Thank you for standing by, and welcome to Asana's Second Quarter and Fiscal Year 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 11 again. I would now like to hand the call over to Eva Leung, head of investor relations. Please go ahead.

Good afternoon, and thank you for joining us on today's conference call to discuss the financial results for Asana, Inc.'s second quarter fiscal year 2026. With me on today's call are Dustin Moskovitz, Asana's cofounder and chair of the board, Dan Rogers, our CEO, Anne Raimondi, our chief operating officer and head of business, and Sonalee Parekh, our chief financial officer. Today's call will include forward-looking statements including statements regarding the expected release and benefits of our product offerings, including AI Studio, our expectations for revenue to be generated by AI Studio, our retention and expansion opportunity, our expectation for our financial outlook, including our revised full-year guidance, strategic plans, our market position, and growth opportunities, and our capital allocation strategy, including our stock repurchase program. Forward-looking statements include risks, uncertainties, and assumptions that may cause our actual results to be materially different from those expressed or implied by the forward-looking statement. Please refer to our filings with the SEC including our most recent annual report on Form 10-K and quarterly report on Form 10-Q for additional information on risks, uncertainties, and assumptions that may cause actual results to differ materially from those set forth in such statements. In addition, during today's call, we will discuss non-GAAP financial measures. These non-GAAP financial measures are in addition to and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP. Reconciliation between GAAP and non-GAAP financial measures and a discussion of the limitations of using non-GAAP measures versus the closest GAAP equivalent on our investor relation web page are available in our earnings release, which is posted at investor.asana.com. And with that, I'd like to turn the call over to Dustin.

Thanks, everyone. I'll kick things off before transitioning to Dan. When Justin and I started Asana, our vision was simple but ambitious. To fundamentally improve how humans work together. We set out to transform collaboration from a source of friction into a source of focus so that teams everywhere could achieve more of what really matters. That's why our mission has always been to help humanity thrive by enabling the world's teams to work together effortlessly. Over time, that vision evolved into the work graph. A foundation that doesn't just reduce work about work, but gives teams clarity on goals, alignment, and impact. That clarity is what enables organizations to move from reactive busy work to proactive value creation. Today, we're at a major inflection point. AI is transforming collaborative work management and Asana is uniquely positioned to lead. Unlike most AI platforms that start from a blank canvas, Asana begins with the work graph. A rich structured model of how work gets done. This context lets AI embed directly into workflows like a teammate. With enterprise-grade security and access controls, delivering outputs that are predictable, trustworthy, and immediately useful. And because it's layered into the workflows teams already use, adoption is seamless, and time to value is faster. That's the opportunity in front of us. From the beginning, our vision was about human-to-human collaboration. Helping every teammate work together more effectively to drive greater productivity. Today, that opportunity has evolved into something even more powerful. A future where humans and AI teammates work side by side to unlock new levels of focus, clarity, and impact. Opportunity like this calls for both vision and operational excellence. Which is why I'm so confident in Dan's leadership. He scaled companies at critical inflection points, pairing innovation with discipline, and reaccelerating growth while expanding margins. And in just his first month as CEO, already leaning in to sharpen our execution. Mapping our differentiated AI approach to mission-critical workflows, our target departments like IT, marketing, and more, while also deepening our focus on non-tech industries like retail, regulated industries. As for me, I'll remain engaged as chair of the board. Working with Dan to enhance our product vision and strengthen our AI differentiation. And with that, let me hand it over to Dan to share his perspective on the quarter. His early impressions, and how he sees us capitalizing on the opportunities ahead. Dan, over to you.

Thank you, Dustin, and welcome, everyone. I'm excited to be speaking with you today for the first time as CEO of Asana. Before we dive into my initial observations and highlights from the quarter, I want to acknowledge Dustin's vision and leadership in building Asana into the company it is today. I also want to thank all Asanas for their support during the transition and the warm welcome I've received. It's truly an honor to lead an extraordinary team with such a strong mission and unmatched product foundations in collaborative work management. Let's turn to the highlights from the quarter before I discuss my observations. Q2 was a solid quarter for Asana, with broad-based performance above expectations across our business. Total revenues were up 10% year over year, exceeding the top end of our guidance with strong contributions from all customer cohorts and geographies. Both North America and international growth accelerated, with international continuing to outpace the US. We also saw encouraging vertical trends. Some of our fastest-growing verticals this quarter included manufacturing and energy, financial services, and retail and consumer goods. Non-tech customers continue to grow in the mid-teens, while tech was stable. Rolling full quarter NRR went to 96% from 95% last quarter. Overall customer growth remained healthy with the number of $100,000 plus customers growing 19% year over year. We continue to see strong momentum in AI Studio. We've more than doubled our AI Studio ARR quarter over quarter. And adoption continues to strengthen as customers build and scale on the platform. Our continued focus on profitable growth and efficient scaling is driving meaningful margin expansion. Non-GAAP operating margin expanded almost 1,600 basis points year over year to 7%, above our guidance range. In my first couple of months, I've spent much of my time meeting with…

Thank you, Dan. I love the new perspectives you bring to Asana and how excited the team is with the direction you are starting to lay out. In Q2, our enterprise motion continued to scale. The number of customer net adds from the $100,000 plus cohorts grew 19% year over year, while our core customers spending $5,000 or more grew 9% year over year. International markets remain a strength for our business driven by growing global demand for our platform, especially in EMEA and Japan. Our international revenue grew 13% year over year, and the US market grew 8% year over year. Japan is one of our fastest-growing markets with customers such as Sumitomo Mitsui Trust Bank, demonstrating the power and relevance of our platform in financial services. They grew their Asana footprint by nearly 70% this quarter and added a foundational service plan. Asana has been implemented in six business divisions, including a full rollout in the asset administration business, and has seen strong adoption in their investor and corporate business units. We continue to increase our presence in non-tech, with those sectors once again growing in the mid-teens. Wasserman, a leading global sports, music, and entertainment company, standardized on Asana this quarter in a multiyear agreement that includes AI Studio and a foundational service plan. Building on the success of their marketing and creative teams who use Asana to produce one-of-a-kind campaigns and experiences across the world, they are migrating key departments like the experience and global communications team, plus recently acquired assets, onto Asana to provide better visibility into project timelines and resource allocation. Wasserman will use AI Studio to automate their creative production workflows. The strategic investments we've made along with the reallocation of resources towards higher leverage areas are driving incremental impact. In Q2, customer…

Thank you, Anne. Dan, I have really enjoyed partnering with you, and I share your conviction that the themes you've outlined have strong potential to drive revenue growth acceleration. With that, let me turn to our results. Q2 revenues came in at $196.9 million, up 10% year over year, which exceeded the high end of our guidance by 1%. Excluding the impact of currency, our Q2 revenue was up 9.4% year over year, still exceeding the high end of our guide. We have just over 25,000 core customers, or customers spending $5,000 or more on an annualized basis. Revenues from core customers grew 12% year over year. This cohort represented 76% of our revenues in Q2. We have 770 customers spending $100,000 or more on an annualized basis, and this customer cohort grew at 19% year over year. As a reminder, we define these customer cohorts based on annualized GAAP revenues in a given quarter. Our overall dollar-based net retention rate was 96%. Core customer NRR was 96%, and among customers spending $100,000 or more, NRR was 95%. Both were stable from last quarter. As a reminder, our NRR is a trailing four-quarter average, and therefore a lagging indicator of more recent trends. Our in-quarter NRRs improved for the overall and core customer cohorts, while the $100,000 plus cohorts declined mainly due to the large renewal we mentioned last quarter. We saw a slight improvement in gross retention across all cohorts, quarter over quarter. Q2 in-quarter NRR increased mostly driven by improvements in downgrade and expansion metrics, thanks to our multiproduct strategy and seat reach. While I am encouraged by the progress we made this quarter on NRR, it's too early to call Q2 an inflection point, given potential downgrade pressure that could cause NRR to revert back to Q1…

Thank you. As a reminder, to ask a question, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 11 again. You will be limited to one question and one follow-up to allow everyone the opportunity to participate. Please stand by while we compile the Q&A roster. Our first question comes from the line of Brent Bracelin of Piper Sandler. Please go ahead, Brent.

Good afternoon. Thanks for taking the question here. Dan, you have a diverse background, senior leadership roles here at several marquee growth companies, Rubrik, ServiceNow, Salesforce, AWS, Microsoft. Why Asana? Why now? And has there been any surprises since you joined the firm here in July?

Yeah. Thanks, Brent. Nice to meet you. So, yeah, first of all, why Asana? Well, if you look from afar, it's very obvious that AI is gonna transform the modern enterprise. And there's gonna be a great productivity unlock. Many enterprises haven't realized that unlock today. It's my bet that that unlock is gonna come from human-AI collaboration. And that Asana is gonna be super well placed to deliver upon that. Yeah. You mentioned my background. I just see this as a great fit for me. It's about, you know, if I think about ServiceNow, that was very much around how do we extend workflows into every nook and cranny of the enterprise. I think about Rubrik, that was very much around how do you inflect revenue and create a massive top-line acceleration. Think about AWS. That was very much around the self-service experience. Kinda having that beginner's mindset and really confronting the problems as they come. So hoping to apply many of that to, you know, the challenge ahead. You know, in some ways, the collaborative work management category is coming into its own right now. This could be the inflection point of the agentic enterprise. So you asked about surprises as well. Look. I'm about forty days in. There's a lot of things I don't know at this point, but what I have been doing is spending time with our customers. I've really been externally focused and trying to figure out how we're giving them success today and what are they looking for in the next part of our journey. And, again, what is really clear is that we are in mission-critical workflows today, helping across industries whether that's retail, manufacturing, media, professional services. So we're already deeply embedded, and my hope and joy is gonna come from how do you take that embeddedness in the workflows and actually deliver magical experiences with agentic experiences unlocked by AI Studio. So appreciate the question, and looking forward to working with you. Thank you. Our next question comes from the line of Alex Zukin of Wolfe Research. Your line is open, Alex.

Maybe just a two-parter quickly. You mentioned a meaningful expansion of function of the service with the AI Foundation Model company. You maybe just dive into how you've seen that use case expand, kind of maybe conceptually size it for us, and how repeatable is that within the other AI companies?

Along just maybe on the demand environment itself. Pretty soon, the normal environment is given some of the changes and the public health activity, persistent mean, it's pretty much through that. This is Eva. We lost the second half of your question. I think you have a problem with your cell.

No problem. Can you guys hear me now?

Yes.

Yeah. Sorry. Just comment on the second part of the question was just the demand environment. You mentioned the top of funnel headwinds that you saw, presumably in the SMB. And then you mentioned on the maybe just the enterprise deals, the pace, how they're progressing, and then kinda how you're seeing that for the rest of the year?

Alex, it's Anne. Thanks for your question. So on the first part of your question, you were really focused on, like, how repeatable are the AI Studio use cases. And I would say what we are seeing is the more that customers are deploying AI Studio across, especially cross-functional use cases, they're discovering other opportunities to create more workflows. So we definitely see that as an expansion opportunity within accounts. The other things we're doing, though, for customers that might need a bit more guidance upfront is the Smart Workflows gallery that we mentioned. So having prepackaged AI Studio workflows where they can get going really quickly that also inspires more usage. Your second question was on the demand environment. So we're definitely still seeing about the same demand environment dynamics we described last quarter. Increased buyer scrutiny and elongation in decisions related to broader consolidation and software stack transformation efforts. However, it's not worsened. And then we are seeing good activity in new business in both enterprise and SMB. However, you called out specifically top of funnel, and we are observing a shift there. We are seeing pressures based on the transition to more LLM-driven changes in search behavior. Things there that we've been working on, though, specifically over the last few quarters, is really investing in driving higher quality traffic. So while top of funnel traffic is down, conversion rates are up. Reflecting that we've got a higher intent audience.

Thank you. Next question comes from the line of Steve Enders of Citi.

Hi, great. Thanks for taking the questions here. Guess I just wanna ask in terms of those pressures or headwinds that you're seeing on the SEO side and it sounds like maybe some downfall pressure is maybe being accounted for as well in the Outlook. But just maybe how are you accounting for that versus kind of what you're seeing today? Is there any way maybe to, I guess, quantify between those impacts, you know, what's actually being accounted for in the numbers here?

Hi, Steve. It's Anne. I'll start, and then I'll let Sonalee cover some of the part of your question around guidance and how we've factored it in. But just following on what I was sharing to Alex's question, areas that we've been really focused on as AI overviews have impacted organic traffic is investing in measurable improvements by building more modern self-AI driven experiences designed to get users to value quickly. Second, we're also evolving our content strategy and tech to maintain visibility and authority in AI and LLM customer research and discovery. And then the third is we're implementing smarter engagement and personalization that adapts based on buyer behavior so that we can drive improvements in both acquisition and expansion. So we very much see that the environment is still changing, and we've got plans in place to offset the adverse effects through Q4. We think this approach that we're taking really sets us up to continue to innovate and adapt as buyer discovery and decision-making is increasingly AI-driven.

Hi, Steve. It's Sonalee. Just wanted to come over the top here because you asked about the impact on numbers. What I tried to make clear in the prepared remarks is that our Q3 and full-year revised outlook does include the potential impact of that SMB and LLM disruption continuing. So while our SMB business did grow double digits in Q2, as Anne called out, AI search has disrupted some of the low intent traffic industry-wide. And Anne and her team have been really proactive in terms of mitigating this impact, but we've built continued risk into the second half guide. The other thing I would just add is that we do feel a bit better about macro than last quarter. But that improvement has been partially offset by some of these headwinds that we're seeing in AI search. And then you also asked, I believe, about net retention and what we're seeing there. And I think what I would call out is that Q2 definitely benefited from stronger than expected expansion and downgrade activity. And continued improvement in logo churn was something we saw last quarter as well. And the other thing I would call out there is that in our second half, we typically do see a larger proportion of renewals.

Okay. Perfect. Thanks for taking the question.

Our next question comes from the line of Matt Bullock of Bank of America. Please go ahead, Matt.

Great. Thanks for taking the question. I wanted to ask about the visibility into those larger renewal deals approaching in the second half in the tech vertical. Maybe just talk about how those conversations are progressing, what you're seeing in terms of utilization in those larger accounts, and how we should think about AI Studio as a potential lever to prevent down-sell.

Thanks.

Hi, Matt. Thanks for that question. So in tech, in particular, and the larger renewals that Sonalee mentioned, I think what we're seeing is greater we brought on a new global head of renewals and we're just improving our operating discipline around renewal hygiene, utilization, interventions, further ahead before the renewal comes up. And so all of that has been paying out. And then in terms of tech specifically, we saw stability in the tech vertical. However, that still is a headwind to our overall growth because non-tech is growing faster than tech. We're definitely seeing improvements in logo churn and expansion overall. And, specifically, what's been helping on that front is healthy AI Studio and foundational service plan adoption. And so that is mitigating that somewhat. And then the adoption of foundational service plans going forward is making our accounts healthier. It's just, you know, faster adoption, healthier growth. They're really investing in the medium to long term to grow utilization in those accounts. So we're very pleased by the results on the foundational service plans.

Super helpful. And then just one quick follow-up if I could. Obviously, encouraging to see the NRR inflect positively in tech stable. Is there a way you can help us frame how NRR would have looked like in the tech vertical x that $100,000,000 TCV renewal deal?

Yeah. Sure. Happy to do that. So you're absolutely right. So the NRR did improve both in our trailing four-quarter and in-quarter. If you were to remove that one large downgrade, the NRR would have been about 50 basis points better than what we reported. The other thing I would just add, if you were to look at our non-tech NRR, it would be closer to the level where it would not adversely impact our growth.

Thank you. Our next question comes from RBC. Please go ahead, Rishi.

Oh, wonderful. Thanks so much for taking my questions. Maybe just two here, and I really appreciate all the detail that you've provided. Dan, as you talk about maybe the potential for collaborative AI, which is super important because it really feels like enterprises are maybe, you know, not really cracked the code on coordinating some of these efficiency gains that we talk about. Can you maybe help us understand, you know, are there ways for you to not only, you know, benefit from that, but even start to productize that pre you know, you've had success with templates in the past. Maybe have, you know, AI-focused templates or playbooks to help, you know, your customers actually realize some of the benefits of coordinated collaborative AI. And then and not to keep beating too much of a drum on the whole, you AI search summaries and the impacts there. But you've talked about you've seen better pipeline conversion. What do you think about investments that you can make that not only you surface better in these AI searches, and, obviously, there's higher intent and better conversion on that. But maybe even, you know, Asana through some level of thought leadership, starts to be viewed as more of you know, actual resource or citation, which maybe drives even higher conversion than what you've seen so far. Thank you so much.

Yeah. Appreciate the question. And, yeah, and many of your observations as well. Yeah. Like you said, the great productivity unlock from AI is ahead of us. In the enterprise within the four walls of an enterprise. We have all, of course, experienced the personal productivity gains from the foundational models. But that unlock is really gonna happen when AI has the context in which to operate, and that context includes really the who, the what, the why, the how, or as we describe in our work graph, it's really the tasks and the relationships between goals, projects, tasks, dependencies, owners, and timelines. And a lot of the real-time execution context too, which is about status progress, blockers, and ownership. So that you can really go end to end on those workflows. And we do think that is the unlock. Yeah. I spent a lot of time in the field, and I'd say we're just scratching the surface today on what those workflows are going to look like. And, you know, one little nudge that we have in the future is this thing called AI teammates and those are really gonna be rooted in this work graph. And that AI teammate is actually able to reason alongside humans and understand all that rich context and decide what the next step is. And follow through on the execution. So that's when we'll see a lot of this real productivity unlock manifesting. You talked about our thought leadership as well, you know, as being a potential source of traffic and, you know, people really leaning into what I might describe as the agentic enterprise. Yeah. Of course, those are some of the things that we think about. And as our roadmap delivers on that future, we really do hope to be a thought leader.

Very helpful. Thank you so much.

Thank you. Our next question comes from the line of Lucky Schreiner of D. A. Davidson. Please go ahead, Lucky.

Great. Thanks for taking my questions, and nice to hear about that AI Studio traction. I wanted to ask are partners starting to show more contribution as AI Studio use cases develop, or is Asana taking on more of that work with the foundational service plans moving forward? And maybe a follow-up to that is do partners plan a role in either those consolidation deals you guys mentioned from Jira and Smartsheet? Thanks.

Hi, Lucky. Happy to answer that. Partners are a critical part of our strategy and growth. And in particular, we certified more partners on AI Studio this past quarter, and it exceeded targets that we had set. Partners really see it as an opportunity to build their business by helping customers build and deploy AI Studio use cases. We do also recognize we're still underpenetrated with channel and partners. It's a key growth driver for us because partner-managed accounts actually have higher net retention rates. So continue to focus and invest in this area. So we're looking forward to seeing more growth come from partners. Right now, we have a lot of strong momentum, in particular, in EMEA and Japan. And partners are critical in many of our consolidation deals.

Our next question comes from the line of Patrick Walravens of Citizens Bank. Your line is open, Patrick.

Oh, great. This is Kincaid on for Pat. Congratulations on the great quarter here, guys. I was just curious on the AI Studio's perspective side. How are you guys really beyond just the ARR significantly? What's gonna be a good measure of success of is this improving workflow since the companies? And then as a follow-up to that, if we look out over the next twelve months, what are you guys looking forward to see? You know, this was super successful. Is there there's three things you could call out there?

Hey, Kincaid. This is Anne. I'm happy to answer that question. Some of the things that we are so maybe just taking a step back. Some of the things that we're really watching on AI Studio is, you know, first and foremost, we continue just to expand to it. Starting in June, we made AI Studio available to all of our paid Asana customers by introducing AI Studio Basic, which provides a trial allotment of credits. This really lets customers experience the power of AI firsthand and it creates a natural path to paid adoption of AI Studio either through our plus or pro tiers. So now that we've expanded access, it's we're really looking at credit consumption, what types of value-added use cases customers are deploying. That's also part of why we're really investing in the AI workflows gallery. What we're seeing is the more use case value-added use cases customers are adopting, the more that credit consumption is happening and therefore, it leads to a sort of a path to growth to paid plans, whether that's plus or pro. So that's the focus area right now is wider access and then driving adoption and driving valuable use case adoption.

Thanks. And it's Sonalee here. Just to come over the top again. You know, as I think about AI Studio really and its impact on our forward growth, the things that I'll be watching are really our AI Studio self-serve pipeline development and conversion from that. Secondly, conversion of our basic tier. So that's the free tier that we've now included in most Asana packages. To paid. Thirdly, the level of AI Studio mitigating downgrade risk, and this is something that we've already seen. So you've heard us talk about being multiproduct causing NRR to improve and really looking for those stickier customers. As they attach and buy more than one product for us. So whilst it's too early to provide our guidance on account of AI Studio, we do expect to see AI Studio continue to ramp in terms of our ARR. And it will have a much more meaningful contribution as we think about fiscal year 2027 and drivers to accelerate our growth.

Thank you. Our next question comes from the line of Jackson Ader of KeyBanc Capital Markets. Please go ahead, Jackson.

Great. Thanks for taking our questions, guys. The first one is on the maybe just focusing on tech renewals. So outside of the very large customer, how have tech renewals performed relative to your expectations here in '25 versus maybe calendar year 2024? And then I have a quick follow-up.

Hi, Jackson. I'll take that first one. Tech renewals have been actually performing better compared to a year ago. I think some of that is as I mentioned, just greater operational scrutiny on our renewals, better management of them ahead of time on utilization, and sort of healthy utilization. But I think the other thing is, you know, we're seeing customers be a lot more intentional about their tech investments, and so that's been quite helpful as customers are going through consolidation. They see that the Asana users and departments are actually quite happy. And so that's also driving some of the renewals, which is we're seeing that as long as replacing maybe other technologies and platforms that don't have that same level of utilization or team engagement. So overall, I would say renewals this year for tech are healthier and better than renewals last year.

Okay. Alright. Great. And then a quick follow-up. Sonalee, on the timing of hiring getting pushed out of the second quarter and in the second is that just is that just a regular life happening where you know, you just you wanted to hire more, but you know, it slipped into the second half, or was that, like, a conscious decision that you made? Thanks.

Yeah. It wasn't a deliberate conscious decision. It really was timing, which is why I wanted to call it out because it's not like we've decided not to hire those people. Those will come into the second half and, you know, again, fully reflected in the guide that we provided today.

Thank you. Our next question comes from the line of Josh Baer of Morgan Stanley. Please go ahead, Josh.

Thank you for the question. I was hoping you could talk a little bit more about the go-to-market for AI Studio. I know you're referencing self-serve and some other successful examples, but was hoping you could talk about how much of it is back to the base type of expansion within existing customers? Is it helping to land new customers? And then, for existing customers, if you could talk a little bit about kind of the conversations and the motion, how much of it is inbound demand from customers, versus, like, focused outreach? Any context there would be great. Thanks.

Josh, thanks for the question. I'm happy to answer that. There we have two motions with go-to-market. As Sonalee mentioned, one that we've been investing in is, you know, the Asana motion of self-serve. So making AI Studio available self-serve to a lot of our SMB and smaller corporate accounts has been a great way for customers to be able to try it, get value, and then when they need help, they can raise their hand. And work with an account team. With our larger accounts, we've really first intentionally gone out to some of our, you know, our what we call our builders. So, customers that already have adopted rules are deploying workflows, and now AI Studio can really accelerate their workflow development because it's just faster, more efficient, and more powerful. And so that was the early go-to-market approach. We have actually seen some really good successes with brand new customers adopting AI Studio from the get-go. There's been a number of examples in both our EMEA and Japan markets where customers are coming in and wanting an AI-driven workflow solution from the start. But the original go-to-market motion was really selling into the installed base. So now that we've gotten cycles on both, I think those are the things that we're in. So self-serve, and then the expansion opportunity there. Going to the installed base and giving them even more value. And then being able to position new use cases for net new customers.

Thank you. Our next question comes from the line of Brent Thill of Jefferies.

Brent, your line is open.

Hey. Thank you. This is John again for Brent Hill. Two questions. One, maybe for Dan. I mean, as you were doing your due diligence before you joined, and your customer conversations after you joined, I mean, what kinda stood out about Asana's collaborative software technology and its approach to AI? That you think is differentiated? And then I have a follow-up with Sonalee. Thank you.

Yeah. So on that first question, you know, as I described a bit earlier, we kinda all know AI is going to infiltrate the enterprise. It is going to be a productivity unlock. So the question for myself was, so what's the gap? Why hasn't it happened today? Why have so many of these Gen AI projects failed if we know that the inevitability of the agentic enterprise is just around the corner? And the answer is the guardrails upon which AI works. And those guardrails are super important. If AI doesn't understand the context, then it just can't add the value that enterprise needs. It's almost taken for granted that modern workflows need to have that context to be, you know, to actually complete themselves. So what is that context? What context really matters? Well, you need to understand the who, which is who are the owners, what are the dependencies, you need to understand the what. Which is the tasks, the projects that they're working on, the goals. You need to understand the when. Which is the timelines that things need to be delivered on, and you need all of that to be real-time and updated as the work travels through an organization. So if you think of workflows, it's clear to me that the modernization of workflows are AI-enabled workflows, that are about human-AI collaboration. And what better place for that to happen than on a collaboration platform that already has AI Studio. So that was my mindset, and I would say, as I visit customers and partners in my first forty days, that really has been reiterated in spades. That the great productivity unlock from AI is just ahead of us. Great. Thank you. That's very helpful.

And then my follow-up would be thinking of prepared remarks, I think, Sonalee, maybe you mentioned you alluded to some more downgrade pressure potentially in the second half. Where would those be most prevalent that you're looking at in terms of maybe customer size? Is it with the largest? And is that mainly the tech vertical or elsewhere as well? Thank you.

Yeah. Thanks. So this is partly seasonal with Asana. So the second half typically does have a larger renewal base. The ones that I called out in the prepared remarks were tech downgrades, but they are nothing like the scale of the one that we called out last quarter. So they would be significantly smaller than that. It's just that there's a larger volume of them in the second half than first.

Thank you. Our next question comes from the line of Taylor McGinnis of UBS. Please go ahead, Taylor.

Yeah. Hi. Thanks so much, Chad, for taking my question. Maybe just one for me. I'd love it if you guys could talk about the demand trends that you're seeing across enterprise and SMB so far at the start of March. And the reason I ask is because it looks like, you know, if SMB and I know you guys announced this partnership with Mastercard. It seems like that, you know, could be a tailwind that potentially offsets potentially some of what you're seeing on the SEO side. You have AI Studio, right, that, you know, could help on the retention side and some of these enterprise deals. So could you just kind of walk us through, you know, the puts and takes and how some of these self-help initiatives have the potential to translate, you know, to good growth in the second half. Thank you.

Hi, Taylor. It's Anne. Thanks for your question. We in the demand environment, we're pretty much seeing the same dynamics that we saw last quarter. As we mentioned earlier, we are continuing to see strong activity in new business, both in enterprise and SMB, but given the pressures on top of funnel, I think we're being soft about what that's gonna turn into for SMB through the latter half of the year. We're gonna continue to ensure that we are going out to market with the multiple products that we have. I think that's one of the things that'll help in both SMB and enterprise. So that's the real focus area for us for the second half of the year. Great. Thank you so much.

Thank you. I would now like to turn the conference back to Eva Leung for closing remarks. Madam?

Thank you, everyone, for joining the call. We'll be on the road attending the Citibank, Piper Sandler, and the Wolfe Conference this and next week. Looking forward to seeing all of you. As always, if you have any questions, please reach out to me at ir@asana.com. Thank you so much.

This concludes today's conference call. Thank you for participating. You may now disconnect.