Asana, Inc. (ASAN) Earnings

Management highlights

### Overall Financial Performance - Q1 FY27 revenue hit $205.1 million, up 9.5% year-over-year, exceeding the upper end of prior guidance. Non-GAAP operating margin reached 11.5%, expanding 720 basis points year-over-year, driven by operating efficiency gains. - In-quarter net retention rate (NRR) improved to 97% for the fourth consecutive quarter, with broad-based improvements across gross retention and expansion. Trailing four-quarter NRR improved across all customer cohorts. ### AI Product Strategy and Adoption - Asana's core strategic focus is becoming the operating system for human-agent teams, addressing four common barriers to enterprise AI adoption: lack of agent discoverability/workflow visibility, no multiplayer framework for team-agent collaboration, lack of contextual onboarding for agents, and ungoverned agent access/data risk. - One year after AI Studio GA release, adoption continues to accelerate: customers adopting AI Studio have materially higher NRR and retention than the broader customer base, driven primarily by seat expansion rather than just lower churn. AI teammates (in-context collaborative agents working alongside human teams) are still early, but paid beta conversion is strong, and tasks with AI teammates are completed nearly 9x faster. ### Acquisition of Stack AI - Asana announced the acquisition of privately held Stack AI, a no-code AI workflow platform that enables custom AI agent and automation orchestration across third-party enterprise systems (CRMs, ERPs, databases, custom tools). The acquisition accelerates Asana's AI roadmap by over 1 year, extending AI Studio capabilities to complex cross-functional cross-system workflows. - Total upfront consideration is $75 million in cash plus an equity-based earn-out, adding ~50 new engineering and go-to-market AI-focused employees. The transaction leaves Asana with over $350 million in remaining cash and equivalents, and does not change existing share repurchase plans. ### Operational Efficiency and Profitability - Disciplined spending and AI-driven internal automation have driven margin expansion: Asana deploys its own AI tools to automate internal workflows, for example delivering 10-15x greater security review coverage without corresponding headcount increases. The company is also aligning talent footprint to more cost-effective regions to support sustained margin expansion. - Self-service product-led growth (PLG) remains a 2 percentage point near-term headwind to ARR growth, but early signals are improving: organizational trial starts rose sequentially for the first time in over 5 quarters, with improved trial conversion and stronger product qualified lead performance.

Guidance

- **Q2 FY27 Guidance**: Revenue expected between $213 million and $215 million, representing 8.2% to 9.2% year-over-year growth. Stack AI is expected to add ~50 basis points to growth, with immaterial currency impact. Non-GAAP operating income is expected between $18 million and $20 million, for an operating margin of 8.5% to 9.3%. Non-GAAP diluted net income per share is expected between $0.08 and $0.09. - **Full Year FY27 Guidance**: Revenue expected between $855.5 million and $863.5 million, representing 8.2% to 9.2% year-over-year growth. The full-year guide incorporates Q1 outperformance and includes a 50 basis point contribution from Stack AI, with a ~20 basis point constant currency tailwind. Non-GAAP operating margin is expected to be at least 9.75%, with non-GAAP diluted net income per share of $0.37. Q4 FY27 exit operating margin is expected to be above the full-year guidance. - **Core Guidance Assumptions**: All core assumptions from last quarter's FY27 outlook are maintained: PLG remains a 2 percentage point ARR growth drag; only modest NRR improvement is assumed for the full year; the return to positive tech vertical growth over the past two quarters is not yet incorporated into guidance; full-year AI product bookings are still expected to represent ~15% of net new ARR. Management will provide a full updated AI contribution outlook on the Q2 call, after evaluating a full quarter of AI Teammates market performance and completing initial Stack AI go-to-market integration. - **Stack AI Margin Impact**: The acquisition is expected to create a ~1 percentage point drag on operating margins in Q2 and the second half of FY27, which is fully incorporated into the current guidance.

Segment performance

Asana does not break out formal product segment financials in this call, but does report core customer and AI product performance: 1) Core customers (customers spending $5,000+ annualized): 26,103 total, with 10% year-over-year revenue growth, representing 76% of total Q1 revenue. 2) $100,000+ annualized spend customers: 817 total, growing 12% year-over-year. 3) AI products: AI product bookings represented 17% of net new ARR in Q1, ahead of the full-year 15% target. The number of customers spending over $100,000 annually on AI Studio alone nearly doubled quarter-over-quarter. 4) Regional: International revenue grew 12% year-over-year, outpacing overall company growth, led by strong performance in EMEA and APAC. 5) Vertical: Technology vertical returned to positive year-over-year growth for the first time in 8 quarters. Non-tech sector growth continues to outpace overall company growth.

Risks & headwinds

- Forward-looking statements (including product launch expectations, revenue growth, retention improvements, and AI adoption benefits) are inherently subject to risks and uncertainties that could cause actual results to differ materially from projections, with additional details available in Asana's SEC filings. - Product-led growth (PLG) remains a confirmed near-term headwind to ARR growth, as shifts in customer software discovery driven by AI search and large language models continue to evolve. - Continued layoff and headcount contraction activity in the technology vertical creates ongoing headwind risk for seat growth and retention in that segment, though this pressure is already incorporated into current guidance, and AI product adoption has helped mitigate downgrade risk. - AI product adoption is still in early stages, and sustained long-term growth and retention contributions from new AI offerings have not yet been fully proven. - The increasingly crowded AI agent and collaborative work management market creates competitive risk, as large established players (Microsoft, ServiceNow, Workday, among others) also pursue the human-agent collaboration market.

Analyst Q&A

• Q: What made acquiring Stack AI the right move now, and how have go-to-market adjustments changed to target non-tech vertical growth? /

  A: Customer demand was the primary driver: after AI Studio launched, customers immediately wanted to extend automations across third-party enterprise systems that Asana did not yet support natively. Stack AI already had mature cross-system orchestration capabilities and proven enterprise traction, particularly in regulated industries, so acquiring it delivered this capability to customers a year faster than building it in-house. For vertical go-to-market, over the past 9 months Asana has focused on multi-product expansion to open new buying centers, improved proactive customer health management to drive adoption and seat expansion, and aligned sales messaging to vertical and department-specific use cases to better serve ideal customer profiles across non-tech sectors.

• Q: What drove the return to positive growth in the tech vertical, and why is this improvement not yet included in guidance? /

  A: After two years of contraction, tech vertical growth resumed driven primarily by AI product adoption: tech customers were early adopters of AI Studio and AI Teammates, driving expansion through add-on AI product purchases and associated seat expansion. Retention trends in the vertical are also improving. Management remains cautious and has not added this improvement to guidance, as they want to see additional sustained positive inflection before updating core assumptions. Growth has now been positive for two consecutive quarters, after stabilizing to flat growth last quarter.

• Q: How does Asana differentiate its human-agent operating system from large competitors like Microsoft and ServiceNow in a crowded market? /

  A: Asana has unique built-in advantages from its 18-year history building collaborative work management. First, Asana's existing work graph (a unified living ledger of all people, tasks, goals and dependencies across an organization) provides the shared context that agents need to operate effectively. Second, Asana solved the hard architectural problem of true multiplayer collaboration, allowing multiple human team members to consistently train and coach agents together. Third, Asana offers native shared memory for agents and enterprise-grade governance (identity, permissions, audit trails, cost constraints) that matches existing frameworks for human teams, addressing key enterprise concerns about ungoverned agents.

• Q: What key milestones need to be achieved to return to 100%+ NRR and reaccelerate growth to above 10%? /

  A: The four core levers to hit this milestone are: 1) continue expanding the multi-product AI platform to drive add-on adoption and expansion across existing customers, 2) maintain focus on proactive customer health to drive higher product utilization and value realization, 3) continue improving sales productivity to deliver higher revenue per sales representative, and 4) increase internal operating velocity to deliver product innovations faster to customers. Management confirms that returning to 100%+ NRR is a key strategic milestone that is within the company's scope.