All right. For important disclosures, please see the Morgan Stanley Research Disclosure Website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. My name is Josh Baer, software analyst here at Morgan Stanley. We are thrilled to have part of the Asana leadership team with us today, Dan Rogers, CEO, and Aziz Meghji, Head of FP&A and also Incoming CFO. Thank you so much for being here.
Thanks for having us, Josh.
Really appreciate it.
Thanks for having us.
As an introduction, Dan, for those investors who might benefit from a refresher on Asana, but also for those who might not know you yet in this role, can you rewind a little bit, thinking about 2025, what attracted you to Asana? You've had an extensive career in senior leadership roles at a bunch of different software companies. You know, what puts you in a great position to lead Asana forward?
Yeah, great. Thank you. Let's turn first to Asana. You know, looking back before I joined, Asana has 170,000 customers around the world, which means we are a known global company, and I had used the Asana product in two of my prior companies, so it was a brand that was much beloved and much known to me. 85% of the Fortune 500 use Asana today. In some sense, we're fairly ubiquitous. When I talked to those customers, as I say, they were kind of hooked on Asana. We were delivering real value in the coordination of human-to-human interaction, that coordination of projects.
Our humble beginnings 17 years ago is the platform for collaborative work management and really the pioneer of the collaborative work management market, with Dustin's vision, bringing the social graph into the work environment through the Work Graph. All of those things attracted to me. What really spiked my interest was our potential around human-to-AI interaction and human-to-agentic interaction. We'll talk a little bit about that, I'm sure today. Vis-à-vis myself, my own background, sometimes I say, you know, I come from England, sometimes I say I was born in the cloud. You know, it was raining when I started, you know, I ended up going to many of the titans of cloud computing, including AWS, ServiceNow, and Salesforce.
Uh, and lastly, spent, uh, time at, uh, a cybersecurity company, Rubrik, helping them on their journey to becoming a public company, uh, as the president there, and then at LaunchDarkly, where I managed to serve, uh, a different audience, which was really developers, developers that were, uh, fast-moving and interacting with many of these new, uh, AI code generation tooling. Uh, so very much around application speed and, uh, uh, going from, uh, idea to kind of code. And, uh, that's really, you know, seeped into me, uh, as a, a fast-moving innovation, uh, kind of mindset that I bring to the-- bring to the party.
Great overview and background. Wanna start with strategy, which is to be the pioneer of the agentic enterprise. Wondering what does this wave of work transformation really entail? What exactly is the strategy to address this opportunity?
Yeah. We're now entering into a new era of work. Work is going to change fundamentally. In this new era, humans and agents are going to be collaborating together. If you close your eyes and kind of wake up in one year's time, it is clear that work is gonna be a tapestry of humans and agents working alongside each other, and agents and agents working alongside each other. What's our role in that? Let's kind of wind back. If you take any company, any organization, as soon as they have 10 people, 100 people, 1,000 people, they need to coordinate with each other. They need to have clarity on who's doing what, when, and how. This was the genesis of Asana. Does the problem go away when you have agents, when you have thousands of agents that are running about in the organization?
No, it actually grows exponentially. Humans and agents still need coordination. They need a, more than ever, a structured system that is the system of record for work. They need a knowledge graph for work, what your priorities are, what your timelines are, how this pertains to the project, what the task inventory is, the tasks to be done. That ledger is Asana. We are the foundational layer for the agentic enterprise. We are the instruction set for these agents and these humans to work off of. Just as we were with human-to-human collaboration, we now are with human-to-agent collaboration and agent-to-agent collaboration. If you break that down one step further, most of us have had the experience of interacting with, you know, a kind of chat agent.
You'll see now as you kind of type in your prompt that experience breaks down into tasks of how I'm going to solve this from an individual basis. Maybe there's 10 tasks that have been articulated in the response that it's gonna go through sequentially. Well, you're gonna need a ledger of all of those tasks for all of the agents that are interacting. Wouldn't it be great if that ledger is persistent and it happens across all of the agents, so they can all operate against the same set of tasks? Again, that's really where Asana comes to the fore.
Excellent. With that backdrop in mind, can we dig in a little bit on Asana's AI products? You have AI Studio, AI Teammates. I mean, what are these products and what, you know, how do they achieve this strategy goal? What value do they bring to customers?
Yeah. Let's start with AI Teammates. AI Teammates is in beta right now. We have over 200 customers in our beta program and will become generally available later in March. That really is the first manifestation, I would say, of fully using the Work Graph for an agent. These are our first-party agents. We'll have agents for marketing teams, agents for operations teams, and agents for IT teams that have pre-described some of the jobs to be done by those departments. Those agents will work off of a Work Graph, so they are instantly productive. They don't have to infer the tasks and the steps that need to be taken because those things have happened in the past in our Work Graph. They know exactly which people they need to interact with. They know exactly what goals that they pertain to.
They know exactly how long those jobs take, who needs to be involved, who needs to approve things, who are the managers. That governance model already exists. Our AI teammates, literally on day one, you can put them in the environment, day one, hour one, and they're instantly productive. Part of the reason why many companies haven't yet found the productivity gains from AI is they have all of these loose tools that are not operating against the common instruction set. They don't have a system of record to work from. Our AI teammates are an antidote to that. Our AI teammates are instantly productive.
If you look at AI Studio, which is a product that we launched just last year, a fast-growing AI product from Asana, we reached over $6 million ARR, which we announced in our Q4 Q4 earnings, in, you know, well under a year. How did we do so? We embedded work intelligence into workflows. Many of our customers use us today, in simple or complex workflows. With AI Studio, you could put AI nodes into those workflows, AI nodes that do quality checks, AI nodes that make sure things are on spec, AI nodes that complete incomplete forms, AI nodes that translate, AI nodes that route the work to the correct people.
If you take, for example, one of the large fashion retailers in Europe, who's a customer of AI Studio, they use AI Studio every day, and it goes from SKU to factory. All of the production steps are being coordinated with AI intelligence along the way. AI Studio follows those same guardrails that preexist within the Work Graph. You don't need to set up some new per-permissions. You don't need to set up some new data privacy rules. They're automatically going to follow those things that have already been established for your enterprise.
Very helpful. Aziz, wanna bring you into the conversation. Maybe we could talk about the business model, the pricing model for these products. How is your AI monetized? Do these agents and AI Teammates need a seat, or are we talking about a hybrid and consumption model?
Thanks, Josh. We're currently a hybrid model, both Studio and Teammates, the monetization model is kinda prepackaged credits. We size that credit package based on, you know, the size of the organization, the number of Teammates they're deploying, the number of use cases, and workflows that they're looking to automate and turbocharge to come up with that right credit allotment. As they work through those credits, if they go over, we have overages and top-up credit package. We found through the betas and the early customer feedback, customers aren't ready for the full consumption model yet. We introduced this hybrid model, and it seems to be working well.
We've got, you know, eight customers this past quarter now, spending $100,000 or more with AI Studio and seeing the full benefit and then really, enjoying how it's priced. It will evolve, and it's dynamic, but today that hybrid model is working well.
Thank you. You've laid out the strategy and some products and the vision. A lot of the investor focus in the market this year has been around the potential risks around AI and the potential disruption. I guess I wanna ask you directly, how do you respond to those investors who worry that AI could just fundamentally disrupt the collaborative work management category?
Yeah. I'd probably put a reflecting mirror back up and kinda say, "Au contraire," think of this as even more important now than ever to have this coordination layer. The fact that you have lots of agents that are gonna be running about, the fact that you're gonna have an increased volume of tasks that are being generated by AI actually increases the need for coordination. It actually increases the need for a Work Graph. The Work Graph is the ledger of the company's strategy. It is the ledger of who's doing what, when, and how. That ledger needs to be accessed to be useful. Individual sessions with the interaction with a foundational model are not going to be sufficient.
The productivity unlocks, the promise of agentic enterprise is when agents and humans are working together against a common system of record for work. In doing so, then we become the system of action. We can move that record on, towards collaborative execution. I'd say we enjoy the advances of the foundational models, because it's going to consume our platform more fully. As I say, we were purpose-built for exactly this moment.
This is kinda what you mean when you say AI is an amplifier for Asana?
Yeah. I mean, right now, it's clear that that gap between the promise of productivity of AI and actual enterprises enjoying that productivity from AI is large. We think that gap is a large coordination gap, that actually those tools need to start to work with each other, and they need to start bringing humans in in a multiplayer mode.
One thing that I learned from earnings on Monday was that both of the leading AI labs are customers of Asana, and that they've been expanding their contracts with you. Maybe that shouldn't have been a surprise, just given Dustin's early relationship with these companies. This fact alone, I think, helps to refute that AI bear case narrative out there. Is there anything else that you can share around how those customers are using Asana as far as the use case or their deployments?
Yeah. Look, at one of those foundation model providers, they have thousands of employees across engineering, and product and marketing and operations and IT, as well as actually the compliance and risk teams. It turns out that the coordination challenge of work is large. They look to us for, I would say, four things. The first is the context of work, that is, tied to our Work Graph, that ability to have a common understanding of the tasks and the projects that need to happen. They look to us for a persistent memory that's not just session dependent from, you know, single interaction with a, you know, a chat, but actually persists across the life of a project, the life of a strategy, the life of a goal.
They look to us for this multiplayer mode, which is helping the rest of the team stay coordinated and have that visibility into how things are going, moving tasks along with seamlessly between teams. They look to us for our built-in enterprise credibility and governance and controls, which really mean that they know that their data is protected when they work within this Asana platform. It already has pre-established who gets access to what, who gets to approve what. So that's all just readily enjoyable. Yeah.
Yeah. That, that same AI lab is not only using CWM, but they're using AI Studio to actually coordinate their risk and compliance workflows, which are so core to their mission. That customer expanded again in Q4. You know, we really enjoy them as a customer, and they see a lot of value from Asana.
Really interesting. Maybe zooming out, thinking about the broader competitive landscape. You're not the only collaborative work management platform. You also have vendors like Microsoft in there that are competing for, you know, being the provider of the rails for enterprise agents. How do you think about this new competitive landscape and ultimately why you have the right to win?
I'd probably, you know, use a very engineering answer, which is it's all about the architecture. For us, the architecture is the Work Graph that you could think of as a neural network of the relationships between tasks, which is the fundamental unit of work, people, projects, goals, projects that overlap all of that. That Work Graph is very powerful. The way that we architected it is not a simple relationship, but it does mean that the agents that operate within our system are instantly productive 'cause they can instantly access that Work Graph. The differentiation is context in the flow of work, the persistent memory across multiple projects, multiple teams, how this thing has been solved in the past. Often that persistent memory might be years rather than the ephemeral nature of a session, which is seconds.
The multiplayer mode, which is that we have already solved the fundamental challenge of making sure that as people update things, everybody is brought along, that humans are collaborating together on our platform, and that operates together seamlessly. As agents also update their progress against their work, that seamlessly fits into that same architecture.
Finally, you know, we very early on in Asana as a company, we were, we had some of the largest companies on the planet as our customers, and we still have many of the largest companies on the planet as our customers who have hundreds of thousands of users, which means we have encountered all of the needs and requirements around, you know, where the data is, who gets to access it, what permissions happen, who gets to approve things, who gets to reject things, who gets to see things. Those have already been solved problems for us. Yeah, now those are kind of readily available for all of our customers.
All four of those are major sources of differentiation, both against the, I'd say some of the point solutions, you know, from some of the foundational providers themselves as well as, you know, the CD-ROM traditional competitors.
Very clear. Maybe shifting gears, Aziz mentioned that, on Monday, you reported earnings. Could you walk through some of the key takeaways from Q4 results and FY27 guidance?
Yeah. We had a solid quarter and, you know, it's a meaningful progress. In FY26, we became a multi-product company. You know, a key highlight was, you know, AI Studio is now at $6 million of ARR, and that's just over three-quarters of full GA. We're scaling with those customers. We now have eight customers that are $100,000+. That's across geos, across verticals. The results itself, we grew 9.2%, which is above the midpoint of our guide. Our margins we generated were 9%, that's about 150 basis points above guide. Five straight quarters of sequential margin improvements, so we're super proud about that. If you look at that on a year-over-year basis, you know, 7% for the full year represents like 1,300 basis points of improvement year-over-year.
That's translating into free cash flow. We had a 13% free cash flow margin for the quarter, which is 700 basis points improvement year-over-year. Strong metrics. The KPIs that we monitor were also improving, not only stabilizing but inflecting. Third straight quarter of NRR improvement, that's on the back of really strong renewals for our largest customers. Our top 10 renewals in Q4 renewed at NRR greater than 100%. Most of those were tech, that's really encouraging. That strong renewal activity is translating into our tech cohort. We've talked about our tech cohort being a headwind. They're not expanding as fast in terms of their own headcount, pace of hiring. For the first time in 7 quarters, our tech cohort did not decline.
It was basically flat growth, and that's on the back of not only strength and renewals, but the expansion that AI Studio is driving and strong new business activity. Lastly, you know, the balance sheet metrics that we look so closely as leading indicators, mainly for our up-market business, CRPO and deferred revenue all both accelerated by 200 basis points. Our CRPO grew 17% in the quarter. Those are good leading indicators for those up-market business. Feel really good about the historical results. On the guide, you know, we guided to an 8% midpoint on revenue growth, and at least 9.5% on margins, and we can unpack the assumptions in that guide. I'm sure you're gonna go there.
Yeah, that would be great. You're pointing to some really impressive areas of stabilization, inflection, even acceleration in some of those leading indicators, thinking about CRPO. The revenue growth guidance is for a slight deceleration. Could you unpack some of that? Are there other headwinds that's driving that? Maybe it's, you know, a lot of it is conservatism. We'll see where we end up. Any thoughts there?
Yeah. On the revenue growth guidance, we kinda capture... There's kind of three different phenomena going on in the business. The first is, you know, our sales-led business, which is mainly our mid-market, up-market business, continues to perform well. We've seen strong productivity increases. We talked about the NRR we're seeing in our large accounts. There's a lot more we can do that to compound the productivity, but that's growing. Those segments are growing above that overall rate. Now, where we are seeing headwinds are in the PLG business. We called out the about 2% impact or headwind to our ARR growth is coming from PLG. That top-of-funnel pressure that we had called out several quarters ago, while it's improving quarter-over-quarter, it's not improving at the rate that we previously expected in Q3.
That is a headwind to the growth. In absence of that headwind, we would be accelerating on the near term. The third thing we're gonna call out that's factored in the guide is we're seeing a lot of encouraging signs of stabilization and inflection in key leading indicators. NRR, I just talked about, we talked about the tech business. Those two are not factored in the guide as continued improvement. We wanna continue to watch and monitor the progress there before we kinda factor that in the guide. We're taking a little bit of prudence and conservatism of how we factor in continued NRR improvement. It's been factored in modestly, and how we factor in the tech stabilization. It's still factored in as a slight decline versus stabilization and inflection.
Lastly, on AI Teammates, you know, we're super excited as Dan walked through in the opportunity of bringing that to our self-serve and our PLG base. It'll be fully GA by the end of Q2 across both motions. It's gonna take some time to ramp, but you'll see a very different trend in terms of how we exit Q4 because of that ramp versus the first half in Q3. Those are some of the dynamics in play in the guide in terms of guidance philosophy. You know, I share generally his philosophy. We've been partners and set in the guide since we both arrived here. Close to the pin, reflect what we're seeing, be prudent, it's a dynamic environment, that's how we approached it.
Excellent. Very helpful. Dan, wanna pull you into the conversation on product-led growth. We're just talking about the headwinds, but at the same time, you're looking to reimagine what product-led growth can be. What does that mean? What investments are you making to turn this into a growth driver?
Maybe I'll start with philosophy. As a product category, collaborative work management and others, the foundational layer for the agentic enterprise, that is a product category that will be served digitally, that we do think many customers will want to buy digitally, discover us digitally, and fully engage and consume, our platform digitally. We are by, you know, all accounts, not walking away from PLG. We, we like it. It really is fundamental for the discovery and consumption of a platform. That is true, and it is also true that we have new dynamics in how that discovery happens, that there is an increasing prevalence of AI search as an example of a way to discover us, that perhaps many of the experiences will remain within the prompt window of some of those foundational providers is how they want to consume Asana.
You see that with our new Claude app as an example. That Claude can fully consume the Work Graph for any Asana customers to actually help them, you know, stay within that kind of context. Lots of dynamics of change in that business. Intellectually, it's very exciting to kind of have that, you know, set of things that we need to kind of tweak and tune and optimize in a broad philosophy that we actually think is very good for us. But because of the tuning, as kind of Aziz intimated there, it gives us uncertainty on PLG, and we see lots of early signs on how that tuning is working mid-funnel and the experiential pieces. It actually pushes us a lot on what our UX experience needs to look like.
I'd say fundamentally committed to digital buying and discovery, it keeps us on our toes. Some of the changes that are happening in the environment on what the product experience needs to look like and the discovery experience needs to look like. You'll see us being, I'd say, very lively in our both our ambition and how we approach it.
Excellent. Wanna ask one on the net retention rates in those large, I think the top 10 enterprise renewals above 100%, I guess a couple questions there. One, what does the renewal pipeline look like? In the past, because of your visibility into the underlying engagement of the platform, sometimes you can have... it doesn't have to be a total surprise if you see downsizing from headcount reduction if you're already seeing that show in engagement. I guess the question is also what signs are you seeing in some of your big customers around headcount growth and engagement?
Yeah. You know, the beauty of growing CRPO and RPO is that we have more of our ARR base under multi-year contract. Less pressure in terms of the renewal activity that comes up each year. We also, in terms of the renewal base in FY26 and FY25, we had some very large customer renewals. We don't have that same dynamic in FY27. We have a more uniform size of renewals and no real outliers from a size perspective. That also de-risks. We've seen some pressure over the last couple of years in the tech vertical NRR. Tech vertical is now 25% of our ARR base. The concentration of tech has come down a lot.
We're now a multi-product company, so having AI Studio and in, you know, a month or so time, having AI Teammates to introduce in those renewal conversations to drive expansion, mitigate downgrade if the customer is inclined to reduce seats, is something, a lever that we haven't had in this fulsome way ever as a company. You know, AI Studio and AI Teammates are not dependent on seats. You can derive the value in absence of seats, in absence of headcounts. That's real powerful lever, and we're seeing that play out in renewal conversations. You're right, we have greater visibility into our renewals. We've, you know, hired about two years ago, an amazing chief customer officer. He's built a team, increased our CSM coverage.
We're getting visibility 12 months in advance of these renewals into the health of the account. Do we think they're at risk of downgrading? We're starting to put action plans, you know, about a year in advance about what we're gonna do to increase utilization, drive better adoption, introduce new workflows, how we can leverage AI Teammates. It gives us a lot more visibility into the health of the customer. Overall, we're seeing actually adoption and utilization increase year-over-year, which that's always been a leading indicator for NRR and for our GRR. That also gives us comfort as well in going into FY27.
Maybe shifting over to margins, so I'm wondering where the sources of leverage are from here. You know, in your opening remarks on the quarter, we've noted such a strong margin expansion recently. Maybe one way to ask the question is, I'm sure that Asana is a heavy user of Asana, and all the AI technology and innovation coming out. Do you have any examples of departments or categories of OpEx where Asana is really driving a lot of efficiency?
Yeah. We're the number one user of AI Studio and AI Teammates, and we use it cross-departmentally. I mean, Dan's, like, biggest push is AI internally. You know, our security department uses it extremely heavily to drive workflows there. We use it in finance, in R&D to manage the dev cycle and spread management. We're using it in our IT department with ticket deflection and kind of help desk like applications. It's definitely driven a level of productivity in our workforce that has allowed us to move faster and drive greater innovation and do more with our current resources. We have really more to do on the adoption side, but it's been a lever of us being more efficient and more productive for sure.
To, to your question, we're just scratching the surface, so we, you know, definitely haven't reached the endpoint of that productivity gain. The more we adopt these tools more fully, the more we embed them, not just as tools, but into our processes, you know, more deeply, then yes, we will continue to have productivity internal gains, that will translate into continued operating margin improvement.
Talked about sales-led growth performing well. Are there still areas that you're focusing on improving, investing in specifically with regard to selling all these new AI tools?
I'll say, you know, of course, it's early days, but our innovation pipeline in terms of delivering and manifesting us as the foundational layer for the agentic enterprise, is rich and ambitious, and, you know, too early to really put into any kind of guidance. In the second half of the year, you'll see even more manifestations of that. AI Teammates will be on a massive acceleration curve, as that product matures, so will AI Studio. You know, the next versions of those, you'll kind of see a lot of innovation and, you know, a bunch of new products that really we're very excited about in the second half that is, you know, too early to even flag what they are, what they're gonna do, but really about realizing our potential in the agentic enterprise.
Should we expect to see headwinds to gross margins as some of these AI tools are ramping early on?
Not material. I mean, if we start to see headwinds to gross margin, it means the gross profit dollars are growing in a way that is not factored in our guidance. We're willing to absorb that trade-off because if we're accelerating growth with Studio and teammates, it means we're getting more deeply embedded in workflows. That's the greatest NRR driver we could have. Based on how we've illustrated in our guide and that target we put out of 15% of our net ARR coming from AI products, we don't expect any gross margin degradation based on that.
Maybe just to round out the conversation on capital allocation, your free cash flow generation has come a long way that we can have this, you know, ask the question. What, what does it mean, like, your current cash profile and where it's going in the future? What does that mean for capital allocation, thinking about M&A and buybacks and?
Yeah. I mean, our capital allocation strategy and framework is dynamic. you know, we just announced increasing our buyback authorization by $160 million to about $200 million, you know, where our shares are trading and based on our view on positioning and growth in the agentic enterprise. We think that's an attractive form of deploying our capital, buying back our shares, and not only neutralizing dilution, but if things hang out at this level, reducing share count and re-returning capital. We'll always be opportunistic about M&A, more probably on the tuck-in variety to complement and augment our technology and talent. Then, you know, obviously investing in the business. You know, we talked about on the call allocating more of our capital or OpEx towards R&D to drive that innovation pipeline and fuel that agentic enterprise strategy.
That will continue to be part of the mix. It'll be dynamic and evolving. It's nice to have free cash flow and growing free cash flow at a really nice rate to allocate and drive even greater value for shareholders.
Excellent. Thank you for the conversation. Thanks, Dan. Thanks, Aziz.
Thank you, Josh.
Thank you. Appreciate it, Josh.