Sprinklr, Inc. Q2 FY2026 earnings call

Rory Read noted that fiscal year 2026 is a transitional year. Phase one of transformation (business optimization) is largely complete, including establishing an ambidextrous strategy, new business management system, cost optimization, go-to-market coverage model realignment, and product delivery roadmap strengthening. Now entering phase two (transition phase) through the back half of FY26 and into FY27, with incremental investments in acceleration and deployment of AI functionality in marketing, insights, and CCaaS products; adding more channels and enhanced video capabilities to core suite; and adding in-region technical and implementation skills. Hired Bit Rambusch as Head of Global Services and Support and Scott Millar as Chief Revenue Officer. Project BearHug launched in March to combat churn, focusing on top 700 customers (80% of revenue), with nearly half engaged and regular cadence with top customers. New core pricing and packaging for new logos, a hybrid model with seat-based pricing and consumption commitment. Technology and product innovation includes AI-native unified platform, Customer Feedback Management product with AI analysis, Sprinklr AI Agents, and Agent Copilot. Q2 saw continued landing and expanding with iconic brands, with 149 customers generating at least $1 million in annual subscription revenue.

Second quarter total revenue grew 8% year over year to $212 million, with subscription revenue growing 6% year over year to $188.5 million. Non-GAAP operating income was $38.2 million, resulting in an 18% non-GAAP operating margin. Subscription revenue-based net dollar expansion rate in the second quarter was 102%. At the end of the second quarter, there were 149 customers generating at least $1 million in annual subscription revenue. Calculated billings for the second quarter were $200.6 million, up 4% year over year. Total remaining performance obligations (RPO) was $923.8 million, up 4% compared to the same period last year, with current RPO (CRPO) at $597.1 million, up 7% year over year. Subscription gross margin was 78% non-GAAP, professional services gross margin was break-even, resulting in a total non-GAAP gross margin of 69%. Free cash flow for the second quarter was $29.8 million, with $31 million after adjusting for restructuring cash payments. Reported free cash flow for the first half of FY26 was $110.5 million, and excluding restructuring charges, it was $123.5 million. During the second quarter, 16.5 million shares of Class A common stock were purchased for $140.4 million as part of the stock buyback program, completing the $150 million authorization.

For Q3, total revenue expected to be $209 million to $210 million (4% growth y/y at midpoint), subscription revenue $186 million to $187 million (3% growth y/y at midpoint), professional services revenue $23 million (15% growth y/y), total billings estimated at $150 million. Non-GAAP operating income expected $28.5 million to $29.5 million, non-GAAP net income per diluted share ~$0.09. For full year FY26, subscription revenue raised to $746 million to $748 million (4% growth y/y at midpoint), total revenue $837 million to $839 million (5% growth y/y at midpoint), non-GAAP operating income raised to $131 million to $133 million, non-GAAP net income per diluted share $0.42 to $0.43. Free cash flow estimated $125 million for full year, slightly negative in Q3, positive in Q4.

Churn remains a challenge. Higher data and hosting costs due to new cloud environments for Sprinklr Service and expanded AI capabilities. Risks associated with forward-looking statements, including actual results differing materially from projections, impact of corporate strategies and leadership changes, benefits of platform, and market opportunity. Potential drags on back half growth from cleanups of challenged accounts in prior periods and investment impacts from strong uptake in AI products leading to higher cloud costs.

Q: Willow Miller asked about when the bend in the business would occur and what metrics to look at.

A: Rory Read said the bend is expected in the second half of FY26 into the beginning of FY27, looking for improvements in renewals, customer satisfaction, challenged accounts, and growth.

Q: Patrick Walravens asked about an example of a churn situation.

A: Rory Read mentioned renewal pressure over several years, issues with focus on customers and execution, and examples like downsells and large ELA adjustments.

Q: Elizabeth Porter asked about drivers to unlock demand for CCaaS.

A: Rory Read said CCaaS continues to grow, focusing on hardening support, expanding functionality, and adding technical skills closer to customers, with growth to accelerate in FY27 after hardening.

Q: Matt Dembley asked about the hybrid pricing model.

A: Rory Read said it's a simplified bundled concept for new logos, allowing customers to consume and trade tokens, increasing satisfaction.

Q: Parker Lane asked about cloud costs and subscription gross margin.

A: Manish Sarin said there will be pressure on gross margin in the second half due to AI product consumption, expecting 2-3 point reduction.

Q: Chris Lynch asked about renewal timing and AI customer understanding.

A: Rory Read said renewal is key but engagement is more important, and AI is an important technology with Sprinklr's AI-native platform tied to workflows.

Q: Jackson Ader asked about net new and personnel changes.

A: Rory Read said net new mix is about 25% new logo and 75% expansion, and new hires are accelerants for transformation.

Q: Clark Wright asked about churn concentration and buyback.

A: Rory Read said churn is more downsell at mid-market, and buyback is on hold while looking at tuck-ins and innovation add-ons.

Q: Andrew King asked about M&A and investment balance.

A: Rory Read said focus is on building and roadmap, with potential for tuck-in acqui-hires in AI, social, or CCaaS, and balancing investing for growth and margin expansion to achieve Rule of 40