What Happened:
Shares of customer experience software provider Sprinklr (NYSE:CXM) fell 33.1% in the afternoon session after the company reported third quarter results, recording a slowdown in large customer wins, and provided cautious commentary on the forward growth outlook. During the quarter, the total number of customers spending more than $1 million declined sequentially and fell below Wall Street's expectations. Management added "Given the macro environment, we are experiencing a higher level of down sales, as large customers right-size their software spend. As such, we are mindful that this cycle of renewals may be one of the more challenging quarters to get through and is factored into the guidance numbers."
On the other hand, revenue beat expectations during the quarter. However, due to some of the highlighted macro headwinds, the company expects to deliver a modest 10% revenue growth in FY'25, well below Consensus estimates. Overall, it was a weaker quarter for the company. Following the earnings results, BTIG analyst Matt VanVliet downgraded the stock's rating from Buy to Neutral, adding, "early FY'25 outlook points to major deceleration."
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What is the market telling us:
Sprinklr's shares are very volatile and over the last year have had 8 moves greater than 5%. But moves this big are very rare even for Sprinklr and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 6 months ago, when the stock gained 7% on the news that the company reported first quarter results that beat analysts' estimates for revenue (both total revenue and subscription revenue) and non-GAAP operating profit. There was also a strong acceleration in contract wins. Looking ahead, revenue and non-GAAP operating income guidance for the next quarter and the full year came in roughly in line with Consensus. Overall, it was a solid quarter for the company, with management also touching on its AI capabilities.
Sprinklr is up 37.3% since the beginning of the year, but at $11.06 per share it is still trading 33.9% below its 52-week high of $16.73 from December 2023. Investors who bought $1,000 worth of Sprinklr's shares at the IPO in June 2021 would now be looking at an investment worth $629.44.
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