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Sprinklr, Inc. (CXM)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY26 results are scheduled for release on December 3, 2025; management previously guided total revenue to $209–$210M, subscription revenue to $186–$187M, non-GAAP operating income to $28.5–$29.5M, and non-GAAP diluted EPS to ~$0.09 .
  • FY26 guidance was raised after Q2: total revenue to $837–$839M (from $825–$827M), subscription revenue to $746–$748M (from $741–$743M), non-GAAP operating income to $131–$133M (from $129–$131M), and non-GAAP diluted EPS to $0.42–$0.43 (from $0.39–$0.40) .
  • Management emphasized transformation progress (Project BearHug), AI product uptake, and CCaaS hardening; near-term gross margin pressure from higher cloud/LLM costs is anticipated in H2 FY26 .
  • Leadership changes are a watch item: CFO transition noted in Q2 (interim CFO designation) and new CFO appointed in October (Anthony Coletta), with continuity in financial strategy cited by management .

What Went Well and What Went Wrong

What Went Well

  • Record non-GAAP operating income in Q2: $38.2M (18% margin); GAAP operating income $16.3M; non-GAAP diluted EPS $0.13 .
  • Strong cash generation: Q2 free cash flow $29.8M; H1 FY26 free cash flow $110.5M; Q1 free cash flow a record $80.7M .
  • Customer momentum: $1M+ ARR customers reached 149 (up 3 QoQ); cRPO +7% YoY; pipeline strength and enterprise focus highlighted (Project BearHug engagement across top accounts) .

Selected quotes:

  • “We generated a record $38.2 million in non-GAAP operating income… 18% non-GAAP operating margin” .
  • “Project BearHug is focused on deeply engaging our top 700 customers who collectively represent more than 80% of our total revenue” .
  • “We are experiencing a strong uptake in our AI products” .

What Went Wrong

  • Renewal/churn pressure persisted: subscription NDR 102% (flat sequentially), with downsell more prevalent than logo churn; management expects improvement as BearHug scales .
  • Gross margin pressure expected: higher cloud/LLM hosting costs to reduce gross margin by ~2–3 points in H2 FY26; Q3 PS margin guided to ~–3% .
  • Sequential step-down in Q3 subscription revenue vs Q2 driven by cleanup of challenged accounts; billings seasonally weak in Q3 (~$150M) .

Financial Results

Actuals through Q2 FY26 and Q3 FY26 guidance (periods chronologically ordered oldest → newest):

MetricQ1 FY26Q2 FY26Q3 FY26 (Guidance)
Total Revenue ($USD Millions)$205.5 $212.0 $209–$210
Subscription Revenue ($USD Millions)$184.1 $188.5 $186–$187
Professional Services Revenue ($USD Millions)$21.4 $23.6 ~$23
GAAP Diluted EPS ($USD)$(0.01) $0.05 ~N/A (non-GAAP EPS guided)
Non-GAAP Diluted EPS ($USD)$0.12 $0.13 ~0.09
Non-GAAP Operating Income ($USD Millions)$36.7 $38.2 $28.5–$29.5
Non-GAAP Operating Margin (%)18% 18% ~14% (midpoint implied)
Free Cash Flow ($USD Millions)$80.7 $29.8 Slightly negative (Q3)
Billings ($USD Millions)~$200 (Q2 guided) $200.6 (actual) ~$150

Segment/Gross Margin detail:

MetricQ1 FY26Q2 FY26
Non-GAAP Subscription Gross Margin (%)78% 78%
Non-GAAP Professional Services Gross Margin (%)6% ~0% (break-even)
Total Non-GAAP Gross Margin (%)70% 69%

KPIs:

KPIQ1 FY26Q2 FY26Q3 FY26 (Outlook/Notes)
$1M+ ARR Customers (count)146 149 Continued focus via BearHug
RPO ($USD Millions)$943.2 $923.8 N/A
cRPO ($USD Millions)$596.8 $597.1 N/A
Subscription NDR (%)102% 102% Improvement targeted via engagement

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenue ($USD Millions)Q3 FY26N/A (provided in Q2)$209–$210 Maintained (prudently guided)
Subscription Revenue ($USD Millions)Q3 FY26N/A (provided in Q2)$186–$187 Sequential step-down vs Q2 (cleanup impact)
Non-GAAP Operating Income ($USD Millions)Q3 FY26N/A (provided in Q2)$28.5–$29.5 Maintained
Non-GAAP Diluted EPS ($USD)Q3 FY26N/A (provided in Q2)~0.09 Maintained
Total Revenue ($USD Millions)FY26$825–$827 $837–$839 Raised
Subscription Revenue ($USD Millions)FY26$741–$743 $746–$748 Raised
Non-GAAP Operating Income ($USD Millions)FY26$129–$131 $131–$133 Raised
Non-GAAP Diluted EPS ($USD)FY26$0.39–$0.40 $0.42–$0.43 Raised
Billings ($USD Millions)Q3 FY26N/A~$150 Seasonal low; cautious

Earnings Call Themes & Trends

TopicQ1 FY26 (Prior)Q2 FY26 (Prior)Current Period (Q3 FY26)Trend
AI/technology initiativesEmphasis on AI-native platform; containment rates 30–80% in service; LLM-agnostic architecture Strong AI uptake; agentic AI and copilot driving costs and value; AI studio updates Continued AI adoption with higher cloud costs impacting margins Growing adoption; near-term margin pressure
Pricing/packagingEnablement and pod structure; re-energize core New hybrid pricing launched for core (seat + consumption tokens) to simplify buying Expand hybrid pricing; monitor consumption revenue dynamics Simplification; potential for uplift with usage
CCaaS (Service)Differentiating with unified data/workflows; cautious on acceleration until hardened Hardening focus; large implementations progressing; plan to accelerate in FY27 Delivery/implementation investment continues; margin pressure in PS Maturing product; acceleration later
Renewal/churnElevated churn/downsells; NDR 102% Continued pressure; BearHug engagement scaling; multi-year renewals increasing Improvement targeted; Q3 step-down reflects cleanup Stabilizing with engagement
Macro/FXCautious enterprise spend; $10M FX headwind offset by savings Prudent guidance; cautious approach to H2 Prudent stance maintained Caution sustained
Capital allocation$150M buyback authorized Buyback completed $150M; 17.6M shares to reserve No re-upping yet; board reassessing Balanced

Management Commentary

  • Transformation progress: “We have largely completed phase one… optimized our cost structure, realigned our go-to-market coverage model, and strengthened our product delivery roadmaps” .
  • BearHug and customer focus: “Project BearHug… focused on deeply engaging our top 700 customers… through the first half… detailed engagements with nearly half of these customers” .
  • AI strategy and margin impact: “Strong uptake in our AI products… leading to higher cloud costs in the second half of the year” .
  • CCaaS approach: “We were going to… govern our growth rate in FY26… to harden it… open the spigot and really start to accelerate that growth once we see that hardening” .

Q&A Highlights

  • Churn dynamics: Downsells more prevalent than logo churn; cleanup of challenged accounts converting to renewals; aiming for longer renewals and deeper C-level engagement .
  • Gross margin outlook: Expect 2–3 point reduction in H2 gross margins due to AI/cloud hosting costs .
  • Q3 guidance shape: Sequential subscription step-down attributed to cleanup work; billings ~$150M; PS margin ~–3% .
  • Pricing: Hybrid seat + consumption model to simplify buying and keep revenue ratable; expanding from core to CCaaS next year .
  • Capital allocation: $150M buyback completed; board will reassess future authorizations; potential tuck-ins in AI/CCaaS/social .

Estimates Context

  • Wall Street consensus EPS and revenue estimates via S&P Global were unavailable at this time due to data access limits; therefore, a beat/miss analysis for Q3 FY26 cannot be provided. We will update post-release when S&P Global data is accessible.

Key Takeaways for Investors

  • Track Q3 delivery vs guidance: subscription revenue $186–$187M, total revenue $209–$210M, non-GAAP EPS ~$0.09; any variance will signal pace of churn remediation and execution consistency .
  • Expect near-term gross margin pressure from AI/cloud costs; monitor subscription GM trend and PS margin trajectory (Q3 guided ~–3%) .
  • Watch BearHug impact: stabilization/expansion within top enterprise accounts (149 $1M+ customers), NDR progression from 102% .
  • CCaaS execution: evidence of hardened delivery and successful large implementations is a medium-term growth lever (FY27 acceleration) .
  • Pricing/consumption dynamics: new hybrid model may support transparency and usage-driven uplift; assess adoption and ratability .
  • Capital allocation and leadership: buyback completed; new CFO (Anthony Coletta) appointed—evaluate continuity and strategic priorities in financial operations .
  • FY26 outlook raised: total revenue and profitability guidance increased post-Q2; confirmation in Q3 would strengthen the narrative .