Rising Regulations And Concentration Risks Will Undermine Performance

Key Takeaways

• Increasing data privacy regulations and social media platform restrictions threaten core platform value, risking higher customer churn and constrained long-term revenue growth.
  
• Overreliance on a few large customers, intensifying pricing pressure, and compliance demands heighten volatility and limit profit margin expansion.
  
• Enhanced enterprise adoption, strategic innovation, and operational improvements are strengthening Sprinklr's market position, supporting long-term growth, customer retention, and industry recognition.

Catalysts

Provides enterprise cloud software products worldwide.

• Despite Sprinklr's leadership in unified customer experience software, heightened global data privacy regulations and potential for more restrictive data access policies from social media platforms threaten to undermine the core value proposition of its platform, which could drive increased customer churn and limit net new revenue growth long term.
  
• Intensifying enterprise scrutiny of AI, automation, and ethical data usage raises the risk that large customers will either delay purchasing decisions, demand significant price concessions, or even migrate to competitors with stronger compliance postures, putting further pressure on both renewal rates and average revenue per customer, making it difficult to sustain current gross margins or expand net margins.
  
• The company's overreliance on a concentrated group of top customers, evidenced by 80% of revenue coming from its 500 largest accounts, significantly increases susceptibility to account downsizing or logo churn-especially if Sprinklr's ongoing execution and post-sale support challenges persist, which could result in unpredictable and volatile revenue and earnings streams in future years.
  
• Industry-wide pricing pressure is likely to intensify due to a proliferation of lower-cost or open-source customer engagement platforms and increasing sector consolidation; this could force Sprinklr to lower prices or increase sales incentives, crimping gross margins and curtailing overall profitability even as operational expenses rise, with negative downstream effects on operating income and cash flow.
  
• If major platforms such as Meta, X (Twitter), or TikTok significantly restrict API or data access, Sprinklr's ability to deliver unified analytics and actionable insights for customers could be abruptly diminished, eroding its product differentiation and stalling revenue growth, with a long-term risk of failing to meet investor expectations on both top-line and bottom-line performance.

Sprinklr Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Sprinklr compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Sprinklr's revenue will grow by 3.2% annually over the next 3 years.
• The bearish analysts assume that profit margins will shrink from 13.6% today to 6.3% in 3 years time.
• The bearish analysts expect earnings to reach $55.7 million (and earnings per share of $0.07) by about July 2028, down from $109.4 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 43.4x on those 2028 earnings, up from 21.5x 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 grow by 2.12% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.93%, as per the Simply Wall St company report.

Sprinklr Future Earnings Per Share Growth

Risks

• Sprinklr is experiencing strong free cash flow generation and has initiated a $150 million stock buyback program, signaling confidence from management and providing potential support for share price appreciation by returning capital to shareholders.
  
• The company is seeing early success with large enterprise customers, citing a record number of customers generating at least $1 million in annual subscription revenue and highlighting growing adoption among iconic global brands, which may drive stable and expanding revenues over time.
  
• Sprinklr is actively executing a transformation strategy that includes strengthening its go-to-market execution, investing in AI-powered solutions, and expanding cross-functional product integration, all of which are designed to position the company to benefit from secular industry trends toward unified customer experience management and digital transformation, potentially leading to higher average deal sizes and margin expansion.
  
• The leadership team has introduced new business management and analytics systems, along with a collaborative pod-based sales structure, and is prioritizing proactive customer engagement through initiatives like Project Bear Hug, which are already helping to stem churn and deepen customer relationships, suggesting improvements in renewal rates and future upsell opportunities.
  
• Strong recognition by third-party analysts such as Gartner and Forrester, along with consistent innovation in AI and expansion into CCaaS, positions Sprinklr advantageously within the industry, enabling it to capture opportunities arising from the proliferation of digital channels, rising demand for personalization, and increased focus on unified platforms, which could fuel long-term revenue growth and improved profitability.

Valuation

• The assumed bearish price target for Sprinklr is $7.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Sprinklr's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $17.0, and the most bearish reporting a price target of just $7.0.
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $885.8 million, earnings will come to $55.7 million, and it would be trading on a PE ratio of 43.4x, assuming you use a discount rate of 7.9%.
• Given the current share price of $9.09, the bearish analyst price target of $7.0 is 29.9% lower.
• 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.