Coveo Solutions Inc
GenAI demo reveals Coveo’s progress and highlights Coveo’s differentiation
TSX: CVO | CAD 11.56 | Outperform | Price Target CAD 13.00
Sentiment: Neutral
Coveo hosts GenAI demo. This morning Coveo hosted a demo and presentation regarding its new GenAI offering, called Coveo Relevance Generative Answering. Reminder, Coveo is currently running pilots of this product with 45 early access customers and expects general availability during FY24 (year-end March 31, 2024).
GenAI is already live on Coveo’s website. For the demo, Coveo showcased its own customer support website (docs.coveo.com), where Generative Answering is live. The demo inserts a GenAI-based answer at the top of the page with classic enterprise search links below. The fact that Coveo’s GenAI offering is live reveals Coveo’s prioritization of the GenAI opportunity and reflects the benefit that stems from Coveo’s modern architecture (cloud-native, 100+ data connectivity, security/privacy, scalability, etc.). Expected benefits are improved customer service productivity through case deflections (i.e., customer self-service) and improved agent productivity. The company is innovating at a rapid pace; pending new features are inline citations, answer styling, follow- up questions, and conversations. Coveo also showed a demo of GenAI-based answers applied to e-commerce search, which is another key use case for GenAI.
Differentiating in GenAI. Coveo highlighted two groups of potential competitors in GenAI-based enterprise search. The first group are custom-made systems using vector databases. The second group are traditional enterprise search competitors. It is the typical “buy vs. build” decision that most software buyers undertake. Against custom-made systems, Coveo offers pre-existing connectivity to 100+ data sources, robust security, scalability, reduced costs, and consistency with existing enterprise search results. Additionally, Coveo has partnerships with leading enterprise platforms like Salesforce, Zendesk, Adobe, ServiceNow, etc. Against traditional enterprise search competitors, Coveo is well regarded. Gartner (publicly available here) ranks Coveo as a leader in the 2022 Magic Quadrant for Insight Engines.
GenAI may drive growth re-acceleration 2H/FY24. We believe that Coveo’s current SaaS RPO growth may re-accelerate 2H/FH24, given potential conversion of GenAI pilots to new bookings and the general availability of its GenAI offering before the end of the year. Additionally, Coveo’s partnership with SAP (announced in March 2023) is likely to further ramp and contribute to 2H/ FY24 growth. Having said that, Q2 current SaaS RPO growth may decline (vs. Q1 and Q4), given temporary headwinds (churn of legacy Qubit customers, which was a ~300 bps headwind Q1) and macro (Coveo is seeing a shorter duration of contracts, longer sales cycles).