nCino's Q3 2026 Earnings Call: Contradictions Emerge in AI Strategy, Global Expansion, and Rule of 40 Timelines

Date of Call: December 3, 2025

Financials Results

• Revenue: $152.2M, up 10% year-over-year
• EPS: $0.31 per diluted share (non-GAAP)
• Operating Margin: 26% of total revenues (non-GAAP operating income of $39.9M), representing 600 bps of operating margin expansion year-over-year and quarter-over-quarter

Guidance:

• Q4 FY26 revenue: $146.75M–$148.25M; subscription revenue: $130.75M–$132.25M (midpoint +4%/+5% YoY; includes ~$1.1M inorganic from Sandbox Banking)
• Q4 non-GAAP operating income: $32.5M–$33.5M; non-GAAP EPS: $0.21–$0.22 (116.5M diluted shares)
• FY26 revenue: $591.9M–$593.4M (midpoint ~10% growth CC)
• FY26 subscription revenue: $520.5M–$522M (midpoint +11% reported; ~7% organic)
• FY26 non-GAAP operating income: $127.2M–$128.2M; non-GAAP EPS: $0.90–$0.91
• FY26 ACV: $564M–$567M (includes ~$4.5M from Sandbox; net ACV adds $48M–$51M)

Business Commentary:

• Revenue Growth and AI Integration:
• NCR reported Q3 2026 revenue of $152.2 million, up 10% year-over-year, with subscription revenues at $133.4 million, up 11% year-over-year.

• Growth was driven by strong demand for AI solutions and the integration of AI capabilities across products.

• Operating Margin Expansion and Efficiency:

• Non-GAAP operating income increased to $39.9 million or 26% of total revenues, reflecting a 600 basis points of operating margin expansion, both year-over-year and quarter-over-quarter.

• Efficiency improvements, cost discipline, and the leveraging of AI tools contributed to this expansion.

• International Revenue Growth:

• Non-U.S. total revenues increased to $33.6 million, up 13% reported and in constant currency.

• Growth was driven by strong sales traction in Japan and EMEA, particularly through the Integration Gateway API infrastructure solution.

• Customer Retention and Renewals:

• The company saw an increase in early customer renewals and new customer wins excited by NCR's AI capabilities.
• This trend is supported by NCR's commitment to providing exceptional user experiences and continuous innovation.
  
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management repeatedly highlighted execution and reaccelerating growth: “Sales and product development both picked up momentum in Q3,” raised full-year guidance, and reported margin expansion (non-GAAP operating margin 26%, +600bps). CEO emphasized strong demand and AI-driven customer interest; CFO increased FY26 revenue and operating income outlooks.

Q&A:

• Question from Michael Infante (Morgan Stanley): Greg, I just wanted to ask on margins. If I look at the incremental AOI margins in the quarter, I think they were close to 90%. If I look at fiscal 4Q, at least as it relates to the high end, it's close to 130%. That would basically put your full year incremental AOI margins around 60%. Like how should you -- how should we be thinking about the leverage you're driving in the business this year? And whether or not some of those AI efficiencies give you some incremental confidence in terms of delivering on your medium-term free cash flow and operating margin targets even faster?
  Response: Management: Efficiency gains are real and aided by AI and disciplined cost management; gross-margin mix improvements and professional services margin initiatives provide further leverage toward margin targets.

• Question from Michael Infante (Morgan Stanley): How are you thinking about your level of visibility into NTM subscription revenue based on what you see already contractually committed and backlog conversion to subs revenue?
  Response: Management: They won't guide next year yet but feel incrementally better about pipeline and sales activity; confidence driven by AI halo and execution.

• Question from Saket Kalia (Barclays): Is the confidence in the ACV guide coming from big customers around commercial lending, international, consumer banking, or other segments? What's the health of the underlying base?
  Response: Management (Sean): Demand is broad-based—U.S. commercial, mortgage, international (notably Japan/EMEA) and onboarding—with AI driving budgets and a shift to quicker, outcome-focused implementations.

• Question from Saket Kalia (Barclays): Do early renewals surprise you and are there modeling impacts we should keep in mind from early renewals?
  Response: Management (Greg): Early renewals reflect customers buying into continuous innovation and pricing transition; discussions focus on value/outcomes and are largely constructive.

• Question from Alexander Sklar (Raymond James): Regarding the two top-50 bank commercial expansions, what were they using nCino for before and what are they expanding into; how much white space remains?
  Response: Management: These expansions reflect in-platform upsell within existing customers; substantial white space remains across product lines within large bank accounts.

• Question from Alexander Sklar (Raymond James): How will customer M&A impact nCino over the next 1–2 years as deals close?
  Response: Management (Greg): M&A is a historical tailwind—internal study shows nCino is go-forward platform in ~95% of >270 M&A events tracked—so M&A should continue to benefit bookings/ACV.

• Question from Joseph Vruwink (Robert W. Baird): The execution-based upside in 3Q was $1.4M; is that from bigger deal sizes or higher conversion rates, and why doesn't that flow fully into Q4?
  Response: Management: Execution upside stems from balanced portfolio, improved churn, and execution discipline; flow-through is managed conservatively per guidance philosophy.

• Question from Joseph Vruwink (Robert W. Baird): The 110 customers adopting Banking Advisor—are they primarily larger customers and can this scale down to smallest customers?
  Response: Management (Sean): Adoption spans all segments and scales—agents and Banking Advisor are deployable across large banks to small community institutions, delivering similar capabilities at different scales.

• Question from Charles Nabhan (Stephens): Can you unpack drivers of mortgage outperformance—new logos vs same-store growth and strengths/weaknesses?
  Response: Management: Outperformance driven by expansions into mortgage from top-100 banks, IMB traction, and prior logo gains that are now producing normalized volume growth on platform.

• Question from Charles Nabhan (Stephens): Do you expect a slow or rapid AI adoption curve across banks into 2026/2027?
  Response: Management (Sean): Early adopters are moving from 'what is AI' to rapid deploy; expect adoption to spike over time with waves of customers following early adopters.

• Question from Ryan Tomasello (KBW): Update on DocFox pipeline, contribution to ACV timing, implementation sales cycles, and ACV uplift?
  Response: Management (Sean): DocFox has increased onboarding pipeline in H2; implementations are ~3–6 months and expected to convert into ACV next year, adding to growth initiatives.

• Question from Ryan Tomasello (KBW): Update on new credit union sales force traction and cross-sells?
  Response: Management: Dedicated credit-union GTM is on-track to meet internal targets; platform messaging resonates though specific deal counts not disclosed.

• Question from Adam Hotchkiss (Goldman Sachs): For intelligence-unit adopters, what's the playbook and timeframe from testing to deployment and which skills resonate most?
  Response: Management (Sean): Fast test deployment (weeks); testing 1–4 months then scale—top interest in proactive portfolio risk monitoring, locate-and-file, and auto-spreading skills.

• Question from Adam Hotchkiss (Goldman Sachs): How has bookings seasonal linearity shaken out relative to expectations?
  Response: Management (Greg): Q4 remains the largest bookings quarter as expected; bookings-to-date and sales activity position the company well to finish strong.

• Question from Eleanor Smith (JPMorgan): Which growth vectors (credit unions, mortgage, onboarding, AI, EMEA) are driving ACV growth?
  Response: Management (Greg): Momentum across all core areas; international (Japan & EMEA) is accelerating and expected to outpace company growth; all five growth initiatives are outperforming company averages.

• Question from Eleanor Smith (JPMorgan): Do you expect a linear path to Rule of 40 next year?
  Response: Management (Greg): Committed to reaching Rule of 40 around Q4 next year; trajectory visible via reaccelerating bookings and cost discipline but not necessarily strictly linear.

• Question from Cristopher Kennedy (William Blair): Update on consumer business bookings vs plans?
  Response: Management (Greg): Consumer momentum continues with expansions in banks and credit unions; no specific bookings disclosed but demand remains healthy.

• Question from Cristopher Kennedy (William Blair): Has thinking about the Rule of 40 components (growth vs margin) evolved?
  Response: Management (Greg): Target unchanged (40); plan is to be aggressive on growth while maintaining cost discipline to reach the goal.

• Question from Aaron Kimson (Citizens JMP): Will AI agent adoption require closer vendor hand-holding and change management versus historical products?
  Response: Management (Sean): Change management is important; nCino will use field-deployed engineers and close customer partnership to ease adoption—technology is ready, focus is on operating humans and digital partners together.

• Question from Aaron Kimson (Citizens JMP): Are the two top-50 bank expansions (30%/60%) timing/M&A or evidence of broader demand shift in core commercial?
  Response: Management (Greg & Sean): Mostly timing and M&A tailwinds; also reflects in-platform white space where existing customers expand into more product lines.

• Question from Kenneth Suchoski (Autonomous Research): How is conversion to platform pricing proceeding and is like-for-like lift still near ~10%?
  Response: Management (Greg): Platform pricing adoption is proceeding per expectations (27% of ACV converted); lift remains in line with targets and Q4 is largest cohort to finalize.

• Question from Kenneth Suchoski (Autonomous Research): Thoughts on reaccelerating international subscription growth and timing?
  Response: Management (Greg & Sean): International momentum (Japan, EMEA) is improving; expect bookings in Q4 to drive reacceleration into next year given focused regional GTM.

• Question from Koji Ikeda (BofA Securities): What would drive a real mindset shift in existing customers that leads to greater expansion activity?
  Response: Management (Sean): Demonstrating AI + operations analytics outcomes and completing platform plays (e.g., solving onboarding for customers already using origination) drive major expansion opportunities.

• Question from Connor Passarella (Truist): What KPIs are you using to evaluate early Banking Advisor success?
  Response: Management (Sean): Focus on customer outcomes—time-to-answer reductions, productivity gains (20–30%), automated monitoring and baseline-to-trend metrics via Operations Analytics to drive intelligence-unit consumption.

Contradiction Point 1

AI Strategy and Customer Adoption

It involves differing perspectives on the role of AI in customer adoption and decision-making, which could impact strategic focus and product development.

What are the details on the top 2 commercial expansions among the top 50 banks? - Michael Infante (Morgan Stanley)

2026Q3: AI is a significant factor in customer conversations. Banking Advisor is deeply integrated into nCino workflows, enhancing efficiency. Agentic workflows are expected to appear sooner than anticipated, contributing to customer engagement. - Sean Desmond(CEO, President & Director)

What will drive growth over the next several years: demand or AI strategy? - Koji Ikeda (BofA Securities)

2026Q2: Our platform and diversified revenue streams are key drivers. AI is a significant opportunity, but it's about delivering outcomes to customers, which drives growth. - Sean Desmond(CEO, President & Director)

Contradiction Point 2

International Growth and Expansion

It involves differing expectations for international growth and expansion, which could impact strategic priorities and resource allocation.

Will the path to the Rule of 40 target be linear next year? - Eleanor Smith (JPMorgan Chase & Co.)

2026Q3: We feel good about growth in Japan and EMEA, with teams focused on specific geographies and solutions. We expect the fruits of efforts to materialize in Q4 and early next year. - Gregory D. Orenstein(CFO & Treasurer)

What is the contribution of the international pipeline to bookings or growth? - Alexander James Sklar (Raymond James)

2026Q2: We are seeing reacceleration in pipeline activity, particularly in EMEA and with FullCircl integration. The leadership team is driving strong results. - Sean Desmond(CEO, President & Director)

Contradiction Point 3

AI Adoption in Banking

It highlights differing perspectives on the pace and adoption of AI technology in the banking industry, which could impact nCino's strategic positioning and product development.

How do you expect AI adoption in banking to increase over time? - Charles Nabhan(Stephens Inc.)

2026Q3: We expect a spike in AI adoption over time, with progressive conversations shifting from 'what is AI?' to 'how can we deploy it quickly?' Financial institutions are eager to modernize and are moving away from multiyear transformation approaches. - Sean Desmond(CEO)

What is the competitive position of vertical vs. horizontal AI vendors in fintech? - Aaron Kimson(Citizens JMP Securities, LLC)

2026Q1: We now have a team of over 70 AI experts that have unlocked a series of products that are going to drive both top and bottom line growth. And they have done amazing work at nCino in the last year, another year of innovation. Look, we've gone from AI as a buzzword to AI as a strategic advantage for our customers. - Sean Desmond(CEO)

Contradiction Point 4

International Revenue Growth

It reveals differing expectations for international revenue growth, which can affect nCino's expansion strategy and investor expectations.

Will your path toward the Rule of 40 target be linear next year? - Eleanor Smith(JPMorgan Chase & Co.)

2026Q3: We feel good about growth in Japan and EMEA, with teams focused on specific geographies and solutions. We expect the fruits of efforts to materialize in Q4 and early next year. - Gregory D. Orenstein(CFO)

What drove the international revenue growth to surpass expectations? - Charles Nabhan(Stephens)

2026Q1: International opportunities, particularly in Japan and Europe, are growing faster than the company's overall growth. Our five core growth initiatives are exceeding company growth rates. - Gregory D. Orenstein(CFO)

Contradiction Point 5

Rule of 40 Target

It involves differing expectations for achieving the Rule of 40 target, which is a critical financial metric for investors and reflects the company's growth and profitability objectives.

Is the 40% rule still achievable by fiscal 2027? - Joseph Vruwink(Robert W. Baird & Co. Incorporated)

2026Q3: Yes, we are committed to achieving Rule of 40 around the fourth quarter of fiscal 2027. We're seeing more efficiency and have a clear trajectory toward it. - Gregory D. Orenstein(CFO)

How do you plan to balance growth and profitability if growth remains constrained into 2027? - Koji Ikeda(BofA Securities, Research Division)

2025Q4: Our focus is on achieving the Rule of 40 milestone by the fourth quarter of next year. We are investing in international markets and sales capacity, and expect to achieve this through leveraging AI, improving R&D efficiency, and capturing market opportunities. - Greg Orenstein(CFO)