Sprinklr (CXM)

Customer experience management platform Sprinklr (NYSE:CXM) reported Q2 CY2025 results exceeding the market’s revenue expectations, with sales up 7.5% year on year to $212 million. Guidance for next quarter’s revenue was better than expected at $209.5 million at the midpoint, 1.4% above analysts’ estimates. Its non-GAAP profit of $0.13 per share was 29.9% above analysts’ consensus estimates.

Company Overview

With a proprietary AI engine processing 450 million data points daily across 30+ digital channels, Sprinklr (NYSE:CXM) provides cloud-based software that helps large enterprises manage customer experiences across social, messaging, chat, and voice channels.

The Internet has given customers more choice on whom to conduct business with and has also given them the power to easily share their experiences with other customers. These twin dynamics effectively have increased pressure on companies to both improve their customer service and also monitor their brand reputation online, driving the need for customer experience software offerings.

Sprinklr's competitors include customer experience platforms like Adobe Experience Cloud (NASDAQ: ADBE), Salesforce Service Cloud (NYSE: CRM), and Zendesk (private). In social media management, it competes with Hootsuite (private) and Khoros (private), while in contact center solutions, it faces competition from NICE (NASDAQ: NICE) and Genesys (private).

A company’s long-term sales performance is one signal of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last three years, Sprinklr grew its sales at a 13.7% annual rate. Although this growth is acceptable on an absolute basis, it fell short of our standards for the software sector, which enjoys a number of secular tailwinds.

This quarter, Sprinklr reported year-on-year revenue growth of 7.5%, and its $212 million of revenue exceeded Wall Street’s estimates by 3.2%. Company management is currently guiding for a 4.4% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 2.8% over the next 12 months, a deceleration versus the last three years. This projection doesn't excite us and implies its products and services will see some demand headwinds.

Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.

Sprinklr’s billings came in at $200.6 million in Q2, and over the last four quarters, its growth was underwhelming as it averaged 3.1% year-on-year increases. This alternate topline metric grew slower than total sales, meaning the company recognizes revenue faster than it collects cash - a headwind for its liquidity that could also signal a slowdown in future revenue growth.

The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.

It’s relatively expensive for Sprinklr to acquire new customers as its CAC payback period checked in at 108.4 months this quarter. The company’s slow recovery of its sales and marketing expenses indicates it operates in a highly competitive market and must invest to stand out, even if the return on that investment is low.

For software companies like Sprinklr, gross profit tells us how much money remains after paying for the base cost of products and services (typically servers, licenses, and certain personnel). These costs are usually low as a percentage of revenue, explaining why software is more lucrative than other sectors.

Sprinklr’s gross margin is slightly below the average software company, giving it less room than its competitors to invest in areas such as product and sales. As you can see below, it averaged a 69.9% gross margin over the last year. That means Sprinklr paid its providers a lot of money ($30.06 for every $100 in revenue) to run its business.

This quarter, Sprinklr’s gross profit margin was 68.2%, marking a 4.3 percentage point decrease from 72.5% in the same quarter last year. Sprinklr’s full-year margin has also been trending down over the past 12 months, decreasing by 4.3 percentage points. If this move continues, it could suggest a more competitive environment with some pressure to lower prices and higher input costs.

Sprinklr’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same, averaging 4% over the last year. This profitability was solid for a software business and shows it’s an efficient company that manages its expenses well. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it’s a show of well-managed operations if they’re high when gross margins are low.

Analyzing the trend in its profitability, Sprinklr’s operating margin might fluctuated slightly but has generally stayed the same over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q2, Sprinklr generated an operating margin profit margin of 7.7%, up 7.7 percentage points year on year. The increase was solid, and because its gross margin actually decreased, we can assume it was more efficient because its operating expenses like marketing, R&D, and administrative overhead grew slower than its revenue.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Sprinklr has shown impressive cash profitability, giving it the option to reinvest or return capital to investors. The company’s free cash flow margin averaged 14.2% over the last year, better than the broader software sector.

Sprinklr’s free cash flow clocked in at $29.75 million in Q2, equivalent to a 14% margin. This result was good as its margin was 5.7 percentage points higher than in the same quarter last year, but we wouldn’t put too much weight on the short term because investment needs can be seasonal, causing temporary swings. Long-term trends carry greater meaning.

Over the next year, analysts predict Sprinklr’s cash conversion will slightly improve. Their consensus estimates imply its free cash flow margin of 14.2% for the last 12 months will increase to 16.1%, giving it more flexibility for investments, share buybacks, and dividends.

Businesses that maintain a cash surplus face reduced bankruptcy risk.

Sprinklr is a profitable, well-capitalized company with $474 million of cash and $48.21 million of debt on its balance sheet. This $425.8 million net cash position is 21.3% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

We were impressed by Sprinklr’s optimistic full-year EPS guidance, which blew past analysts’ expectations. We were also happy its revenue outperformed Wall Street’s estimates. On the other hand, its EPS guidance for next quarter slightly missed. Overall, we think this was a mixed quarter. The market seemed to focus on the guidance miss and seemed to be hoping for more, and the stock traded down 2.6% to $8.40 immediately after reporting.

Updated: November 11, 2025 at 9:37 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Sprinklr.

Sprinklr doesn’t pass our quality test. Although its revenue growth was solid over the last five years, it’s expected to deteriorate over the next 12 months and its operating margin hasn't moved over the last year. And while the company’s operating margins are in line with the overall software sector, the downside is its gross margin is below our standards.

Sprinklr’s price-to-sales ratio based on the next 12 months is 2.3x. This valuation multiple is fair, but we don’t have much confidence in the company. There are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $11 on the company (compared to the current share price of $7.55).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.