Non-GAAP Operating Margins Reach 15% While Revenue Growth Slows

Sprinklr delivered its third quarter fiscal 2026 results with a measured pace in revenue expansion, but improvements in profitability stood out. Total revenue grew 9% year-over-year to $219.07 million, with subscription revenue up 5% to $190.30 million. Notably, the non-GAAP operating margin expanded to 15%, compared to 11% in the same period last year—a signal that the company's ongoing transformation efforts are translating into improved operating efficiency, even as overall top-line growth decelerates.

Customer Base Expands, But Remaining Performance Obligations Shrink

Sprinklr’s roster of high-value clients continued to rise: the company reported 145 customers generating $1 million or more in revenue, highlighting progress with large enterprises. However, a closer look reveals that total remaining performance obligations (RPO)—a measure of future contracted revenues—decreased 5% year-over-year. In contrast, current RPO, which focuses on near-term (next 12 months) revenue, edged up by 3%. The divergence between long-term and current obligations hints at changing sales dynamics and could influence revenue predictability for coming quarters.

Cash Flow and Balance Sheet Stay Healthy

Cash flow trends for Q3 remained robust. Net cash from operating activities was $20.0 million, and free cash flow hit $15.52 million for the quarter—triple the free cash flow seen a year ago. As of October 31, 2025, Sprinklr held $480.35 million in cash, cash equivalents, and marketable securities, supporting flexibility for investment and operational needs.

Profitability Metrics and Earnings Remain Solid

Sprinklr reported non-GAAP net income of $29.07 million (or $0.12 per diluted share), an improvement from $25.57 million ($0.10 per share) a year earlier. However, GAAP net income was just $2.90 million, with a diluted EPS of $0.01—down from $0.04 a year ago—due to higher operating expenses and tax costs. The improved non-GAAP results highlight Sprinklr’s ability to manage stock-based compensation and other non-cash expenses to drive bottom-line growth.

Guidance Calls for Steady Margins Despite Conservative Growth Targets

Looking ahead to the fiscal fourth quarter, Sprinklr expects subscription revenue between $191M and $192M, and total revenue between $216.5M and $217.5M. The company is forecasting non-GAAP operating income between $29M and $30M, with non-GAAP net income per share in the range of $0.09 to $0.10. For the full fiscal year ending January 2026, guidance implies flat to modest growth but calls for continued margin discipline. This cautious optimism reflects a market environment that values operational leverage, particularly in software.

Takeaway: Margin Strength Remains a Focus Amid Shifting Revenue Trends

Sprinklr’s latest results underscore a pivot toward operating efficiency and disciplined expense management. While revenue and subscription growth have moderated, improvements in margins and cash generation could provide resilience if top-line momentum softens further. For investors, the near-term focus is likely to remain on whether Sprinklr can strike the right balance between growth investments and sustained profitability as it heads toward FY27. The company’s performance in the next few quarters could offer more insight into how this strategy plays out—and whether renewed growth will accompany ongoing efficiency gains.

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