Veeva Systems Captures a Larger Share of Its Niche

A Member of Pat McKeough’s Inner Circle recently asked for his advice on Veeva Systems, a life sciences company that specializes in cloud computing software.

Pat likes the strong subscription revenue growth, impressive cash generation, and debt-free balance sheet. The company’s commitment to innovation, evidenced by its substantial R&D investments, ensures it remains at the technological forefront. However, Pat notes the firm currently trades at a premium multiple that may not be sustainable in the long term.

Veeva Systems Inc. (Symbol VEEV on New York; www.veeva.com), is a leading provider of cloud solutions for the global life sciences industry. The company’s offerings span cloud software, data, and business consulting and are designed to meet the unique needs of its customers—from research and development through commercialization.

Veeva’s products are aimed at helping life sciences companies develop and bring products to market faster and more efficiently, market and sell more effectively, and maintain compliance with government regulations.

The San Francisco-based company has more than 1,477 customers, ranging from large pharmaceutical firms to biotech startups.

Veeva operates in a number of areas. In the commercial category, several improvements have been made to the Veeva Commercial Cloud product, including advanced marketing and patient management applications. In the development area, Veeva’s Development Cloud offering continues to benefit from the addition of large customers in a number of critical R&D categories (clinical, quality, and regulatory). In data management, Veeva Data Cloud is a data platform comprised of connected reference data, deep data, and transaction data.

Between 2020 and 2024 (fiscal years end January 31), the company’s revenue rose steadily. It increased by 114.1%, from $1.10 billion in 2019 to $2.36 billion in fiscal 2024. In fiscal 2025, revenue rose a further 16.2%, to $2.75 billion.

Earnings rose 127.7%, from $347.4 million in fiscal 2020 ($2.19 a share) to $791.0 million ($4.84) in fiscal 2024. In fiscal 2025, earnings jumped a further 37.9%, to $ billion ($4.84 a share).

In the three months ended January 31, 2025, Veeva Systems Inc.’s overall revenue rose 14.3% to $720.9 million from $630.6 million. Recurring subscription services accounted for $608.6 million and grew 16.7% from $521.5 million—while comprising 84% of total revenue.

Excluding one-time items, Veeva made $267.9 million, or $1.74 a share, in the latest quarter, That was up 27.2% from $226.3 million, or $1.38.

Veeva Systems: Deep R&D investments create sustainable competitive advantages

To stay ahead of the competition with new innovations, the company spends a very high 25% of sales on research. That makes the company much more profitable than it appears.

Standard accounting practice treats research spending as a regular expense, like rent or the electric bill. But successful research—the kind that leads directly to profit-boosting products or service improvements—is more like an investment with tax-deferral benefits. The company writes off the outlays in the current year and is only liable for taxes on the benefits as they appear in future years.

With a high cash balance of $5.2 billion, the company has a strong balance sheet. Veeva has no long-term debt.

The company’s outlook is positive. It currently offers over 30 software and data products specifically suited to the life sciences industry. Its comprehensive solutions help both large and small companies move through the R&D process and bring products to commercialization faster.

Veeva continues to add new customers. At the same time, switching platforms would likely be very disruptive for its existing clients. What’s more, there are few competitors providing similar software and technology. And it’s a much-needed technology—a great deal of information in its target markets is still stored and communicated across different platforms (e-mail, web portals, paper, etc.), which is quite inefficient when compared to Veeva’s advanced internet-based software.

The company’s outlook is positive, but the shares trade at a high 31.1 times its forecast 2025 earnings of $7.30 per share. That adds risk.

Recommendation in Pat’s Inner Circle: Veeva Systems Inc. is okay to hold.

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Scott Clayton

Scott is an associate editor at TSI Network. He is the lead reporter and analyst for Dividend Advisor, Power Growth Investor and Canadian Wealth Advisor and a member of the Investment Planning Committee. Scott began his investment and financial career working with Pat McKeough at The Investment Reporter in the 1980s. Subsequently, he worked at the Financial Post Corporation Service for 10 years. He joined TSI Network in 1998. He is a Bachelor of Economics graduate of York University, and he also has an M.B.A. from the Schulich School of Business.

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