Gloo Holdings, Inc. Q2 FY2027 earnings call

• Strategic Focus on Applied AI: Gloo is shifting from providing software tools to delivering actual work outcomes via Agentic workflows. This approach leverages improving AI models to increase efficiency, expand operating margins, and deliver greater value to customers.
• Customer Growth and Expansion: The company has over 30 customers with annual contract values exceeding $1 million, and recently secured its first customer with an annual contract value surpassing $10 million. The university vertical is emerging as a strong growth area, with over 40 universities now in the client portfolio.
• Acquisition Integration and Synergies: Five acquisitions have been completed since going public, including Cedarstone (closed in Q3). These acquisitions add capabilities, expertise, and trusted customer relationships. Specifically, Cedarstone adds over 250 mid-market network capability providers, creating significant cross-selling opportunities with existing partners like Masterworks.
• Operational Efficiency and Cost Discipline: Gross margin improved significantly, with cost of revenue decreasing to 64.0% of total revenue from 74.8% in the prior year period. Adjusted EBITDA improved sequentially by $3.2 million to negative $8.3 million. The company completed meaningful cost actions and restructuring charges ($4.4 million) to integrate acquisitions and streamline operations.
• Product Innovation: Launched 'Gloo Code,' an agentic building capability within Gloo AI Studio, aimed at helping developers optimize token usage. A hackathon is scheduled for October to drive developer engagement and application building within the faith and flourishing ecosystem.

Total revenue for Q2 ended July 31, 2026, reached $46.6 million, representing an 188% year-over-year increase and a 12% sequential increase from Q1. This growth was driven by strong performance in both 'Powering Tech' and 'Powering Reach' segments, bolstered by acquisitions including Masterworks, Westfall Group, and Enterprisemarketdesk (EMD). Platform Solutions revenue specifically surged to $22.9 million, up 209% year-over-year, contributing significantly to the top-line expansion.

• Full Year 2026 Revenue: Raised by $5 million to $200 million, inclusive of the Cedarstone acquisition. This represents more than double the previous year's revenue.
• Q3 2026 Revenue: Expected to be $55 million.
• Q3 2026 Adjusted EBITDA: Expected to narrow to negative $3.5 million, a nearly $5 million improvement over Q2.
• Q4 2026 Profitability: Management remains committed to achieving adjusted EBITDA profitability in Q4 2026, maintaining cost discipline.
• Share Count: Weighted average share count expected to be approximately 90 million shares in Q3.

• Forward-Looking Statements: Results may differ materially from expectations due to risks and uncertainties related to future events and financial performance.
• Integration Risks: Ongoing integration of acquired entities (e.g., Cedarstone, Midwestern Interactive) carries execution risks, though management reports positive synergy progress.
• Market and Competition: The market is fragmented and underserved; failure to maintain leadership in applied AI or adapt to rapid model improvements could impact competitiveness.
• Regulatory and Compliance: Subject to standard SEC filing requirements and risk factors disclosed in Form 10-K and 10-Q filings.

Q: Analyst asked about the drivers of P&L improvement and visibility into H2 revenue (backlog vs. new sales).

A: CEO Scott Beck highlighted that margin improvements are driven by operational leverage and cost synergies. He noted strong visibility for Q3 and Q4 due to a robust pipeline and recurring revenue base, supported by increasing cross-selling across capital partners. M&A remains opportunistic with a cash-efficient structure, expected to continue into 2027.

Q: Analyst inquired about the customer journey for large accounts and sales incentives for cross-selling.

A: CTO Pat Gelsinger explained that large accounts often start with one product but expand via a 'land, expand, expand' strategy. Formalized sales compensation programs now incentivize cross-selling across all sellers. With 30+ customers at $1M+ ACV and several approaching $10M, there is significant momentum in deepening wallet share and expanding into new verticals like universities.

Q: Analyst asked about the traction of Gloo Code and the developer community response.

A: Pat Gelsinger reported strong initial sign-ups for Gloo Code ahead of the October hackathon. The platform targets internal users, capital partners, and retail developers, offering a cost-effective, privacy-preserving coding environment. Partnerships like YouVersion enhance the value proposition, with adoption metrics being closely monitored.

Q: Analyst questioned how Gloo balances LLM costs and competitive moats given falling token prices.

A: Pat Gelsinger stated that Gloo benefits directly from lower token prices through cost savings and indirect benefits via increased customer adoption. The company acts as an open router, selecting the most cost-effective models (often open-source) while ensuring superior experiences. Agentic workflows further reduce delivery costs, widening the moat through efficiency and scale.

Q: Analyst asked about the role of Forward Deployed Engineers (FDEs) in AI adoption bottlenecks.

A: Pat Gelsinger identified FDEs as a key differentiator, especially through Midwestern and Gloo 360. By acting as CIO/CTO for clients, Gloo provides talent and skilling that organizations lack internally. This accelerates AI transformation and addresses data consolidation challenges, which are critical for successful AI implementation.