AI And International Expansion Will Reshape Global Banking

Key Takeaways

• Expanded AI-driven product suite and digital transformation trends support stronger client engagement, subscription growth, and potential for lasting multi-year revenue gains through international and new market opportunities.
  
• Streamlined operations and AI-led efficiency improvements increase profitability and unlock resources for reinvestment, while faster project delivery accelerates sales and margin enhancement.
  
• Slowing subscription growth, integration risks from acquisitions, operational restructuring, and mounting competitive pressures threaten nCino's margins, scalability, and long-term differentiation.

Catalysts

A software-as-a-service company, provides software solutions to financial institutions in the United States, the United Kingdom, and internationally.

• Recent product launches and embedded AI capabilities (such as Banking Adviser with 16 new features) are driving increased interest from customers seeking workflow automation and improved operational efficiency, which should accelerate subscription revenue growth and strengthen net dollar retention.
  
• Ongoing digital transformation initiatives within global banking, combined with nCino's robust international expansion (notably strong performance in Europe and Japan), position the company to benefit from the continued migration of financial institutions from legacy systems to cloud-based SaaS platforms-supporting multi-year revenue growth.
  
• Strategic cost-saving measures, including a 7% workforce reduction and office downsizing, together with greater use of AI for product delivery and support, are expected to generate approximately $24 million in annualized savings-improving operating margins and enabling further investment in AI and R&D.
  
• Enhanced modular product suite (including mortgage, consumer, and commercial lending as well as onboarding solutions) increases nCino's share-of-wallet opportunity with existing clients and opens new markets (notably credit unions), which should drive higher ACV bookings and longer-term revenue growth.
  
• Shortening implementation cycles through product design optimization and increased AI-driven efficiency is set to reduce project delivery times from months/years to days/weeks, which could unlock faster sales cycles, improved professional services margins, and better pipeline conversion rates-positively impacting both revenue and earnings.

nCino Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming nCino's revenue will grow by 8.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from -5.3% today to 2.9% in 3 years time.
• Analysts expect earnings to reach $20.6 million (and earnings per share of $0.26) by about July 2028, up from $-29.3 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 217.8x on those 2028 earnings, up from -122.6x today. This future PE is greater than the current PE for the US Software industry at 42.7x.
• Analysts expect the number of shares outstanding to decline by 0.67% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.1%, as per the Simply Wall St company report.

nCino Future Earnings Per Share Growth

Risks

• Longer-term deceleration in subscription revenue growth is already forecasted, with guidance for mid-single digit organic growth in FY26 and anticipated difficult comps in the second half, suggesting headwinds for sustained top-line momentum and future revenue expansion.
  
• Persistent customer implementation friction, particularly lengthy deployment cycles and historically heavy reliance on professional services, has been a drag on gross margins and could slow pipeline conversion-making it harder for nCino to rapidly scale and expand profitably.
  
• Growing dependence on M&A (with FullCircl, DocFox, Allegro, and Sandbox Banking) for international and TAM expansion creates integration risks and may mask underlying organic growth challenges; failed integrations or unrealized synergies could dampen net margins and revenue growth.
  
• nCino's restructuring, with a 7% workforce reduction and revealed overcapacity, raises questions on sustained operating leverage and efficiency improvements, with the risk that further rightsizing or cost-cutting could erode R&D investment and long-term differentiation-potentially impacting future earnings.
  
• Intensifying competition from fintech upstarts and established incumbents, coupled with the trend toward commoditized, API-driven, and lower-cost banking platforms, could pressure pricing and customer retention, leading to erosion of gross margins and limiting recurring revenue growth.

Valuation

• The analysts have a consensus price target of $31.786 for nCino based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $38.0, and the most bearish reporting a price target of just $27.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $701.1 million, earnings will come to $20.6 million, and it would be trading on a PE ratio of 217.8x, assuming you use a discount rate of 8.1%.
• Given the current share price of $31.23, the analyst price target of $31.79 is 1.7% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.