Summary of Sprinklr's Q2 Fiscal Year 2027 Earnings Call

1Key Financial Results and Metrics

Total Revenue: $213.7 million, up 1% year-over-year.

Subscription Revenue: $194.8 million, up 3% year-over-year.

Non-GAAP Operating Income: $31.3 million, representing a 15% non-GAAP operating margin.

Net Dollar Expansion Rate: 102% overall; 112% for the $1 million-plus ARR cohort, maintaining above 110% for five consecutive quarters.

Total Remaining Performance Obligations (RPO): $1.03 billion, up 11% year-over-year.

Free Cash Flow: $13.1 million for Q2, totaling $79 million for the first half of FY '27.

Gross Margins: Non-GAAP subscription gross margin at 74%, while services gross margin was negative 22%, leading to a total non-GAAP gross margin of 66%.

2Strategic Updates and Business Highlights

Leadership Changes: Appointment of Tom Addis as Chief Revenue Officer and Jordi Ribas to the Board of Directors.

Customer Engagement: Strong growth in New Annual Revenue (NAR) at over 50% year-over-year; 4 deals over $1 million ARR closed in the quarter.

AI Initiatives: Over 200 AI engagements with significant growth in AI-native products, particularly Agentic AI capabilities, which saw a 40% increase in ARR year-over-year.

Gartner Recognition: Sprinklr was recognized as a leader in the 2026 Magic Quadrant for Social Media Management and Listening.

3Forward Guidance and Outlook

Q3 Revenue Guidance: Expected total revenue of $215 million to $216 million, with subscription revenue of $196 million to $197 million (3% growth year-over-year).

Full Year FY '27 Guidance: Total revenue expected to be $866.5 million to $868.5 million (1% growth year-over-year), with subscription revenue revised to $782.5 million to $784.5 million (4% growth year-over-year).

Non-GAAP Operating Income for FY '27: Expected to be $139 million to $141 million, with a 16% operating margin.

4Bad News, Challenges, or Points of Concern

Professional Services Revenue: Came in lower than expected at $18.9 million, down 34% year-over-year for Q3 guidance, attributed to execution challenges and partner cost overruns.

Gross Margin Pressure: Services gross margin remains negative, with expectations of continued challenges in Q3 due to ongoing optimization efforts.

Execution Risks: Transitioning to a more efficient services organization under Rory Read's interim leadership, with a focus on improving partner utilization and service delivery.

Market Environment: Ongoing geopolitical uncertainties, particularly in the Middle East, which may affect future deal closures and operational stability.

5Notable Q&A Insights

Professional Services Performance: Rory Read emphasized that the issues in professional services are execution-related rather than indicative of demand weakness, with plans for improvement in the coming quarters.

Focus on Growth: Read highlighted the importance of maintaining focus on new deal signings while addressing service execution, indicating a balanced approach to resource allocation.

AI Engagements: The company has shifted from proof-of-concept projects to more substantial implementations, indicating a maturation in customer understanding and application of AI capabilities.

Customer Sentiment: Positive trends in renewal rates and customer engagement were noted, with a strong emphasis on the importance of executing well in the second half of the fiscal year to set the stage for FY '28 growth. Overall, while Sprinklr is seeing improvements in key financial metrics and customer engagement, challenges in professional services and gross margins remain focal points as the company transitions into the next phase of its growth strategy.