[Operator Instructions] Your first question comes from the line of Jason Celino with KeyBanc.

I think I heard you kind of explained why the Field Systems ARR was coming down a little bit. Maybe can you -- maybe just retouch on that a little? And then specifically, when we look at your ARR performance as a whole, excluding Field Systems, how do you think that performed in the quarter?

Jason, it's Rob. I'll start with this. We made the move from a position of strength within Field Systems. So it's a one-time decision, discrete decision to move from a white label provider to a proprietary version that comes online soon. That existing revenue is low-margin revenue. And with the new revenue, that's going to be higher-margin revenue. And importantly, that technology will natively integrate into our larger solution suite. And given that position of strength we have in Field Systems, and you see that in that revenue growth for the quarter. For us, this was actually a relatively straightforward decision to make to accelerate. You asked about ARR at the overall company level and at the segments. I feel really good about that. AECO, up 14%. ARR performing at $1.577 billion. So that 14% to get to that is an impressive amount of net new ARR. And within the Transportation & Logistics business, we were on point there with the 7% growth in the ARR. So I'd say all according to plan and from that position of strength, made that decision in Field Systems.

All right. And then when we look at like the AECO segment specifically, I guess what are you hearing from the different segments as it relates to macro and tailwinds and headwinds? And maybe just go a little deeper there.

Sure, Jason. At the macro level, I continue to like what we see. End market strength won't surprise you, data centers, energy, reshoring, onshoring of manufacturing are all particularly strong. Infrastructure strength overall, which we see play through in Field Systems even more so. So broad-based strength at the macro level. North America, I'd say, leading the way, obviously, in terms of the size and the continued strength. We also had a good quarter out of the Asia Pacific region.

Your next question comes from the line of Jerry Revich with Wells Fargo.

Nice quarter. Rob, I wanted to ask you. Can you just expand on the prepared remarks you made on Transportation & Logistics and what that might look like? Are you thinking about the whole segment, just a piece of it? And can you just give us a rough sense of expectations for valuation if you're able and willing to share what the initial conversations have been so far?

Jerry, thanks for the question. So let me say the interest started inbound. That interest was recent. We take our fiduciary obligation seriously, and thus, we communicated that we will undertake the review. I also want to emphatically say that we remain fully focused on executing our strategy within the Trimble platform. This is a great business. It's got a bright future. And so I'm not surprised that we got the calls. To close the loop, there is no predetermined outcome. There's no predetermined time line. And the solve that we'll have in this work is through the lens of shareholder value. And that's the fiduciary obligation.

Okay. I appreciate that. And then can we shift gears in Heavy Civil and Geospatial. You had a nice pickup in demand. Can you talk about the supply side of the equation. So we're seeing an acceleration in machine deliveries and tightness on the used market in particular. I'm wondering to what extent can your supply base ramp up given the demand picture into the back half of the year and beyond?

Jerry, I want to first shout out to our team, both in Civil and Geospatial. They've just done a terrific job with this business over the last few years, that outperformance in the quarter is on a pretty long string now of outperformance in the business. And it's more than the macros. The macros are certainly healthy, particularly in the infrastructure side and data centers, energy. So we see that playing through the market, and it's pretty global in nature. At an execution level within the business to control what we can control, the team continues to innovate. We're expanding the network of the mixed fleet that we're able to support and we're expanding our points of distribution into the market. We're expanding the ecosystem development. So that translates into third-party extensibility built on top of our Earthworks platform within the Civil business. In Geospatial, new product launches are driving business, and we're going to see even more as we move into the second half of the year and particularly as you -- we come into the conference season with INTERGEO in September and Trimble Dimensions in November.

Your next question comes from the line of Rob Wertheimer with Melius Research.

Rob, I had a question on just how you're thinking about capital allocation broadly. Obviously, it's incredibly dynamic. You're seeing, I guess, a lot of opportunities from AI. The market sees some threats and so some assets are cheaper. So just in general, do you find it to be a more fruitful kind of search if you're looking at acquisitions? And then do you feel any different strategic need to assemble any other assets in the portfolio than you did a year or 2 ago.

Rob, great question. Broadly speaking, on the capital allocation front, we see it the same as ever. We focus first on investing back into the business organically. Phil put forward the model we have on buyback. And then, of course, we have been an acquisitive company over time. If you look at the acquisition front, one of the dynamics we see at play at the moment in an AI-forward world is there's more opportunity for us to create our own features and capabilities. So in the past, where we might have looked for some tuck-in capabilities, we think we can do more of those ourselves today. So that actually would be one different commentary I have on the acquisition front. To the extent that we can build new sets of competencies or the new, let's say, markets to enter, we remain open to that. So we'll be active. I'd say we're always active on the M&A front scanning the landscape. We actually have a venture arm in Trimble. So we pay attention, and we're actively engaged. I would not say that the valuation environment has come down in the private market in any sort of fundamental way. And so we certainly weigh that against the buyback opportunity that Phil highlighted with the $1 billion reauthorization.

Your next question comes from the line of Josh Tilton with Wolfe Research.

Two quick ones for me. First one, maybe to follow up on Celino's question. And again, I apologize if I missed this, and I also didn't run the math. So again, I apologize if it was clear that way. But had we not encountered this ARR divestiture in Field Systems, would we be reiterating the ARR guide for the full year at the midpoint? Or would we be raising the ARR guide for the full year at the midpoint?

Josh, it's Phil. Let me take that one. So yes, the Field Systems impact for this very discrete item is about 400 to 500 basis points over the next few quarters for Field Systems specifically. It's about, call it, a little under 100 basis points at the company level. So aside for those issues, we would be reiterating the range that we have.

Super helpful. And then maybe just a quick follow-up. I appreciate the incremental color on acknowledging the potential sale in transportation. I have to imagine that the inbounds that you're getting is because these buyers, I don't want to say, see this as the bottom, right? But they must see a better environment in the future hence wanting to buy the asset now and ride that positivity up as opposed to missing out on that opportunity. Can you maybe just dive one level deeper on like what are they seeing that we should be seeing or paying attention to that maybe gives them hope that there is a better environment in your transportation market over the next, call it, 12 to 24 months than we saw over the last 12 months?

Jason, great question. This is Rob. I'll take it. This is a great business. So this business has great potential. We believe in the opportunity. With the inbound, we have a fiduciary obligation, and we take our fiduciary obligation seriously. And we compare that to our own plan to execute our own strategy within the Trimble platform. And that's why I say we remain fully focused on executing the strategy because I go back to this being a great business with great potential. The solve is actually pretty easy in the end is what do we see as the highest shareholder value creation. And so we look at the stakeholders between our customers, our employees and our shareholders, and we make the decision accordingly. And by the way, if there's a decision to make because there is no predetermined outcome and there's no predetermined time line.

Your next question comes from the line of Quinn Fredrickson with Baird.

First question just on AECO. Could you unpack the difference between organic revenue growth and ARR growth in the segment this quarter? It was just a little wider than I would have thought. I'm not sure if that's all the conversion uplift going away or if there's any other factors.

Quinn, it's Phil. Thanks for the question. So in AECO, we have some term licenses and multiyear term and also some ProServe as well. The revenue is recognized upfront with those items generally. And so the timing of those in any given quarter could be up or down and create a delta between the revenue and ARR. If you actually go and look in our past and particularly in Q2, we've seen this dynamic before. So it's nothing new. And this is why we focus on the ARR metric. And the 14% growth has been consistent in that range and in line with what our expectations are this year. And there's no change to our outlook or guide for AECO with that.

That's helpful. Second question, we're a few months into the Claude partnership. Is there any data you could share on new SketchUp user licenses and how that's trending relative to what you had hoped for at this point in time?

Quinn, this is Rob. Good question. It is early to have any definitive conclusions. But there are 4 things that I can say based on over 25,000 unique users that we've seen in Claude using the connector. The first is around learning. We're learning how to build skills to make the connector even better. The second is that we're following the telemetry to generate the marketing motions to drive adoption to turn a user into a customer. The third, what we're confirming is what we expected is that this is not going to replace the current workflows, professional call it, grade work that's done, the deterministic analysis that could be daylight modeling, structural analysis, energy modeling that's still happening within SketchUp itself. And the fourth, as we said originally and as we still know today is that importantly, our IP is protected. And we're building these same capabilities into the SketchUp user interface itself, and that's been launched in what we call our Trimble Labs program. So it's out there with some early users. So I would say in line with the expectations we had, Quinn. So thanks for asking.

Your next question comes from the line of Tami Zakaria with JPMorgan.

Very nice quarter. I wanted to follow up on Slide 8 of your presentation where you show how Trimble delivers value to data centers. Can you help us understand what is the duration of a typical data center project where you can stay involved? And is there a revenue curve that follows that has a phase when Trimble's value contribution peaks? Or is it pretty consistent from breaking the ground to handing over the project?

Tami, it's Rob. I'll take your question, and it's an interesting one. So if you think about a project life cycle, it often starts with capital program management, the owner of making a decision to invest in the capital into the data center itself. And we can service that need through Trimble Technology with an O and AECO, and we do that today. So that happens before there's ever even any surveyors out in the field. And guess what, after you've decided to make the capital investment, you send the surveyors out at some point after that to actually create the digital model of the physical earth to have that topographic map, but the as is conditions. Once you have that work, you now need to send that digital model into a set of engineering and construction workflows because you need to do site preparation, which is an opportunity for our civil construction business to move the dirt and move it right the first time. As you lay that foundation, the concrete pad, Trimble is involved in that, not only in the design, but in the layout and the verification of that as you move from the pad into the, let's call it, the building itself and into the interiors through the structural shell, through the mechanical electrical rough and through the full fit-out. We're involved in that from design solutions to estimating solutions to project coordination to field layout as well. And then at the end, with the commissioning and the handover and then the whole quality control loop, we end up there as well. So from that concept to completion, Trimble is relevant, involved and engaged in a data center. To answer the other part of your question about the, let's say, the duration and how that flows in over time, I would say that it can cover that full life cycle of a project. So it doesn't all hit immediately at once. There does tend to be some months of, you'd say, lag between when that's -- it could be months or quarters, by the way, from when the project is commissioned and approved all the way through when the various trades are taking on our technology. It's hard to see it in the numbers today because our customers have a very healthy amount -- or most of our customers have a very healthy amount of backlog, obviously, those who are serving data centers have healthy backlog. And so we see it in the business that we're already doing with them today. So great question. Thank you.

Understood. And my second question, I think I heard you say you are going to reach the EBITDA target of 30% a year early. So what's next? Is it time to maybe renew the 2027 target and extend to maybe 2029, '30? How are you thinking about it?

Tami, I expect that we'll do an Investor Day next year. I mean that would be the right amount of timing, and it's not -- we're not going to -- not ready to talk about 2027 guides. But what I would say to address the comment you made is that I would emphatically say I am proud of this team for delivering the EBITDA target, which could potentially be a year ahead of what we put forward. That's a big deal. That's a big deal for us, and I hope our shareholders see that as a big deal as well that this business is performing and performing [Technical Difficulty] expectations. And it is extremely reasonable to assume that we will continue to drive operating leverage going forward and expand upon that as we move the business into 2027 and beyond. So it's a great place to be and gives us optimistic about the ongoing upside potential.

Your next question comes from the line of Nay Soe Naing with Berenberg.

My first one is on -- I appreciate the fact that your AI strategy today is primarily focusing on customer adoption today. But I would love to get an update on how you're thinking about your monetization strategies going forward. I asked that because last week, one of your peers mentioned that they're looking to monetize AI features starting from next year and another peer recently came out with AI-specific supporting packages as well. So any directional update that we could have on your monetization strategy would be very helpful.

Thanks for the question. This is Rob. I'll take it. And it was a little hard to hear you, but I think you're asking about the AI monetization. And I'll start by saying it's definitely a learning journey. And I can tell you that we're monetizing today. We're monetizing on a stand-alone basis, and we're monetizing through hybrid license and consumption models. It just takes time to show up when you're a scaled company like Trimble. The near-term priority we have is to drive adoption, to drive workflow engagement across our expanded surface area and then to leverage telemetry to measure the real-world value that we're creating for our customers. And as that usage continues to scale, we're going to learn. Like we're going to adapt our pricing. We'll adapt our packaging, and we expect to see that through a combination of tiered subscription bundles that looks like the good, better, best offerings that we've talked about before. We definitely expect to see hybrid models with license and consumption-based -- those consumption-based usage models on a go-forward basis. Like we have in the Transporeon business today, it's already a transaction-based model that we have. So we're building capabilities and those capabilities give us optionality. I like where we are on this journey right now.

Your next question comes from the line of Chad Dillard with Bernstein.

Just wanted to revisit that product change in Field Systems. So first of all, what was the product? And then if I look at the run rate, it seems like it's a $75 million headwind. So just trying to figure out like what the denominator is, like what's the total size? And then if you could unpack that 400 to 500 basis points impact over the next couple of quarters, what's churn? What else is it?

Chad, thanks for the question. This is Rob. I'll start and then Phil will give you the quantitative, which is different than what you put forward. I mean at the qualitative level, within the civil business, we have a lot of different technologies. Here, we're talking about essentially field data processing. And that is a service -- that's the specific service that we're bringing in-house with proprietary technology. And again, doing this from a position of strength with the momentum we have in the business, we always had a plan, and we've been developing this ourselves as we decided to bring it forward. Phil, why don't you take the quant?

Yes. Thanks, Chad. Yes. So when I talked about the 400 to 500, that's specific to the Field Systems ARR. So the ARR Field systems last year was about $400 million. So the 400 to 500 basis points affects the growth rate. So that implies, call it, $16 million to $20 million on the ARR this year, and then you can extrapolate that obviously to the impact on the company.

Got it. And then I was hoping you can give some color in terms of your revenue that comes from usage-based consumption. And then just maybe more broadly, like how are your KPIs for managing the business changing as you lean more into AI and more usage-based consumption?

Great question, Chad. So when you ask about revenue from usage-based models, let me give you an example within the Transporeon business. We're talking over $150 million of transaction-based revenue that we have in that business today. That is a usage-based model. So when I talk about having the DNA and building on the DNA that we have, it's not just a future thing because we have it -- we already have that today. When we have the SketchUp in the fourth quarter of last year, launched a hybrid model with the license and then AI-based usage on top of that. That is -- again, that's -- it's in the market. It's not a futures thing that comes. So it's important for me, hopefully, to be able to communicate well here that the usage-based revenue is something that we already know how to do. As we take this more broadly, let's say, with AI, let's call it, AI pure consumption-based, we also are building the underlying engines to be able to do the -- all the billing mechanisms and to be able to do that on a global level. That is a lot of work to put that forward. When we think about the KPIs and how they're changing in the business, some of the KPIs -- actually, a lot of the KPIs are the same as they ever were. The KPIs such as net retention. We pay a lot of attention to the net retention. We see our gross retention holding where it was. We're not losing customers. So that -- and then so the net retention, the bridge from gross to net gets into the cross-sell, the upsell, the pricing and beyond. That's exactly where it has been. When we get into the, I'll say, specifically on the AI capabilities and features that we're adding, we're paying a lot of attention to the adoption, which is to say, how are they being used, the telemetry helps us with that. So getting that indication that the discovery is happening, that the usage is happening and not just that it's used once, you track the daily or the weekly active usage. That's a measure of engagement. And that -- those would be the -- let's call those the predictive indicators for where we go forward as it starts to get, I'd say, revenue of a size and ARR of a size that we can report on.

Your next question comes from the line of Kristen Owen with Oppenheimer.

Just wanted to follow up on the back half guidance. You've got a couple of moving pieces here between the tariff refunds here in Q2 and then the ARR transition in Field Systems. So I just wanted to understand, did anything change in the back half assumptions for the year? Just help bridge that gap for us, please.

Kristen, it's Phil. So the tariff refund, that's more of a Q2 issue, not an issue. It was a bit of a -- it was a headwind on the revenue for Field Systems. That's really more discrete to Q2 and the bulk of our refunds coming in, in Q2. So we really don't expect a material impact on that going forward. So effectively, think about that as behind us. As I think about the back half of the year, so no change to how we're thinking about the back half of the year when we started the year. And actually, in fact, the raise in the guide, the $50 million on the revenue and the $0.10 on the EPS would actually imply that we are raising the back half of the guide relative to the flow-through from Q2. So we see a lot of strong momentum in the business and as we enter the second half of the year.

That's super helpful. And then if I could ask you, you showed some really interesting data points on AECO growth. And the one that stood out to me is the 1 million incremental projects that you're seeing in Trimble Connect. Can you maybe help us understand like what's filling the top of the funnel there? What's the sales motion? You talked about some of the MCP early indicators, but just help us understand what's driving that incremental growth in Trimble Connect.

Kristen, thanks for the question. It's Rob, and I'm glad you asked because it is a great statistic for us. The users that we have that come in to Connect and those -- and the projects that come in -- come through our modeling solutions that come in through project management solutions. They come in the field from our machine control users, our surveyors, folks doing reality capture out in the field. So the users create projects. Those projects are initiated and managed in Trimble Connect. That is indicative of the network effects that we see in the business. It's just -- it's really compelling to see the adoption of this common and connected data environment and to see it globally. I mean this is not even -- it's not a regional topic. It's a global topic. And then the projects get added, that drives those API calls, the 30 billion API calls. There's an intensity of that usage and the collaboration and the coordination that happens amongst stakeholders leveraging the Connect -- Trimble Connect environment. So -- and by the way, that is both serving AECO and Field Systems. That was why I wanted to set up as an overall engineering and construction commentary early in the prepared remarks. So really great things happening for us. It's something that is, we believe, very uniquely Trimble, that ability to link the work in the office in the field, the hardware and the software of Trimble, thereby connecting the physical and the digital world.

Your next question comes from the line of Nicholas Igneri with Barclays.

So product revenue grew faster than subscription and services for the second straight quarter, which is sort of a reversal from the software-led narrative investors have become accustomed to. Can you just help us understand what specifically drove the stronger product performance? And should we view this as a temporary trend or something more structural?

Nicholas, it's Phil. Let me take this one. Yes. So this is really driven by the performance in our Field Systems. Our AECO business is, aside from the ProServe, virtually all software. The Field Systems is the one that has more of the product revenue of it. And just with the strong performance of that business, the mix of that has changed where the product revenue is a little bit more and continue to see the momentum in that business and team has done a really good job.

Okay. Great. And then just Document Crunch has now been part of the portfolio for a few months. And I think Slide 15 noted strong performance in the quarter. I was just hoping you can further unpack that performance there and maybe just tell us what you guys have learned so far about customer demand.

Thanks for the question. This is Rob. I appreciate you asking about Document Crunch. This is a great team, great energy, great engagement I see between the teams. So just come in and just in a really perfect way. Our sellers have a lot of interest. I mean it's such a natural fit within the Trimble Construction One, bundled set of solutions, the commercial framework that we have. So we've got a lot of seller interest. We've got a lot of customer interest. On the product front, the Document Crunch team came out with their next-generation solution that is being very well received in the market and by customers. It's just -- it's really -- and when you put -- when we think about this area of contract management and the risk intelligence around those contracts and really get your head around the data of just how litigious the industry can be and what the cost of those claims can be when they arise, the value proposition for having this AI-based risk management approach is a really incredible value proposition and then tie that into the proprietary set of data, we have a Trimble through from project management into the financials, into that awareness of what's happening in the field, and it just really brings things together very nicely. The other thing we love about this team coming into the Trimble family is that we're putting more capital into this business in the form of people. This is an AI-native team. We're leveraging this team and the DNA they have to develop new features and capabilities that we may have in the past gone out and looked to acquire into some new categories where we think we can do it ourselves, leveraging this team. And that is one of the things we always look out for in acquisitions like this. So thanks for the opportunity to put color around that.

Your next question comes from the line of Clarke Jeffries with Piper Sandler.

I just wanted to clarify around the Timing or how the behavior of the replacing of the white label products, the internal solution will develop? Will that be on renewal? Or is there just kind of a cutover point at some point in time during the second half? Just wondering if there are -- if the impacts are completely contained to second half or if it's even some into '27 on renewal?

Clarke, this is Phil. Yes. So think about it in terms of effectively exiting a product. So it's winding down this year through this year, which is why it has a bigger impact on the second half of this year. We're building the new product. We should have that released soon. And then there's going to be a ramp-up as we start to sell that product. So that's why there's a bit of a lagging effect between the time right now where there's the wind down and then we build up into 2027 with the replacement product.

Perfect. And then just a question on the comment around it being higher-margin revenue. Does that -- is that going to be manifested in the gross margin line? Is that where most of the margin benefit comes from? And then just -- and maybe getting ahead of ourselves, if there's an Analyst Day plan in the future, but certainly, one of the biggest parts of the margin story over the past few years has been the gross margin accretion, the growing recurring revenue in the base. T&L had been one of the biggest sources of gross margin improvement. When you think about what the portfolio is and Field Systems and AECO gross margin trajectories, do you feel -- still feel strongly about the gross margin story looking beyond 2026? And anything we should consider when thinking about the margin drivers just in the '27 with the early achievement on the EBITDA line?

Yes. Clarke, so I don't think we're ready to guide on specifically on 2027, but let me talk a little more generally on the questions. So for the specific product, the answer is, yes, I would expect that when we launch that product as it builds up that, that would be accretive to gross margin. Now again, sizing that on the -- a very large-scale business is -- it will have a positive impact, but it may not be materially picked up in the gross margin as we think about the size of the Field Systems business. And then as I think about more broadly speaking, on the gross margin, our software is certainly growing faster generally. Obviously, the Field Systems products, as we talked about earlier, has been doing really well and has a lot of momentum to it. But as I think about the Investor Day targets and over the longer term, software is growing faster. That naturally has higher gross margin. So if nothing else, with just the mix change with the software growing faster than hardware over the long term, I would expect a continued expansion in the gross margin at the company level.

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.