly weaker, and then that was offset, as you noted, with the strength in the U.S.

Rob Wertheimer: Thank you.

Operator: Your next question from the line of Kristen Owen with Oppenheimer. Your line is now open. Please go ahead.

Kristen Owen: Hi, good morning. Thank you for the question. I recall that we talked a little bit about this last quarter, but maybe just coming back to it, help us understand that gap that we are seeing in AECO revenue versus ARR growth and then just given the term license calendar piece, does that gap start to narrow in 2027?

Phil Sawarynski: Hey, Kristen. Good morning. This is Phil. Let me take that one. So yeah, the main dynamics on that delta is, well, there is two pieces to it. I will call it the timing of the term licenses. So the term licenses, we recognize that revenue upfront. We smooth that out for ARR. So that timing in any given quarter can be up or down. There is also a facet of that if we sell some multi-year terms, there is even more revenue in a given quarter. The other piece of it is professional services that we have still in AECO, a large portion, particularly in our owners business.

That has been declining as we move more and more from customization into more standard cloud offerings and so that obviously is not tied to ARR. So that is why we are focused on ARR that really normalizes those dynamics. And if I look over a longer term, if I just look at our full year, for example, this year, the gap actually closes. We are guiding in the low to mid-teens for the revenue growth and about 13% for ARR. So that does get closer if you look at it over a multi-quarter period.

Kristen Owen: Great. Thank you so much. And then I did want to follow up to the extent that you are able to give an update on the transportation business. Obviously, conditions in Europe have changed. Diesel prices have come up. Just any sort of update that you can provide on the alternatives discussion there. Thank you.

Rob Painter: Hey, Kristen. This is Rob. The answer is it is business as usual for us. I hope you got a sense from my prepared remarks that there are a lot of really good things happening in the business. Having both of those user conferences in the quarter ground to this and the importance of what we do. The European market has its puts and takes with the diesel prices. There are aspects that, of course, are not good, and then there are other aspects which create business for us and so the message overall is the same as last quarter. There is no predetermined outcome or timeline as it relates to the review.

Kristen Owen: Great. Thank you.

Operator: Your next question from the line of Mark Schappel with Loop Capital Markets. Your line is now open. Please go ahead.

Mark Schappel: Hi, thank you for taking my question. As you look ahead into 2027, Rob, could you just talk about any changes that you anticipate on your go-to-market strategy? In particular, maybe you could talk about how you're thinking about sales coverage or channel partnerships, cross-selling, and maybe where you see some of the greatest opportunity for improvement there.

Rob Painter: Good morning. Hey, great question. I give the teams, all our teams great credit for the transformations they have made over the years on the go-to-market side of the house and really moving from product-based selling to platform selling to that named account user selling. That which is absolutely crucial if you are going to drive the cross-sell opportunities, you are going to best serve the customers for what they buy from us. I would say the next wave of what I would characterize as our opportunity to level up would be at the intersection of the direct and the indirect.

So with the AECO and field where we serve common customers, we are able to do that, I think, quite well at the enterprise account level and I have seen that get better and better throughout the year. So, I would expect to see good things from the team there and maybe it is somewhere late 2027 into 2028 where it is scale, let us say without much of the handholding that it works on its own.

But that intersection point, direct, indirect, serving large account opportunities, it is going well, and I think that we are going to be able to unlock even quite a lot more of that next year and there is even an intersection point with our form of forward deployed engineers working with that. And when we are doing that, it is just really exciting to see what customers are unlocking with our technology.

Mark Schappel: Thank you.

Rob Painter: You are welcome.

Operator: Your next question from the line of Chad Dillard with Bernstein. Your line is now open. Please go ahead.

Chad Dillard: Hey, good morning, guys. So Rob, I wanted to go back to your prepared remarks when you were talking about the different capabilities of AI in your products. You mentioned that there is millions of dollars of labor savings. So I guess my question is, number one, how much does Trimble or how much is Trimble entitled to capture? And then number two, can you talk about the adoption of those capabilities by your customers, by region?

Rob Painter: Hey, Chad. Good morning. It really is just, it's fun, it's exciting, it's compelling to see what these capabilities are achieving and what they're accomplishing. Again, I'll keep coming back to this frame that we want to drive adoption engagement. There's a lot we're learning. There's a lot our customers are learning. With respect to, I'll say, a thought on value, I'll call it value capture, and how we think about that. We think about quantifying value delivery and then getting our fair share of that value capture. So the equation for us has got to start with the value that's created for the customers, then we work backwards from there.

That's a more of really a thematic answer that I'd give you and you can see order of magnitude improvements as you transcend from, we'll call it a point solution productivity and workflow, solving those higher order problems and there are aspects, you could say somewhat separate but related, where we can see savings in labor hours. Say if you're using Document Crunch, and you're doing where AI is automating redlining, there's less human intervention needed for that. On the ERP side, I referenced automation and payroll and invoices, and expense reporting that we think is saving hundreds of thousands of hours and therefore millions of dollars in labor hours. So we think about it.

We definitely think about, so I'll say labor savings for customers, which matters so much in this market that is tight on labor. Understand that, quantify that, then work backwards to our value capture. That value capture, at a minimum, we would want to be within a frame of how we've historically done that, with a bias to that being even higher.

Chad Dillard: Great. That's helpful. And then maybe want to talk about your M&A pipeline and your approach. I guess, how do you think about the split between buy versus build, especially now that you're shifting more towards AI capabilities as products?

Rob Painter: Yes, Chad, it's a great question. First, within the capital allocation frame, with the M&A pillar, we believe in disciplined M&A that fits our strategy, and it has to absolutely fit our strategy. We differentially think about the intersection of the physical and the digital. In other words, differential interest and capabilities that head at that intersection point. My answer today on buy versus build, I think, is different than it would have been a couple of years ago, where today we have a sharper lens on acquisitions that might have been more tuck-in, I would have described as tuck-in the past. We're asking ourselves a lot more questions if we can build instead of buy.

And next week at the user conference, we'll have at least one, maybe more examples to be able to share where we're making announcements on some, we'll call them capabilities or features or products that we've been able to build fast, and we're building them inside of our platform and natively connecting them. That's different. That's pretty exciting.

Chad Dillard: Great. Thanks all.

Rob Painter: You're welcome.

Operator: We have reached the end of the Q&A session, and that does conclude today's call. Thank you all for attending. You may now disconnect

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