Sprinklr’s Revenue Grew Just 1% and the Stock Fell 9%. Can AI Innovation Break the Slump?

On September 2, Sprinklr's shares plummeted 8.55% following the release of its fiscal second-quarter 2027 results. Revenue grew by a mere 1% to $213.7 million, with subscription revenues up 3% to $194.8 million. This performance highlights the pressing need for Sprinklr to demonstrate that its AI-driven customer experience tools are more than just a safeguard for its existing user base.

Beneath the disappointing headline, however, are some positive indicators. Remaining performance obligations increased by 11% to $1.03 billion, offering a measure of contracted revenue stability. Sprinklr now serves over 1,600 enterprises, accounting for 59% of the Fortune 100. Its platform seamlessly integrates customer-service, social-media, marketing, and analytics data, providing its AI tools with a level of context that standalone assistants may lack.

The company's free cash flow of $13.1 million indicates that it's not solely dependent on external financing. Unfortunately, the income statement paints a less optimistic picture. GAAP operating income dropped to $10 million from $16.3 million the previous year, while non-GAAP operating income declined to $31.3 million from $38.2 million.

Management forecast full-year revenue between $866.5 million and $868.5 million, indicating no immediate turnaround. Large clients can consolidate vendor relationships, delay projects, or explore lower-cost AI alternatives before revisiting their contracts. Professional investors pulled back their investments in Sprinklr before the earnings report.

Hedge funds, for instance, reduced their collective exposure from 34 in Q1 to 28 at the end of Q2. Solel Partners, the largest listed hedge-fund holder, maintained its position with 3,649,369 shares as of June 30. There's also a concerning trend of increased short interest before the earnings drop. On August 14, 9.13 million shares were short, representing 5.21% of the float, a decrease of 31.2% from 13.27 million shares on July 31, with just 3.4 days to cover.

This data points to a reduction in open short positions, but not the reason behind individual traders' changing positions. Sprinklr possesses valuable assets, including large customers, a billion-dollar contracted backlog, and data-rich workflows. However, the crucial element of acceleration is still missing. AI could potentially act as an investment catalyst only if it boosts renewals, expansion, and overall revenue growth.

Without these improvements, the stock may remain undervalued for operational reasons rather than emotional ones. Moving forward, the next earnings report should be evaluated based on subscription growth and the conversion of RPO (Remaining Performance Obligations) into adjusted earnings. While Sprinklr's cost control measures may provide temporary profit protection, the platform's long-term success hinges on customers increasing their spending.

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