Shares of Sprinklr (NYSE: CXM) were down 33% as of 2 p.m. ET Thursday after the customer experience management software company announced solid fiscal third-quarter 2024 results (for the period ended Oct. 31, 2023), but followed with disappointing forward guidance for next fiscal year.
On the former, Sprinklr's fiscal Q3 2024 revenue grew 18% year over year to $186.3 million, translating to adjusted (non-GAAP) net income of $0.12 per share. Analysts, on average, were expecting earnings of $0.07 per share in revenue closer to $180 million.
Why Sprinklr's strong quarter just wasn't enough
Within Sprinklr's top line, subscription revenue grew 22% to $170.5 million, with professional services revenue comprising the remainder at $15.9 million. The company also saw solid momentum from large customers, with the number of clients generating at least $1 million in annual recurring revenue up 15% year over year to 123.
Sprinklr Founder and CEO Ragy Thomas called it "another solid quarter across the board with record levels of profitability supported by strength in our Sprinklr Service product suite."
Sprinklr also raised its full-year guidance to call for total revenue of $725.5 million to $727.5 million (up $6.5 million from both ends of the previous range), subscription revenue of $664 million to $666 million (up from $658 million to $660 million before), and adjusted net income per share of between $0.36 and $0.37 (up from between $0.30 and $0.31 previously).
Sprinklr management says growth is set to decelerate
If you're wondering why Sprinklr fell so hard today, look no further than management's comments surrounding growth in the coming quarters. First, during the subsequent conference call, Sprinklr CFO Manish Sarin clarified that subscription revenue during the quarter benefited by $1 million from new business being booked earlier than expected.
More concerning, however, is that Sarin added now that the company's Sprinklr Service product suite has achieved some scale, the company is going to "refocus ... go-to-market efforts to better align [its] resources across all product suites." The company believes the financial benefits of this refocus will take several quarters to materialize.
As such, Sprinklr issued preliminary guidance for sequential quarterly revenue increases of around 2.5% for all of fiscal-year 2025 -- or total revenue growth of roughly 10% next year to around $799 million (based on the midpoint of its current fiscal-year outlook). By contrast, Wall Street's consensus estimates called for significantly higher growth next fiscal year of around 15%, to roughly $834 million.
In the end, today's steep 30%+ post-earnings drop might be an overreaction. But with growth rapidly decelerating and with shares having more than doubled so far in calendar-year 2023 leading up to this report, it's hardly surprising to see Sprinklr stock falling in response.
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Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
