Gloo Holdings, Inc. Q2 FY2026 earnings call

• Strategic Growth & AI: Revenue growth is driven by applied AI leadership, specifically Glue AI Studio and agentic workflows that deliver outcomes rather than just tools. Improved frontier models act as a tailwind, increasing efficiency and margins.
• Customer Expansion: The company now has over 30 customers with annual contract values exceeding $1 million, including its first customer exceeding $10 million. Acquisitions like Cedarstone added over 250 new mid-market clients, facilitating cross-selling opportunities.
• Vertical Penetration: Universities are emerging as a strong growth vertical, with over 40 universities in the client portfolio. The strategy focuses on 'land, expand, and expand' within these segments.
• Product Innovation: Launched GlueCode, an agentic building capability within Glue AI Studio, aimed at helping developers optimize token usage. A hackathon is scheduled for October to drive developer adoption.
• M&A Integration: Completed five acquisitions since going public, including Westfall Gold, XRI, EMD, Midwestern Interactive, and Cedarstone. Synergies are realized through cross-selling and operational integration, reducing duplication while expanding capabilities.
• Financial Discipline: Despite high growth, the company maintained cost discipline, taking $4.4 million in restructuring charges to integrate acquisitions. Adjusted EBITDA improved sequentially to negative $8.3 million, moving toward breakeven.

Total revenue increased 188% year-over-year to $46.6 million, with a 12% sequential increase from Q1. Platform solutions revenue grew significantly to $22.9 million (up 209% year-over-year), representing approximately 49% of total revenue. Total platform revenue (including other segments) reached $23.6 million, up 170% year-over-year. Cost of revenue improved to 64.0% of total revenue, a 10.8 percentage point improvement from the prior year period.

• Full-year 2026 revenue guidance raised by $5 million to $200 million, inclusive of the Cedarstone acquisition.
• Q3 2026 revenue expected to be $55 million.
• Q3 2026 adjusted EBITDA expected to narrow to negative $3.5 million, a nearly $5 million improvement from Q2.
• Management expects adjusted EBITDA profitability to be achieved in Q4 2026.
• Q3 weighted average share count expected to be approximately 90 million shares.

• Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from expectations.
• Specific risk factors are detailed in SEC filings, including the Form 10-K for the fiscal year ended January 31, 2026, and subsequent Form 10-Q reports.
• Operational failures or integration issues from acquisitions could impact performance if synergies are not fully realized.

Q: Analyst asked about the drivers of margin improvement, specifically distinguishing between cost synergies and gross margin step-ups, and sought visibility into the revenue mix between backlog and new sales. / A: CEO confirmed significant progress in margins, expecting further operating expense leverage in coming quarters. He highlighted strong visibility due to a robust pipeline and growing recurring revenue base, noting that cross-selling across capital partners is accelerating growth beyond initial contracts.

Q: Analyst inquired about the trajectory of profitability post-Q4 breakeven, asking if seasonal dips should be expected. / A: CFO explained that Q3 is typically the strongest quarter due to advertising and fundraising seasons for key units like Masterworks and Westfall. Q4 sees moderate growth due to Christmas and January falling in the fiscal year. Looking ahead to 2027, the focus shifts to becoming pre-cash flow positive in the back half of the year.

Q: Analyst requested details on the cross-sell motion, specifically how much business is driven by existing vs. new customers and the structure of sales incentives. / A: Pat Gelsinger noted that formalized sales compensation programs now incentivize cross-selling across all sellers. Scott Beck emphasized that acquisitions like Cedarstone bring trusted relationships; for instance, Cedarstone’s accounting and donor services clients present immediate cross-sell opportunities to Masterworks, creating a powerful flywheel effect.

Q: Analyst asked how the company balances LLM costs with cutting-edge AI adoption, referencing token price fluctuations. / A: Pat Gelsinger stated that Glue Studio acts as an open router, selecting the most cost-effective models (often open source) for specific tasks to manage costs while delivering superior experiences. He noted that while token prices have dropped, demand remains unlimited, and agentic workflows allow them to lower delivery costs and improve margins simultaneously.

Q: Analyst asked about the role of Forward Deployed Engineering (FDEs) in overcoming AI adoption bottlenecks and M&A gaps. / A: Pat Gelsinger identified FDEs as a key differentiator, providing talent and implementation support that customers lack. He cited Midwestern and Glue 360 as examples where FDEs act as CIO/CTO extensions. Regarding M&A, the company seeks capabilities, customer bases, and denominational expertise to fill gaps, such as adding Workday functionality via EMD or marketing synergies via Cedarstone.