CXM Q2 Deep Dive: Transformation Progress and Churn Pressure Offset Growth Initiatives

September 04, 2025 at 09:50 AM EDT

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Customer experience management platform Sprinklr (NYSE: CXM) announced better-than-expected revenue in Q2 CY2025, 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.

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Sprinklr (CXM) Q2 CY2025 Highlights:

Revenue: $212 million vs analyst estimates of $205.4 million (7.5% year-on-year growth, 3.2% beat)
Adjusted EPS: $0.13 vs analyst estimates of $0.10 (29.9% beat)
Adjusted Operating Income: $38.25 million vs analyst estimates of $33.75 million (18% margin, 13.3% beat)
The company lifted its revenue guidance for the full year to $838 million at the midpoint from $826 million, a 1.5% increase
Management raised its full-year Adjusted EPS guidance to $0.43 at the midpoint, a 7.6% increase
Operating Margin: 7.7%, up from 0% in the same quarter last year
Billings: $200.6 million at quarter end, up 4% year on year
Market Capitalization: $2.00 billion

StockStory’s Take

Sprinklr’s second quarter saw revenue and adjusted profitability come in above Wall Street expectations, but the market responded negatively as management highlighted ongoing churn pressures and the continued need for operational improvement. CEO Rory Read described the period as a transitional phase, noting that efforts such as Project BearHug are focused on repairing customer relationships and stabilizing renewal rates. The company’s recent initiatives have begun to show early signs of progress, but management acknowledged that inconsistent execution and technical debt remain hurdles.

Looking forward, Sprinklr’s raised guidance is underpinned by targeted investments in AI-powered product enhancements and a sharpened focus on enterprise customers. Management indicated that the second half of the year will be marked by a transition phase, with the goal of improving customer retention and accelerating growth into next year. CEO Rory Read emphasized, “We believe the investments we are now making and our continued focus on improving execution should begin to show a bend in our business over the next few quarters,” reflecting cautious optimism amid persistent operational challenges.

Key Insights from Management’s Remarks

Management attributed the quarter’s results to cost optimization, expanded AI product usage, and a renewed focus on high-value enterprise clients, while also outlining the operational and strategic changes underway.

Churn Remains a Key Focus: Continued customer churn, especially among mid-market and challenged accounts, pressured renewal rates and net expansion, prompting the launch of Project BearHug to address at-risk relationships among top customers.
AI Product Uptake Drives Costs: Rapid adoption of Agentic AI and AI-powered features led to increased cloud and hosting expenses, which impacted gross margins despite driving customer engagement and future growth potential.
Transformation Leadership Changes: CFO Manish Sarin’s departure and the hiring of a new Chief Revenue Officer and Head of Global Services mark a shift in leadership, intended to accelerate the company’s transformation strategy and strengthen operational execution.
Pricing Model Simplification: The rollout of a hybrid pricing model—combining seat-based and consumption-based elements—aims to improve customer transparency and satisfaction, with early implementation focused on new enterprise accounts.
Enterprise Segment Focus: Management reaffirmed a shift away from smaller accounts, prioritizing global enterprises where the unified platform’s breadth—especially in AI and Customer Feedback Management—can deliver the most value and expansion potential.

Drivers of Future Performance

Sprinklr’s outlook is shaped by increased investment in AI capabilities, a focus on expanding enterprise relationships, and ongoing efforts to reduce churn and improve operational execution.

AI-Driven Product Expansion: Management plans additional investment in AI-powered features across marketing, customer service, and Customer Feedback Management, aiming to expand adoption among large enterprise customers and support growth in subscription revenue.
Operational Execution and Churn: The company’s guidance reflects ongoing efforts to improve customer retention through Project BearHug and enhanced support for major accounts. Management believes better engagement and execution should lead to a gradual improvement in renewal rates and predictability.
Margin Pressures from Investments: While non-GAAP operating margins have improved, management expects near-term margin pressure from higher cloud and infrastructure costs related to AI adoption, as well as increased hiring in technical and go-to-market roles to support the transformation.

Catalysts in Upcoming Quarters

In future quarters, the StockStory team will be watching (1) the effectiveness of Project BearHug in reducing churn and improving enterprise customer renewals, (2) the adoption and monetization of Sprinklr’s enhanced AI and Customer Feedback Management products, and (3) the impact of leadership changes on operational execution. Progress on simplifying pricing and sustaining margin improvement amid higher AI-related costs will also be important markers of success.

Sprinklr currently trades at $7.68, down from $8.62 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free).

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