Sprinklr Q3 Earnings: Growth and Margin Expansion Amid Scaling Challenges

Amid a challenging market backdrop, Sprinklr demonstrated resilience in its subscription business. Q3 2026 total revenue grew 9% YoY to $219.1 million. Subscription revenue rose 5% to $190.3 million and achieved a net dollar retention rate of 102%, reflecting strong customer loyalty and expansion.

However, this growth in subscriptions was accompanied by a 5% decline in total remaining performance obligations (RPO) YoY, which contrasts with a 3% rise in current RPO (cRPO).

The gap between declining total RPO and growing cRPO highlights scaling friction as the company struggles to secure new deals or significantly extend existing contracts. Management has acknowledged operational execution risks and macroeconomic pressures, with full-year guidance pointing to modest 5-7% revenue growth.

Margin Expansion Under Pressure

Sprinklr delivered a 15% non-GAAP operating margin in Q3 2026 despite facing significant cost headwinds. This achievement comes even as its cloud infrastructure expenses grew 15% year-over-year, underscoring operational discipline in a rising-cost environment. The company's ability to expand margins amid these pressures reflects improved efficiency, particularly in scaling AI-driven product adoption through initiatives like Project Bear Hug as highlighted in earnings calls.

Free cash flow more than tripled to $15.5 million, providing tangible proof of financial prudence. This liquidity strengthens Sprinklr's position to reinvest in growth areas while maintaining a robust $480 million cash balance. However, investors should note persistent risks: subscription revenue growth remains moderate at 5% YoY, and cloud cost inflation could intensify if AI infrastructure demands outpace pricing power. The 3% rise in remaining performance obligations suggests renewed enterprise focus, though stagnant RPO trends earlier this year highlight lingering execution challenges. While margin expansion signals operational maturity, the path forward hinges on balancing AI investment with cost control-a dynamic requiring close monitoring as cloud expenses continue to climb.

Customer Penetration and Retention Trends

Sprinklr's Q3 results show strength among its largest clients, with 145 customers generating over $1 million annually in subscription revenue, underpinning its enterprise focus. Renewal rates improved by 8% following the Project Bear Hug initiative, reflecting tangible progress in customer retention efforts within key accounts. However, broader scaling remains challenging: subscription revenue rose just 5% year-over-year to $190.3 million, while total remaining performance obligations (RPO) fell 5% despite a modest 3% growth in committed RPO (cRPO). This divergence suggests the company is securing deeper engagement from existing large accounts but faces friction in converting new enterprise deals at scale. The retention gains are encouraging, yet the pressure to expand the base of high-value customers persists.

Strategic Risks and Forward Catalysts

Sprinklr's cautious Q4 revenue guidance, projecting 5-7% growth to $216.5–217.5 million, frames a tempered outlook amid ongoing market challenges. Yet, a solid $480 million cash balance provides strategic flexibility provides strategic flexibility to navigate uncertainties and potentially fund key initiatives. This liquidity is underpinned by free cash flow that tripled to $15.5 million, reflecting disciplined capital management even as revenue growth remains moderate.

However, significant risks persist. Stagnant subscription revenue growth, already showing a 5% decline in total remaining performance obligations (RPO), signals potential customer attrition or pricing pressure. Concurrently, rising cloud infrastructure costs threaten to erode the impressive 15% non-GAAP operating margin, adding friction to profitability. Aggressive investment in AI capabilities, while necessary for future competitiveness, also strains resources and could temporarily dampen near-term returns.

The core growth thesis hinges on substitution demand accelerating. Project Bear Hug's success in boosting customer retention and renewal rates demonstrates strong product stickiness, suggesting existing clients are increasingly substituting fragmented solutions with Sprinklr's unified platform. Enterprise adoption is also strengthening, with 145 customers hitting $1 million+ annual contract value, indicating willingness to pay for integrated CXM.

Nevertheless, scaling this success faces friction. The 3% rise in current RPO, while positive, reflects a renewed focus on large enterprise accounts that are inherently slower to expand. Balancing moderate revenue growth with significant AI investments and cloud cost inflation remains a critical execution challenge. The $480 million cash buffer offers a buffer, but sustained margin expansion and market share gains will depend on successfully navigating these scaling hurdles while the competitive landscape intensifies.