Good afternoon, everyone, and welcome to this next virtual fireside chat session at the 27th Annual Needham Growth Conference. I'm Ryan MacDonald, and I lead Needham's healthcare IT research efforts. In this session, I'm pleased to be joined by the team from Veeva. We've got CFO Brian Van Wagener, EVP of Strategy Paul Shawah, and VP of IR Gunnar Hansen. Gentlemen, thanks for joining me today.
Thanks, having us. Ryan, appreciate it.
Great. Well, for those who are listening in, thanks for joining us. We've got about 40 minutes for this fireside chat. We're going to go through a number of questions for the Veeva team, but if you do have questions for management, please put them in the chat box, and we'll make sure to get those asked and answered. Well, with that, why don't we get started? So, Paul, Brian, while I would be shocked if anyone listening here today were unfamiliar with Veeva, let's start with a brief overview of the business. And Brian, perhaps you can provide some perspective on what the first seven months back at Veeva has been like, and maybe give us a little bit of a comparison to when you were last at Veeva.
Yeah, thanks for the question. Thanks again for having us here, Ryan. So if you are just getting to know Veeva, our vision is to build the industry cloud for life sciences. That's a big vision. It means software, data, business consulting, all working together to make the life sciences industry more efficient and effective. And so we think about making both our individual customers better and the industry better. And we're supporting life sciences in how they develop, how they manufacture, how they commercialize, and bring those medicines to market. And so it's sort of unique, serving one industry and a really broad range of mission-critical systems and designing all those things to be interoperable. For us, that means we're a multi-product company. We've got five major product categories in both R&D and Commercial.
And then in each of those major product areas, we've got multiple products that are all in different stages of maturity and penetration. So in total, across Veeva, it's more than 50 products now. Some of those are market leaders today. Some are very new. So it's an interesting portfolio. We deliver all those products, or will be delivering all those products, on a platform called Vault that's built specifically for the needs of life sciences. Our 2025 goal that we set a little more than five years ago has been to be a $3 billion revenue run rate company this year. So we're on track to do that. And our 2030 goal that we announced at our Investor Day in November is to be a $6 billion revenue run rate company in 2030.
We're excited about the path ahead for the growth for Veeva, of course, but also to help the life sciences industry be more effective and efficient, and ultimately to deliver life-saving medicine to patients. I've been here back at Veeva, as you touched on, for about six months now. Really a treat for me to come back. I had led sales operations before and worked closely with our CEO, Peter, prior to that. I think the biggest thing that I see, Ryan, is just the quality and strength of the execution across such a broad business. It's really easy to say something like we're a multi-product company. It's super hard to do it. It requires a really disciplined operating model and a lot of years tinkering with that to make it work.
And so, to see the quality of execution across so many products, some of which we were launching as I was first starting at Veeva and are now getting into that kind of high growth phase, really fun to see and really happy to be back and working with the team.
Yeah, definitely multi-product success is easier said than done. That's for sure. Well, great. Well, Paul, you know, maybe to begin with, obviously, we probably wouldn't need to talk about the big news over the past month and the fact that you were made aware that a customer had decided not to migrate over to Vault CRM and instead choosing to develop a customized solution with Salesforce. Can you provide a little bit more context about the relationship with this customer, maybe why they chose to leave? Was it a formal RFP process? And just anything really that you've learned more about the situation in the past month or so?
Yeah, Ryan, so first, they never expected to win every customer. I mean, so it's not entirely surprising that that was the case with Veeva's CRM. Certainly going to be true with Vault CRM. Having said that, we do expect we're going to win the vast majority. This was more of an IT-driven process and decision. So there was a formal process that started many, many months ago, even before some of the innovations that we've announced in our latest CRM. But having said that, the relationship with the customer is still very strong. With this customer, I expect even continued growth, right? Continued growth. And as you know, we have a portfolio of products in commercial. We have a portfolio of products in R&D. I expect we'll continue to expand in both of those areas because we're delivering unique value.
The relationship is strong, and our focus is on making them wildly successful. Who knows what will happen with the CRM system? As you know, that's going to play out over many, many years. It's certainly our hope to win them back over time.
Yeah. And can you also understand about sort of how long, I guess, maybe what the timeline is of this process and how it plays out? Obviously, generally, how long is the customer contracted for? And is there any concerns that you're already kind of booking in previous growth with this customer that obviously might not be there anymore?
Yeah, so remember, they have a very long way to go, right, so Salesforce does not have a product today. They may have a product later this year. Of course, that's going to be very basic, so this will be something that plays out over multiple years as they try to build something out, so in terms of timeline, they're going to be a Veeva CRM customer throughout all of that time. Their field team needs to use something until they build something that they're able to move to if they even get to that point, right? We've seen a lot of these projects play out before. Some of these custom-built things are very hard to deliver on, but until then, they stay on Veeva CRM, and I think this could go for another four or five years.
Yeah, that makes sense. Okay. Now, Paul, I mean, I don't believe you've lost very many, if any, big customers in the 14 years you've been at Veeva. So I'm kind of curious, what have you and Peter been saying to the team following sort of this event? What, if any, changes are you making to the playbook to better sort of defend market share given this instance?
Yeah, I mean, we're always looking at new ways to improve, right? Whether that's our account coverage model and how we engage with our customers or our product strategy, that is a continuous process. Having said that, I wouldn't think of this single decision as a specific kind of driver for additional change, right? We have the right product strategy. We're very confident in where we're going. We have the most advanced CRM system out there, and it's getting better. So the product exists. We have live customers on it. We announced AI in CRM. That's going to be natively available in 2025. So we'll be the first to be able to do that. We have this foundation for customer centricity and what we're doing in Vault CRM with sales, marketing, medical service, all in a single vault. That's never been done. So we feel good about the strategy.
It's the right strategy. And our focus is to continue to execute well. And then where we find opportunities to improve, we'll take advantage of that.
Yeah, that makes sense. Obviously, outside of the single instance, the transition seems to have gone very well. You already announced four top 20 customers having already decided to migrate over to Vault CRM. What's really resonating in customer conversations? And are new products like Service Center and Campaign Manager giving you an advantage in the marketplace at the moment?
Yeah, so you're right. By and large, it's going very well. We had four top 20 customers commit. I expect we're going to have additional customers commit over time. Many of the customers that have committed have spoken publicly. So a lot of the comments are in things like, "It's the market-leading CRM that works." They want to spend their time innovating, not rebuilding the CRM, right? It's a hard problem. They know it's a hard problem to solve. Many have done two or three or four CRMs in their lifetime, and they want to focus on innovation. They have the best CRM there is today. So that certainly resonates. Two is business disruption. Either the fear of going backwards and doing something that's risky or the disruption of having to retrain lots of users on taking people out of the field. That's very, very expensive.
And then third, I would add, is just the innovation. So you mentioned some of our new products like Service Center and Campaign Manager are certainly exciting. But I would also call out AI and CRM, how we're connecting up our commercial content business to CRM now that they're both on the Vault platform. That's unique. Nobody else will be able to do that. So those are some of the things that are resonating. And of course, just being the industry partner, right? We've delivered a very long track record of delivering for the industry. So we're not the company that overhypes, but we're going to do what we say. And I think most of our customers appreciate that.
Yeah, makes sense. Now, Brian, you talked about in sort of the intro about the 2030 targets that Veeva recently set back in the fall. Just kind of curious, as you were building out those assumptions on those targets, what assumptions, if any, were you making for churn as a part of this transition when you thought about those targets? And I'm sure it's a bit ridiculous to ask this when we've got five years to hit those targets, but do you have any concern in this instance, I guess, of your ability to hit the 2030 targets you set?
Yeah, headline is no concerns and no change, more importantly, in the guidance that we released at 2030. So as Paul said, we went down this path knowing we were unlikely to win every customer, keep every customer. We expect to win the vast majority. That's baked into our assumptions for 2030, but not all. And this doesn't really change the trajectory that we see the business being on.
That's great. It's great to hear. All right. Well, then we're at the start of 2025 here. I would love to sort of take a step back and sort of level set expectations in terms of what you're seeing in the broader macro environment. Each year brings its own host of challenges for life sciences market, whether it was shrinking sales headcount during the pandemic, adjusting to the Inflation Reduction Act, challenging biotech funding environment. What I'm saying is that seems like changes are constant in this industry. And so as you look at the 2025, we have a new administration coming in. Is this sort of just par for the course that there's just another challenge? Or is this actually really impacting what your customers are thinking or how they're thinking about their budgets?
Just help me get a sense of what the environment's like there for the beginning of the year.
Yeah. I mean, you called out a number of things that are happening. It always feels like in the moment that there's more happening than any other point in time. I would say that it is somewhat busy. It's becoming business as usual, right? The macro environment has certainly become worse, and we've seen that over the last one to two years. It hasn't fundamentally changed. I think what is a little bit different, and we called this out maybe a quarter ago, is that customers are starting to settle into the new environment, right? They're adjusting to all of the change that's happened. And I think that's what we're expecting to play out or to continue to play out in 2025. There's still a lot of uncertainty and a lot of the things that you brought up, administration change and new policy and all of those sorts of things.
But the industry is uniquely good at navigating a lot of this change. Whether it's regulatory change or administration change or anything else, they generally navigate those kinds of things well. And they think with a longer-term perspective. So I would say we're not expecting a fundamental shift as we enter 2025.
Just given that we were at the big healthcare conference earlier this week, it seems like the year's kicked off with quite a bit of M&A. Can you just remind investors sort of how Veeva tends to play out, things play out for Veeva during sort of heavy M&A scenarios like we're seeing at least to start this year?
Yeah. So M&A can create some opportunities or some threats. Generally, it ends up being kind of a neutral impact, right? So what tends to happen is there may be some kind of consolidation in parts of our business where it may be, let's say, more per-user basis or where you may have two companies coming together, one small and one large, and the smaller company has a much higher price because of their volume, and then they end up getting a lower price because they become part of a larger entity that can create some price attrition. So those are some of the things that may create some headwinds. But then there's certainly some tailwinds, right? And that means that some companies may have Veeva in one area and not Veeva in another area.
And that creates an opportunity to consolidate onto the best technology, and we usually win those decisions. So it really depends. It's specific. And a lot of times, the reason for M&A is to enter New Markets. And therefore, we see less of that kind of synergy cost savings kind of mentality. It's typically more of a growth and pipeline and expansion approach.
Makes sense.
Yeah. And it's such an important part, Ryan, of the respiratory rhythm of the life sciences industry. So it's very healthy, right? That M&A is what sparks the next wave of investment, oftentimes in SMB. And so with more of a long-range multi-year view versus this year, next year, we keep an eye on those kinds of things to see is the industry still getting that level of investment and are our customers growing into new areas, as Paul said.
Makes sense. Maybe to shift to another area within commercial, Crossix has seemed to be one of the key contributors to the strong commercial performance over the past year. I'd love to know what you would attribute this to. Is it simply sort of the market growing stronger than expected? Pharma marketing, I think, started the year. The expectation was 5%-6%. And I think it's ended up around 11%-12% growth. Or is it something, would you say, like you're just gaining greater market share relative to the market?
Yeah. I mean, I would say it's probably two things, right? One is the market has, to some extent, improved compared to the previous year. So operating in a slightly better market. But I think the bigger piece is we're executing really well. And we've invested a lot over the last 18 months in the Crossix products, both on the measurement and optimization side and on the audience side. And that investment, that innovation's paying off. It's very clear in the market today that Crossix is the best way to do measurement. And it's very clear it's the best way to do kind of the audience targeting and segmentation. So whereas customers may have done something more custom historically, they're now looking to a standard product, the best product to do that. So we're the beneficiary of a lot of that investment we've made over the last couple of years.
And then as you think about, I think, the broader Commercial Cloud strategy, you've really invested on the data side over the past several years here. Crossix is a component of that. But then you also have the Compass data sets and the Data Cloud assets that you continue to launch into the market. But we're really driving towards sort of a vision state of a data-driven, more of a data-driven CRM. And what I get most excited about is this potential combination over time of Crossix and Campaign Manager and Compass sort of all integrated into one. Yeah, I know Campaign Manager is very early, but how differentiated do you think this combination can be? And how far do you think Veeva is from sort of this future state?
Yeah. I mean, this concept of a data-driven CRM is real. And what you're talking about is the industry cloud. That's the power of the industry cloud. It's software and data and even consulting, I would add that to it, right? Because a lot of this is about process change. If you can operate differently now in a way that's more data-driven, how should you be operating? What does that operating model look like? So consulting, I would say, is a key part of that. And we are very unique in our model that we deliver lots of software applications that all work together, data assets that fit into that software, and then all of the advisory operating model process change and consulting. So that's what you're referring to. And it's real. This is not five years out. This is happening today. You mentioned Crossix and CRM.
I'll give you one good example. In Crossix, we're able to look at patient activity out on things like websites, for example. We can find patients going to, let's say, a branded website, and we're able to surface that information. ["Hey, there's a patient going to this website. Here's their healthcare professional."] In the CRM system, here's the sales rep that calls on that healthcare professional. There's this pretty strong buying signal. How do you activate on that? What should that sales rep do based on that? That is very, very powerful. That's the power of the cloud, bringing all these pieces together. It's not science fiction. It's real. I think there's more to do. We have a lot more potential when you layer in things like Campaign Manager and the rest of Compass. Yeah, I'm excited.
We're delivering on this vision of being more data-driven, and we have all the pieces to bring together so our customers don't have to stitch this together by themselves. We know that that's hard to do, and we're going to make it a whole lot easier.
How much evangelization do you still need to do on sort of being able to sort of showcase those capabilities and that the customer actually understands that it's possible today, and one of the things that's been interesting recently is social media has obviously been a big channel for healthcare marketing spend, and Meta is making some changes that might make it harder to target on their platform, so does that create a catalyst for change and maybe to accelerate what you're talking about or adoption of what Veeva has to offer here?
Yeah. I mean, there's always more we could be doing or want to be doing around showcasing that innovation. What we like to do is to show real value, right? Deliver really pragmatic areas. You don't hear from Veeva a lot of hype about all the stuff that can be possible five years from now, and then we never deliver on it. You hear really practical use cases like this one that I just talked about. It's a very specific use case, but it's a very powerful use case. If a patient's going to a Brand.com website, there's a very important reason they're doing that. Most people don't navigate to a drug website if they don't have a good reason to do so. So we find these very practical areas, and then it's on us to make sure that our customers understand that.
We use forums like our Summit, which is a very powerful industry-wide event to showcase and help our customers understand and appreciate that value. So yeah, we look for better ways to do that, but we're kind of excited at that potential.
That's great. Now, I could probably conduct an entire fireside chat just on the commercial business alone, but we should definitely shift the conversation to R&D, particularly given the fact that R&D subscription revenues are going to be the primary driver of achieving these 2030 targets that you've set. Can you talk about which products really lead the charge on that march to $4 billion in R&D revenues in 2030 relative to the ones that's led you to achieving the 2025 targets that you're hitting today?
Yeah. That's a great question, Ryan. So if you look at the business today, it's roughly 50/50 between commercial R&D. As we look out to 2030, it's about two-thirds R&D and a third commercial. So it's almost twice the growth rate that we see in the R&D products over this next five years. Part of what we're excited about, as Paul was touching on earlier, is just recharging the growth engine for commercial long-term. But in the next five years, the main story is R&D. And it is a different set of products than what got you here, as you'd expect. We think about product adoption happening in three phases. We've got early adopters, which is when we're first launching a product. We're building it with customers. We're focused on getting them live and happy, building the product. And then we move to the second phase, which is reference selling.
That's when we get that first wave of early adopters out and evangelizing the product within the industry. It's a small industry. Folks hear it when we do that. Then the last phase is market leader. There's usually some late adopters and other folks we focus on growing with. Some of our first R&D products are now in that market leader phase. eTMF, CTMS, QualityDocs would be kind of headline as well as some of our regulatory suite, Submissions, Submissions Archive. The big products, I think, as you look out to 2030, are really driven in the clinical and quality space as well as safety. I think we talk a lot about EDC and clinical, but it's also continued growth in CTMS, even though they're the market leader. There's still a lot of market there.
RTSM is another product closely related to both ClinOps and EDC. It's one of our single largest product opportunities. So there's a lot of growth there. In quality, it's QMS and it's LIMS, which is a newer product. And then we're really excited about safety. We've been investing in that product for a number of years. It's a very deep product, as we've discovered, and the market moves a little bit slower on that. The benefit of slower-moving markets is they're very slow on the other side too. So we think we've got really good momentum on safety coming out of this year and over the years ahead. So those are probably the big areas in clinical, in particular EDC and RTSM, quality, and then safety.
That's really helpful, and maybe to talk about EDC, because it seems to be a continued driver of sort of near-term success in R&D for Veeva. Correct me if I'm wrong, but I think you've added two more top 20 customers in the past year to have eight total now. What continues to drive the success of that product offering? And is the rate of sort of adding two new top 20s per year, is that a good cadence to expect for investors?
So you're right. We did add two top 20s. We're at eight total. I expect we're going to continue to accelerate and become the market leader, run that path there. And your question's a good one. What's driving that? Why is that happening? You know that companies spend a lot of money on the clinical trials process. It's a very important process. Obviously, it's the core of delivering medicine, creating new medicines. And to the extent that you can make that more efficient, 1%, 5%, 10% more efficient, that creates really huge value. How can I run that clinical trial fast, clinical study faster, get it started faster, manage changes faster, analyze the data, bring all the data sets together, and get results that I can create a submission from, do that more efficiently?
That's why companies are moving to EDC specifically, but in general, more broadly, the clinical suite from Veeva, right? Because we're really connecting all those pieces together. EDC is kind of a core pillar of that, but it's not the only piece. So we have to have a better product, and we do. And that's proven in the marketplace. And that's what's driving some of the momentum that you're referring to.
And as you've mentioned, I think in the past, EDC can unlock opportunities for sort of adjacent new or adjacent products like ePRO and RTSM, which combined could be as large as the end market for EDC. Can you just provide a bit more color on how EDC success can drive that newer product adoption in these categories? And then when do you expect, or how difficult is it to sort of add on those products or sort of continue to kind of take the gain share for some of these newer products from sort of a core product today?
Yeah. So your premise of the question is accurate, right? The EDC, I would think of as the foundation of the data capture. But it's not required to do RTSM, as an example. You can use our RTSM and not use our EDC. But think of EDC as kind of the core of that data capture component of the trial. And the RTSM is something that ties into the data capture because they're all related, right? You got to get those supplies and medicines to the patient so you can actually run the trial and execute on the trial itself. And then that ties into capturing information about the patient directly. And that's our eCOA. So they all fit together and to the extent that you can have them in a unified suite where all of the pieces are talking to each other, it creates a lot of additional value.
So, where many of our customers, I would say EDC is a little bit further ahead in the market than where our eCOA and RTSM is, it creates the perfect foundation and then to start adding additional products onto that. And I would say it even reaches upstream into the operational side of the clinical trial management system and that full suite of products. So they all tie together. And I would say if you buy into our clinical trials management system and you buy into our EDC, it's very likely you're going to build out the rest of the suite over time using the rest of the Vault products.
Makes sense. Safety continues to be an interesting area of opportunity. And Brian, you just mentioned it's sort of a deep area, but maybe slower-moving than historically. And I know Peter has definitely talked about how complicated that segment with customers are resistant to change, essentially, in safety. Are you starting to see signs of this resistance to change softening at all? And if so, as you've had discussions with customers, what do you think the great unlock is to sort of drive a faster rate of change in the safety market?
Yeah. So it is somewhat of a conservative market where they want to get something in place, and they don't want to touch it or they don't want to change it. But the reality is requirements change. They have to move. They have to evolve it. And doing it with a modern cloud system like Safety, like Vault Safety, is a whole lot better. So at some point, it gets to the point where it's too painful to maintain the old thing, and it's much better to move at once to transform and become more efficient with Vault. I think we're at that. We're very close to that tipping point, right? We're starting to see that. We have three top 20s. We've executed very well. The industry was watching because these are hard projects to do, right?
It's a hard product to build, and it's an important process to get right, and now we're past that point, so you can kind of think of this as the EDC market playing out. We had two top 20 EDCs that we wanted. It took us a couple of years to kind of get those live and happy and referenceable and then talking up on a big stage, and we're starting to hit that point in safety, so I feel really good about where we are, and I would say the other thing we've done in safety is not only beyond just kind of advancing the core product, it's delivering and building out the suite, so SafetyDocs and Signal and Workbench; this is now very unique. It's that unique value proposition of having the suite of products all working together.
Yeah, we're more and more bullish on where safety is and its lifecycle.
Interesting. Brian, maybe for you, going back to sort of the long-term targets, you've obviously already talked about the top line and sort of some of the drivers there. But one of the components is at least 35% operating margins in 2030. The company's on pace to finish this fiscal year with 41% non-GAAP operating margins. Where is that additional or incremental five to six points of margin going to be invested over the next five years?
Yeah. The best way to think about that 35% is as a floor rather than guidance. So we give long-range revenue guidance through our 2030 targets. We give annual revenue guidance and annual margin guidance. So what we're not trying to say is we're on a mission to spend 5% or 6% and get down to 35%, right? It's a floor that we think of to ensure that we're thinking about both revenue and growth. And that's been a really core part of Veeva for a long time. So that 35% is unchanged since our last goals, our 2025 goal that we set in 2020. We've been consistently exceeding that. I think as you look out, there are some tailwinds to margins, right?
You asked about where might we invest, but there's some tailwinds as well as we wind down the Salesforce contract, as we get general operating leverage on the business, and as services shrinks as a percentage of revenue, which, again, is just a function of the size of the business and the renewal base growing. I think we will continue to make investments for growth. So we'll invest in new products. We've talked about the New Markets initiative. We'll look at that year by year. And then our data business, which is an area that we're committed to and excited about for growth, but it does take some investment to build out a data network. So those are the predominant places that we're making investments. But the 35% isn't meant to be a target that we're working towards around those, just a floor that we think of.
Yeah. It's a really helpful context. Okay. And then based on the conversation we've had here today, so far, there seems to be plenty of opportunity for growth across the commercial and R&D segments of your core markets over the next several years. So I'm kind of curious to know a bit more about this experiment of developing more horizontal enterprise software applications that you discussed during the Analyst Day in November. Can you provide a bit more insight into the strategic rationale here?
Yeah. I'll take that one. We've been talking about this for quite a while, right? And I think probably many folks here know that we're a PBC, and we think about balancing the interests and needs of a lot of stakeholders. And I think part of what that means is we think very long-term as a company and want to be a generational kind of company. We've got to earn that, but we've got to put the work into doing that if we're going to do it. And so you look out to 2030 and a $6 billion revenue run rate, wow, the annual growth on that starts to get pretty big. So we have to start thinking now about what that next horizon of growth is for the company.
We think there's a lot of growth left in life sciences out through 2030, beyond 2030, but you don't start a new business overnight, and so this is also about getting started on a new big frontier of growth to support what will be a much larger company after 2030. We're really excited about New Markets and around entering horizontal software. We've done a lot of innovation at Veeva to date, have a perspective that there's room for innovation in horizontal markets as well. We're still mostly in the first generation of cloud software. It would be very surprising in the history of computing if the first generation was the last generation, so we think there's room to innovate, and we're starting with, as many folks here probably know, with the platform that underpins that, so we've got a very small team, hard at work on that right now.
We'll be later on announcing which specific applications and markets, but we're focusing on the platform first and really excited about where this can go, but it's something quite new, and we're still very early in the journey on that.
Excellent. Just a reminder to the audience, we've got about seven minutes left. If you do have questions for management, make sure to put them in the chat. We'll make sure to get them asked and answered. And we do have one question. So it was around, and this is my error, it's 2025, and I didn't ask a Gen AI question yet. So thanks to the audience for that. They wanted to understand, Paul, how, if at all, are you intending to monetize Gen AI within the product suite? And Brian, is there any built-in or any potential for gross margin compression as generative AI technology grows in usage and potentially you've got to obviously pay for that? So just the two parts there.
Yeah. So I'll take the first one. So in terms of monetizing, maybe let me take a step back and kind of talk a little bit about our AI strategy. So our AI strategy is in some areas we're going to build AI features, which are part of an existing product. So you would get them as you license a core product. And CRM is a good example of that. We announced something called CRM Bot, and it's included in the CRM license. I'll explain a little bit more about that. In other cases, we'll actually have a separate product that we monetize separately, and that's our MLR Bot that is an add-on to PromoMats. So as you buy PromoMats, you can also license the new MLR thing.
Now, one of the differences there, one of what is unique in each of those areas, MLR Bot is a licensed product, but it's also our own large language model that we're building and training and running and operating on behalf of our customers. And it's kind of a standalone area. It's a really important area. Customers are spending a lot of money trying to figure that out today and not getting the value that they're anticipating. We think we can do that better. So that's an area that we are going to monetize, and that's why it's a separate product. In the area of CRM, it's a different strategy. The strategy there, many of our customers, they don't want a single model. They want to use their own model because this is where they create differentiation. They don't want to be like the rest of the industry.
Their secret sauce is the insights they generate, the actions they suggest, the recommendations they make to the field team. They want to build and own and create that. So our strategy is to enable that and to make it kind of natively embedded into the CRM system. And it's because it's their Large Language Model, we do not monetize that. So we'll be very specific. This is what allows us to be. We're not taking a blunt object approach of like, "You got to buy everything from us, and we're going to monetize everything," and that's our main revenue driver. It's not that way at all. We're being very thoughtful about the use case. So we're excited about our AI strategy, and that's evolved over time, and our customers are appreciating the direction that we're going there.
I think to, yeah, maybe pick up the second part of the question around margins. I think that nuanced kind of three-pronged approach that Paul talked about is really the headline in how we think about margins and why there's not really a risk to margins from Gen AI. You've seen a lot of companies just launch features and hope that that pays off in acquisition or retention. In general, we've aligned our strategy so that the places where we're incurring compute costs are the things that we're charging for is sort of the mental heuristic I'd use. So we see it as a revenue growth opportunity. We don't see it as a vehicle for margin compression, and we're excited and think this is the right strategy for the life sciences industry. They've got very specific needs.
You've seen things like Einstein in the past get launched and get basically no adoption because they weren't built for life sciences. So we're trying to start by really listening to our customers, how they want to use AI, what their real needs are, and then aligning the right strategy for the right use case.
Makes sense, and maybe just more broadly, Paul, I mean, are you seeing a real demand from customers for generative AI features in the product? I know we've started to see use cases for hospitals and health systems and in the insurance reimbursement process, but are pharma companies actually asking for this functionality?
Yeah, very much so. And not surprisingly, the two areas that were announced are some of the two areas or the two of the areas of highest demand. We have our ear to the market, right? We know what the industry is looking to do and what they need and how we think deeply about how we can help them. So the content side is one really important area in getting through that content review and approval process more efficiently. So no surprise that that's exactly where we announced our first product there. And then the second is in the CRM system. How do you make the field reps more productive? Can I give them essentially this virtual assistant that'll make them more productive, do basic tasks for them, but also answer questions for them as they prepare for a conversation with a customer?
So those are some of the top two. There are many other use cases. There's a lot of areas that we could go, but we're starting with some of the highest value.
Another one that's come in in the last couple of minutes here is around the Commercial Cloud sort of budgetary environment or decision-making environment. Given the importance of the CRM transition, is that distracting customers at all from looking at other innovations within Commercial Cloud as we think about Data Cloud or some of those other products? Or can you kind of roll all of that into the same sort of discussion sort of process?
Yeah. So I would think about it as CRM and the suite, so all of the add-ons around CRM. That's pretty stable. That's a decision where companies know they're going to make a transition. So they're generally not doing a whole lot of new things. In some cases, they do, but in general, they want to keep that very stable. Then I would characterize everything else within commercial and that are areas like Crossix and Compass and Link, and that's totally independent. It's not throttled. It's not based at all on the decision they're making in CRM or that transition. So we're seeing, and you've seen over the last year as a specific example, particular strength in Crossix. So it's very independent from the CRM decision.
Excellent. Maybe just a last touch point on M&A. Obviously, culture has been very important in terms of how Veeva has been built and continued to evolve. How are you thinking about M&A in this space, opportunities to expand into some adjacencies, whether it be on R&D or commercial? And actually, would you consider M&A on this new horizontal enterprise application as well? Thanks.
Yeah. We take a very disciplined approach to M&A. You've seen us do a few things in the past, but it's a pretty high bar. Culture matters. The price of the asset matters. It's got to really fit our strategy and where we're going. And so I think as we look in the life sciences space, I wouldn't anticipate major M&A there. Been surprised before, but I think what we've talked about is we'd predominantly be thinking about M&A for customer success rather than to drive revenue directly in life sciences. And so I think the predominant place we would look at larger M&A would be to support New Markets, but it's super early there still, right? We're still building a platform, still picking which markets we want to enter. And so we're going to take a disciplined approach there too. The bar remains really high.
It's got to be a high-quality asset, good culture fit for Veeva, right price, right market for us. So we'll start with the platform, think about the markets, and then think through whether M&A is the right vehicle to support that.
Awesome. All right. Well, with that, gentlemen, we're out of time. Paul, Brian, Gunnar, thank you so much for joining me today. Thanks to the audience for participating and for some great questions as well. But we'll leave it there and have a great rest of the conference, everyone.
Thanks, Ryan.