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Sprinklr (CXM) Q2 FY2027 — The stock fell 8.6% the same session, from $7.60 to $6.95, on 8.2 million shares against a 3.6 million average. Sprinklr grew subscription revenue 3.4% and the cost of delivering that subscription grew 17.8%, so subscription gross profit went BACKWARDS year on year. Operating expense moved 0.27%. The gross line explains 86% of a $6.3m fall in operating income, and 75% of the fall in gross profit came from professional services - a segment that is 8.8% of revenue and lost 25 cents on every dollar it billed. THE CALL: BEARISH (3/5, MODERATE) — base-case value ~$5.19 vs ~$6.95 today. KEY METRICS: - Total revenue $213.7m, up 0.8%. Subscription $194.8m, up 3.4%. Gross profit $139.2m, DOWN 3.7%. GAAP operating income $10.0m against $16.3m - a 39% fall on a flat top line - Subscription cost of revenue rose 17.8% to $50.9m while subscription revenue rose 3.4%, so subscription gross profit FELL, $145.3m to $144.0m. Margin 73.9% against 77.1% - Subscription gross margin by fiscal year: 82.6% (FY2024), 80.4% (FY2025), 76.4% (FY2026), 73.9% now. At the FY2024 margin this quarter earns $17.1m more gross profit - Professional services: revenue $18.9m, down 19.8%; cost of delivery $23.7m, down 2.4%. A $0.7m gross loss became $4.8m - 75% of the fall in gross profit on 8.8% of revenue - Operating expense is flat: research, sales and admin went $129.3m to $129.7m, up 0.27%. The gross line explains 86% of the $6.3m operating income decline - The FY2026 10-K said so in writing: gross margin 'will decline in the near term due to higher data and hosting costs, coupled with higher service delivery costs' - FY2026 subscription cost carried '$33.3 million' more of third-party data, cloud and network infrastructure. $70.9m of non-cancellable hosting commitments fall due in FY2027 - Non-GAAP operating income $31.3m, down 18.2%, margin 14.6% against 18.0% - but it BEAT the $29.5-30.5m guided in June. Revenue missed its own $214-215m guide - Guidance since March: non-GAAP operating income $144-146m cut to $139-141m; revenue $869-871m cut to $866.5-868.5m. Profit moved $5.0m, revenue $2.5m - $452.9m cash and securities, no borrowings. $200m buyback authorised March 2026, $125.8m executed in H1. Diluted shares down 9.6% to 237.8m - Free cash flow $78.9m in the half against $110.5m, down 28%. Total RPO grew 11% to $1.03bn while revenue grew 1% - the strongest argument against our call - Our model: FY2027 revenue $868m, gross margin held at 65.5%, opex $527m, 9% discount rate. Bear $3.10, base $4.96, bull $8.13, weighted 30/45/25 = $5.19 What to watch: Subscription gross margin back above 76% - the FY2026 level - for two consecutive quarters, or professional services back to breakeven. The Q3 release in early December carries both Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.