Sprinklr's Turning Point: Renewals, AI, and the $1B RPO Milestone

Sprinklr's Q1 FY27 earnings call on June 3, 2026, marked a pivotal moment in its transformation. The company delivered a 7% revenue beat to $219.5M, reported the strongest renewal rates since FY24, and crossed the $1B total RPO threshold for the first time. Yet management also flagged Middle East disruptions and a deliberate shift away from services revenue, creating a nuanced picture that has investors both excited and cautious.

Renewals and RPO: A Long-Awaited Bend

The headline story is the improvement in Renewal rates and the durability of contracted demand. Total RPO crossed the $1B mark, a key milestone that CEO Rory Read credited to “the largest software deal in Sprinklr's history” – a multiyear platform agreement with a leading global consumer electronics company. That win, coupled with better execution, pushed net dollar expansion to 104%, the second consecutive quarter of improvement.

We had to move 54 customers on the fly out of a damaged cloud infrastructure environment in the Middle East to Ireland, on the fly, 54 of them.

Renewal momentum has been building for several quarters. As Read noted in the March 11 call, “I told you in 3Q that I began to see a more predictable environment around renewal rates, and that was a good sign.” That predictability has now translated into tangible results.

AI as the Growth Engine and Margin Strain

Sprinklr's AI-native platform is gaining traction, with AI SKUs ARR up 47% year-over-year and over 180 AI engagements in flight. The company is investing heavily in forward-deployed engineers and cloud infrastructure to capture this opportunity, which is pressuring margins. CFO Anthony Coletta explained, “We are prudently investing to capture this opportunity... as we are seeing an increasing number of AI engagements in flight across the platform.”

This investment shows up in gross margin, which declined to 65.2% from 69.6% a year ago. The gross margin compression is a deliberate trade-off, as management expects efficiency gains in the second half. The stock has rallied 37% in the last 90 days, indicating that investors are buying into the long-term story despite near-term margin pressure.

Middle East Headwinds and Guidance Dynamics

The Middle East conflict created a $3-4M revenue slip in Q1 and forced Sprinklr to move 54 customers from a damaged cloud delivery center to Ireland. Despite this, Read noted, “The environment is improving,” and the pipeline remains healthy. However, management chose to keep full-year subscription guidance largely unchanged (3% growth) while lowering total revenue guidance due to a planned decline in professional services revenue, which is expected to normalize to ~10% of total revenue.

This cautious guidance reflects both geopolitical uncertainty and a strategic pivot away from services-heavy projects. The services gross margin is expected to be negative 10% in Q2 as investments in delivery continue. Still, the company raised its subscription revenue guidance for FY27 and expects sequential subscription growth to resume in Q3.

Overall, Sprinklr is executing on its turnaround with clear metrics: renewal rates are improving, Total RPO is at record levels, and the large deal win underscores platform strength. The path to acceleration in FY28 is becoming more visible, even if near-term challenges persist.