Sprout Social (SPT) Q3 FY2026 Earnings Call: Margin Reaches 21% as Trellis Expands

Sprout Social (NASDAQ: SPT) reported Q3 FY2026 revenue of $125.1 million, while operating leverage and free cash flow improved sharply. Management emphasized enterprise adoption, Trellis monetization and cost discipline, but said cautious customer spending continued to pressure new business and expansion.

Key Takeaways

• Revenue increased 8.3% year over year to $125.1 million. Non-GAAP operating income reached $26.3 million, representing a 21% margin and a 910-basis-point annual improvement.
• Non-GAAP free cash flow rose 158% year over year to $26.7 million. Trailing-12-month non-GAAP free cash flow was approximately $71 million, up 70% from the prior period.
• Subscription revenue from customers contributing at least $30,000 in ARR grew 18% year over year and exceeded 62% of total subscription revenue.
• The company ended Q3 with 3,925 customers contributing at least $30,000 in ARR, down one sequentially but up 6% year over year. Customers contributing at least $150,000 grew 22% year over year.
• Trellis is now available across every plan and in the trial experience. Thousands of customers are using the AI offering, while Sprout Social is adding shared credits as an enterprise-oriented monetization option.
• Management expects Q4 FY2026 to be Sprout Social’s first GAAP-profitable quarter and raised its full-year non-GAAP operating income outlook.

Key Financial Data

Sprout Social used more than $26 million of its $50 million repurchase authorization to buy 2.6 million shares at an average price of $10.25 per share, including commissions.

Business and Operating Performance

Sprout Social continued shifting toward larger, more sophisticated customers. The $30,000-and-above ARR cohort generated more than 62% of subscription revenue, compared with a 38% contribution from customers below that threshold. Management said larger customers offer stronger unit economics, retention and expansion profiles, while adopting more products such as Influencer Marketing and NewsWhip.

The strongest customer growth remained at the upper end. Customers with at least $50,000 in ARR increased 11% year over year, while those with at least $150,000 grew 22%. Sprout Social added more than 10 customers in the $150,000-and-above category during Q3.

Management highlighted an almost $250,000 ARR deal with a Fortune 500 technology company covering Trellis Plus, Premium Analytics, Listening, Employee Advocacy and Premier Success. It also cited an almost $200,000 ARR entertainment-sector win and a six-figure expansion with a global manufacturer that renewed 10 months early, committed for another three years and more than doubled its annual contract value.

Trellis now spans Listening, Publishing, the Smart Inbox and Reporting. Sprout Social said its data engine processes more than 2 billion social messages daily across more than a dozen networks. Trellis Plus initially used per-seat pricing, and the company is introducing shared credits that can be used across employees and automations.

For customers below $30,000 in ARR, Sprout Social is pursuing a lower-cost, self-service model. Essentials became generally available in July, with digital acquisition, onboarding, support and expansion intended to improve unit economics across the segment.

Management Guidance

Management’s outlook assumes no improvement in the demand environment. The company expects Q4 FY2026 to be its first GAAP-profitable quarter and is targeting sustainable quarterly GAAP profitability thereafter.

Sprout Social also reaffirmed its target of reaching 30% under its Rule of 40 framework by Q4 FY2027. Management said the composition is expected to be weighted more heavily toward profitability, given the anticipated Q4 FY2026 margin exit rate.

Risks and Watchpoints

• Cautious customer spending pressured new business and expansion, particularly among customers in the $30,000-to-$50,000 ARR range.
• Management cited tighter budget scrutiny, more stakeholders in approval processes and greater demand for ROI and total-cost-of-ownership justification, all of which have lengthened sales cycles.
• AI spending is competing with other budget priorities at some customers, although management said social media remains mission-critical.
• Q4 is historically Sprout Social’s largest bookings quarter. Because revenue is recognized ratably, management said Q4 booking outcomes would have a greater effect on FY2027 than on Q4 revenue itself.
• Q3 benefited from hiring timing and other one-time factors. Management does not expect those benefits to recur in Q4.
• Contract durations shortened in Q3, affecting RPO comparisons, although management characterized this as a quarterly fluctuation rather than an ongoing issue.

Analyst Q&A Highlights

Trellis adoption and monetization: Management said thousands of customers are using Trellis and that the product featured in all three major customer transactions discussed during the call. Monetization remains early, but the shared-credit model is intended to support enterprises with large user counts and varied use cases.

Midmarket pressure: Weakness was concentrated in the $30,000-to-$50,000 ARR range. Gross retention remained stable, while pressure was more visible in new customer additions and expansion. Management expects improvement in this range during Q4.

ACV growth: The 12.1% increase reflected both customer mix and higher ACV across cohorts. Management attributed the gains to broader multiproduct adoption spanning Listening, NewsWhip, Influencer Marketing and Employee Advocacy.

Enterprise opportunity: Management sees growth from both new customers consolidating multiple vendors onto Sprout Social and existing customers expanding into additional products and departments.

Search disruption and social channels: Management said customers are increasingly discussing how AI answers, answer engine optimization and generative engine optimization affect traditional SEO. The company views stronger social content and engagement as supporting how brands appear in large language model results.

Full Earnings Call Transcript

Complete Earnings Call Transcript

Management Remarks

Operator

Hello, everyone. Thank you for joining us, and welcome to the Sprout Social Third Quarter 2026 Earnings Call. [Operator Instructions]

I will now hand the call over to Lexi Johnson, Investor Relations Manager. Lexi, please go ahead.

Alexis Johnson

Thank you, and welcome to Sprout Social's third quarter 2026 earnings call. We will be discussing the results announced in our press release issued after market close today, and have also released an updated investor presentation, which can be found on our website. With me are Sprout Social's CEO, Ryan Barretto; and Vice President of FP&A, Erin Graupmann.

Today's call will contain forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward-looking. These include, among others, statements concerning our expected future financial performance, including our Q4 and 2026 outlook and business plans and objectives, and can be identified by words such as expect, anticipate, intend, plan, believe, seek, opportunity, target or will. These statements reflect our views as of today only and should not be relied upon as representing our views of any subsequent date, and we do not undertake any duty to update these statements.

Forward-looking statements address matters that are subject to risks and uncertainties that could cause actual results to differ materially. For a discussion of the risks and other important factors that could affect our actual results, please refer to our annual report on Form 10-K for the year ended December 31, 2025, as well as our quarterly report on Form 10-Q for the quarter ended September 30, 2026, to be filed with the SEC.

During the call, we will discuss non-GAAP financial measures, which are not prepared in accordance with generally accepted accounting principles. Definitions of these non-GAAP financial measures, along with reconciliations to the most directly comparable GAAP financial measures are included in our third quarter earnings release, which has been furnished to the SEC and is available on our website at investors.sproutsocial.com.

As a reminder, we will be referring to the metric approximated subscription revenue contribution for customers contributing $30,000 and above in ARR. This metric is intended to approximate the subscription revenue of a subset of customers over a historical period by using their average ARR as a proxy and annualizing this quarterly estimate on a trailing 12-month basis. For brevity, we'll refer to this metric through the rest of this call as $30,000 and above subscription revenue.

Now let me turn the call over to Ryan. Ryan?

Ryan Barretto

Thank you, Lexi, and welcome to our third quarter earnings call for fiscal 2026. Sprout delivered another quarter ahead of expectations with revenue of $125.1 million, representing 8.3% year-over-year growth. Non-GAAP operating income came in well ahead of expectations at $26.3 million, representing a 21% margin, up 910 basis points year-over-year. This is an all-time quarterly high for Sprout, and we currently expect Q4 to be our first-ever GAAP profitable quarter, which is a significant milestone, illustrating our focus on cost discipline.

Current remaining performance obligations grew 8.4% year-over-year to $280.2 million and total remaining performance obligations grew 10.3%. Sprout also delivered strong non-GAAP free cash flow in the third quarter at $26.7 million, an improvement of 158% year-over-year. On a trailing 12-month basis, the company has generated approximately $71 million in non-GAAP free cash flow, an improvement of 70% over the prior period. We believe this improvement underscores our ability to drive leverage in our model.

In Q3, Sprout Social earned #1 rankings across social media management, analytics, listening tools and social customer service in the G2 Fall of 2026 Grid Reports. We believe this recognition from user reviews illustrates the continued value our products provide to our customers. Q3 marked a turning point for AI at Sprout as Trellis moved from a set of features into the way an increasing number of our customers work every day.

In July, we made Trellis available to every customer on every plan, and its capabilities now span listening, publishing, the smart inbox and reporting, acting as a single intelligence layer across the platform. With thousands of customers using Trellis already, we're optimistic about our opportunity to further monetize those capabilities as adoption scales.

We believe what sets Trellis apart is the data powering its insights. We believe social is the voice of the customer and the voice of culture and generalized AI tools have limited access to it. Sprout's data engine ingests more than 2 billion social messages a day across more than a dozen networks with privileged access we've built over 16 years. That is the foundation for Trellis and for the agentic capabilities we're building.

An AI agent is only as good as the data it can see, and that shapes 2 things we believe customers care most about. The first is quality. Trellis draws on the full volume of the conversation directly from the networks, so the insights are more complete and delivered in real time. The second is trust. The data is licensed and governed versus the script web pages, links and press clips that generalized AI tools rely on. And we pair it with purpose-built models grounded in our expertise in social.

Trellis is designed to analyze, interpret and summarize that raw social data and transform it into insights tuned to each brand, so customers can rely on them in campaign planning and business decisions. This is why customers turn to Trellis for this kind of work. The Chicago Cubs use Trellis in listening to help them monitor and inform their leadership on fan sentiment around ownership, ticket launches, the CBA lockout and trade deadlines. The team there specifically mentions the ease of uncovering these trends and packaging them into summaries and recommendations that previously took hours to collate.

But we're also seeing teams push Trellis well beyond listening. At Cornerstone Building Brands, one of North America's largest makers of exterior building products, Trellis is turning data overload into centralized analysis and automated reporting across 35 brands, each tailored to its own priorities. Social media specialist, Chelsey Godfrey, told us that by connecting social intelligence to measurable business goals, we've positioned social as a source of market intelligence rather than just a marketing channel.

A Fortune 25 healthcare company uses Trellis to produce social intelligence newsletters for executives. Every week, leaders get a read on market trends, industry shifts and emerging opportunities, so company strategy stays tied to what's happening in the market.

And at Tag Americas, a global creative production partner to major brands and agencies, social intelligence comes first. Every creative idea is checked against market signals before a single asset is produced. They use listening to find unexpected overlaps between brands and audiences, and leverage live dashboards pulling directly from Sprout to show stakeholders what social is doing for the business.

Steven Glasgow, Senior Director of Social, shared in our customer community that by the time a concept reaches a CMO, it isn't just a creative intuition, it's a data-backed business decision. Across these examples, social data is reaching further into the business, powered by Sprouts agents.

AI is also changing how customers buy from us. We've built a clear path from free to paid. Every customer starts with a baseline of Trellis access at no additional cost. When they need more agentic work done, they can buy Trellis Plus per user seat. And based on customer feedback and demand, we're now introducing a shared credits option, one pool that every user and every automation draws from, which we expect to be appealing to enterprises with large user counts and very different use cases.

As Trellis does more work in the background, usage can scale with the value customers get. We believe Trellis can open the door to broader adoption within existing accounts and strengthen our new business offering. Trellis is also teaching us where organizations find the most impact and value in agentic experiences. What we learn from how our customers use it today will guide how we bring more proactive, autonomous capabilities to the platform.

In Q3, we also expanded the capabilities of Trellis. Now in social listening, customers can describe what they want to listen for in plain language and Trellis builds the query for them, including what to include and what to exclude, so it's easier and faster for any user to get to the insights they need. We also made Trellis available within the trial experience, so every prospect can now get hands on and evaluate the power of Trellis even before they become a Sprout customer.

In NewsWhip, we introduced AI sentiment analysis. NewsWhip has always shown customers what's being published about their brand and how fast it's spreading. Now they can see how it lands. The AI is designed to read each article in context and judge whether a reasonable reader would think differently about the brand afterward, and customers can tailor it to the key messages and narratives they care about.

In Influencer Marketing, brand safety now evaluates creator content across images, video and audio, not just text, so brands can review the content itself before it runs and while a campaign is live. And for enterprise customers, we automated user management with Okta and Entra ID, and expanded data masking and blocked words that can be routed for approval, giving enterprise teams even more control over who has access and what gets published.

As we've been discussing with you for the past few quarters, our strategy is increasingly focused on larger, more sophisticated customers where our platform breadth, product road map and go-to-market investments are most aligned with their needs. Our progress is visible in the changing mix of our business. This quarter, approximated trailing 12-month subscription revenue for customers contributing $30,000 or more in ARR grew 18% year-over-year, and now contributes over 62% of total subscription revenue.

This larger customer segment has stronger unit economics and a better retention and expansion profile, and they tend to adopt more of our strategic products than our smaller customers do. In fact, this cohort carries an average ACV multiples higher than our total average ACV with higher attach rates of products like Influencer Marketing and NewsWhip.

As we look to the remainder of 2026, we continue to expect this segment to represent an increasing percentage of our subscription revenue. In Q3, we did see pressure in net adds. We ended the quarter with 3,925 customers contributing $30,000 or more in ARR, down one sequentially with the lower adds concentrated mostly in the $30,000 to $50,000 range. Similar to other SaaS providers, we continue to experience a cautious macroeconomic landscape. This impacted new business and expansion trends during the quarter. At the same time, and despite the macro pressures, we were pleased to see customer retention remain stable in this cohort.

We're also encouraged by the success at the higher end of the $30,000-plus segment. Customers at $50,000 or more in ARR continue to grow, up 11% year-over-year. And the number of customers at 150,000 or more grew 22% year-over-year. We also added over 10 customers at $150,000 or more in ARR in Q3, consistent with last quarter, which we believe illustrates the traction we are seeing upmarket despite the current demand environment.

As we dig into some of our customer wins from the quarter, the trends become more clear as to why we see so much opportunity with our large customer cohort. I'll start with an impressive almost $250,000 ARR new business deal with a Fortune 500 technology company, illustrating Sprout's ability to eliminate enterprise vendor sprawl and drive massive organizational adoption. They came to us with a fragmented social stack and consolidated it on Sprout, investing in Trellis Plus, Premium Analytics, Listening, Employee Advocacy and Premier Success, 5 products in a single new logo is what vendor consolidation looks like at this scale.

What stands out to me is the adoption. The previous employee advocacy program had stalled and with easier onboarding and role-based permissions and now runs across thousands of employees with campaign reporting replacing the manual tracking. We also put social intelligence in the hands of people who aren't data scientists so they can build topics, benchmark competitors and read sentiment without writing Boolean queries.

And for their executives, secure access and automated reporting keep leadership informed on social trends without adding work for the team. This is a pattern we are seeing with larger customers. They want one trusted platform they can roll out across the entire organization.

Next is a new business win at a major American entertainment company with almost $200,000 in ARR. Their challenge is volume. They manage a large roster of artists and labels, pushing out a high volume of content and fielding massive inbound audience engagement. They chose Premium Analytics, Influencer Marketing, Trellis Plus and Premier Success to bring all of it onto one platform.

What they're doing with Sprout comes down to 2 things. First, running social campaigns at scale with confidence, one release calendar with multilevel approvals and mobile workflows so their teams can publish on the go at live events. Second, knowing what's working with creators and fans. They're building a creator database so they can vet brand safety and improve ROI creator by creator. And on fan engagement, our AI-powered inbox intelligence triages incoming messages across all of their profiles and surfaces sentiment and audience themes so the team can see what fans care about at scale.

Last is a 6-figure ARR expansion with a leading global manufacturer behind household brands. They renewed 10 months early, committed to 3 more years and more than doubled their annual contract value. We believe this multiyear commitment illustrates the value customers see in Sprout as a strategic platform. They consolidated their market research and customer engagement onto Sprout, replacing several incumbent point solutions, and their suite now includes Premium Analytics, Listening, Service Cloud, Trellis Plus, NewsWhip and Premier Success.

What I like about this one is how it moves the customer from watching and waiting to anticipating and acting. When you own brands that are this visible, hearing about a story late is expensive and problematic. NewsWhip lets them forecast media spikes up to 24 hours ahead with greater accuracy so they can prepare before a story peaks. Sprout also tracks the environmental sustainability conversation around the company and AI agents compose executive-ready summaries that allow leadership to act on reputational risk early. For a brand like this, social is where reputation gets decided and Sprout is giving them a head start.

Next, I'd like to turn to our strategy for customers below $30,000 in approximated subscription revenue. This cohort represents 38% of approximated subscription revenue in the trailing 12 months ended September 30, 2026, compared to 59% in the trailing 12 months ended June 30, 2022. This 20-plus point shift reflects our multiyear move towards larger and more strategic customers, while also highlighting the opportunity we have to serve this part of the market with a more efficient product and go-to-market motion.

As you may recall, we outlined 2 pillars of our strategy for the segment, evolving our self-serve motion through automation and AI and reworking the low end of the market around a simpler purpose-built product. The Essentials product is one component of our broader self-serve strategy for the sub-$30,000 customer cohort, a fully digital, no sales touch experience. We're extending the self-serve model across the full customer life cycle from acquisition through onboarding, support and expansion with the goal of improving unit economics across the entire lower segment, not just at the point of initial purchase. Our Essentials product went GA in July, following positive signals from our initial testing. Together, all these efforts are designed to make the self-serve motion a scalable, efficient engine for the lower segment.

I'll now run through our quarterly financial results and then discuss our outlook for Q4 and fiscal 2026. Q3 total revenue was $125.1 million, representing 8.3% year-over-year growth. Our third quarter results were highlighted by a quarterly non-GAAP operating margin of 21%, up 910 basis points year-over-year. This came in ahead of expectations due to top line overperformance alongside several onetime factors, including the timing of hiring.

We ended the quarter with 3,925 customers contributing $30,000 or more in ARR and 2,155 customers over $50,000 in ARR, up 6% and 11%, respectively, year-over-year. Since the fourth quarter of 2022, we have added over 1,900 customers contributing $30,000 or more in ARR and over 1,100 customers contributing $50,000 or more in ARR. Growing these more socially sophisticated customers remains a central part of our longer-term strategy.

Turning to cash flow. We generated $26.7 million in non-GAAP free cash flow during the quarter, an increase of 158% from the prior year. For the 9 months ended September 30, we generated $59.8 million in non-GAAP free cash flow, a 71% improvement over the same period last year. As we've communicated previously, we expect our non-GAAP free cash flow margin to closely track our non-GAAP operating margin on an annual basis, and we remain committed to growing both non-GAAP and GAAP operating leverage on a fiscal year basis.

Q3 ACV increased 12.1% year-over-year, reflecting the continued mix shift towards larger, more sophisticated customers and broader adoption of higher-value products across the platform. Expanding ACV remains a core part of our strategy, and we see continued opportunity to grow customer value through products like Influencer Marketing, customer care, Premium Analytics and NewsWhip.

Turning to RPO. Recall that last quarter, we called out the growth in both total RPO and cRPO benefited due to longer contract durations as well as timing of renewals. In Q3, we also lapped the acquisition of NewsWhip. As a result, and as we expected, year-over-year growth on these metrics moderated to be more in line with recent trends.

In Q3, total RPO totaled $393.9 million, representing growth of 10.3% year-over-year. We expect to recognize 71.1% or $280.2 million of total RPO as revenue over the next 12 months, representing cRPO growth of 8.4% year-over-year. We ended the quarter with $103.7 million in cash and cash equivalents, up from $90.6 million a year ago.

In Q3, we deployed over $26 million of our $50 million buyback authorization to acquire 2.6 million shares in the quarter at an average price of $10.25, including commissions. The buyback reflects our confidence in the durability of our business, our ability to generate free cash flow and the long-term opportunity we see ahead. We plan to remain agile in deploying capital to deliver the best return for shareholders, and we'll continue our disciplined approach to our spend, while maintaining flexibility to invest behind Trellis and AI-driven product expansion.

Moving on to guidance. Our outlook assumes that we will not see an improvement in the demand environment. We expect the backdrop to remain consistent with what we experienced this quarter. While we aren't offering guidance for fiscal 2027 today, it's worth noting that Q4 has historically been our largest bookings quarter. With ongoing pressures continuing to impact both new business and expansion, these headwinds could contribute variability in our Q4 performance and as a result, impact our 2027 trajectory. As usual, we'll offer our next fiscal year guidance on our Q4 earnings call.

For the fourth quarter of fiscal 2026, we expect revenue in the range of $124.2 million to $125.2 million. Non-GAAP operating income in the range of $21.4 million to $22.4 million. Non-GAAP net income per share between $0.36 and $0.38. This assumes approximately 59 million basic weighted average shares of common stock outstanding. And as I mentioned earlier, we currently expect to achieve GAAP profitability in Q4, reflecting our focus on cost discipline and financial stewardship. Importantly, we're targeting GAAP profitability on a sustainable quarterly basis looking ahead.

For fiscal year 2026, we expect revenue in the range of $494.7 million to $495.7 million. For the year, we're raising our outlook on the bottom line. We now expect non-GAAP operating income in the range of $77.8 million to $78.8 million. For modeling purposes, we expect to exit Q4 '26 with a non-GAAP operating margin of approximately 18%. This is 1 point ahead of our expectations last quarter and non-GAAP net income per share between $1.29 to $1.31, assuming approximately 59.7 million basic weighted average shares of common stock outstanding.

Finally, we are reaffirming our target of reaching 30% under our Rule of 40 framework by the fourth quarter of fiscal 2027. Given our Q4 '26 exit run rate, it would be fair to assume the composition will be more heavily weighted towards the bottom line. We expect continued growth in our $30,000 and above customer segment with continued headwinds from customers below $30,000. Our focus is improving the quality and durability of growth, while continuing to expand non-GAAP profitability.

Note that our guidance excludes the impact of any potential share repurchases for purposes of our earnings per share outlook given the timing and amount of repurchases is inherently uncertain and subject to a number of restrictions and other requirements.

In conclusion, I'm pleased with our progress in Q3. Looking ahead, we are targeting GAAP profitability on a sustainable quarterly basis, improving non-GAAP annual free cash flow margin and continuing to invest in our business innovation. Together with our focus on larger, more sophisticated customers, we believe this improves the quality and durability of our growth.

And with that, Erin and I are now happy to open up the call for questions. Operator?

Operator

[Operator Instructions] Your first question is from the line of Rob Oliver with Baird.

Question-and-Answer Session

Robert Oliver

Ryan, 2 questions for you. First, just on Trellis, I would love to hear just early feedback you're getting on Trellis, what, if any, role its played in some of the large wins that you called out? I think you called out a $250,000-plus deal with -- and the enterprise wins where you're still seeing the strength, what role it's playing. And then in particular, around the pricing, I know you guys have set Trellis Plus at a specific price point, but included some functionality of Trellis in the core seats. So I just wanted to get an understanding for those 3 things, traction that you're getting, participation in the larger deals and then any early reads on how enterprises are responding to pricing?

Ryan Barretto

Thanks, Rob. Appreciate the question. We're really excited about the progress that we saw in Q3. I would call it a real big step forward for us here. In Trellis, as you may remember, in July, we made Trellis available to every customer on every plan. And then we released Trellis Plus, our paid tier, which went live in the same month. And so we've seen Trellis really move from a set of features into the way an increasing number of our customers are working every day, and we have thousands of customers that are leveraging those capabilities.

And so if we think about where it is today, Trellis is spanning across listening, publishing, the smart inbox and reporting. And it's really acting as a single intelligence layer across the platform. And then we also just made Trellis available in the trial experience, so prospects can get their hands on it and evaluate it before they officially become customers. And we really believe that this strengthens our new business offering as well. So the feedback has been good from customers here.

If I think about the use cases, and you heard some of this in the prepared remarks, but we're seeing Trellis ground executives on creative decisions, really giving them real-time social signals before they're investing dollars, and you heard that in the media company as well as the Cubs. We're seeing Trellis really turn social from a marketing channel into intelligence for the entire business, and we're seeing it across comms and care to the product organization and the C-suite, and we shared that in the manufacturing brand. And then we're really seeing Trellis help brands from a reputational risk perspective as well. So a lot of good progress there.

From a pricing perspective, we really aim to create a clear path from free to paid. As you might remember, as we were rolling this out, one of the first goals here was to really drive awareness, usage adoption. And then as we've seen that, we've introduced the Trellis Plus to ensure that our customers as they're continuing to drive a higher baseline of usage that they -- that it becomes an opportunity for growth as well.

So we started with that as a per user seat. And then based on customer feedback and demand, we're introducing this quarter a shared credits option, which is a pool that every user and every automation will draw from, which we believe is going to be especially appealing to enterprises with larger user counts and very different use cases. So lots of progress in terms of the capabilities being delivered, really good feedback from customers and a good setup for monetization.

Robert Oliver

That's really helpful. I appreciate all the color. And if I may squeeze in one more. Just on that kind of midrange customer where you called out some of the weaker activity. I think it was the $30,000 to $50,000 customer. Just would love to hear from you, Ryan, just your take on kind of the general health of that customer. I know you said not unlike a lot of other software companies, and indeed some are feeling that as well. You guys have a really nice plan to deal with very efficiently the sort of very low-end customers. You're having success at the high end. That midrange has been a bread and butter for you guys over the years. So just would love to hear how you guys are changing, how you expect that customer to change, how you're addressing that element of your market?

Ryan Barretto

Yes, I appreciate it. Yes. So in Q3, I mean, we had 3,925 customers at that $30,000 or more, which was down one sequentially. And the lower adds pressure was really concentrated mostly in that $30,000 to $50,000 range. And to the point there, Rob, we're seeing some of the macro pressure showing up in how buyers are making decisions. We're seeing it from buyers applying more scrutiny to budget, more stakeholders involved in the decision-making and approvals and then just a push for more ROI and TCO business cases. And these dynamics have lengthened sales cycle and weighed on both new business and expansion.

At the same time, I want to call out that the gross retention in this cohort has remained stable. So the pressure is on new customer adds and expansion. And when we look at the dollars in the cohort, approximated subscription revenue contribution from these customers grew 18% year-over-year and represents now 62% of our total. We also saw in Q3, ACV up 12.1%. And then if you look at the customer count by size, the growth is at the higher end. The customers at $50,000 or more grew sequentially and are up 11% year-on-year. And then our customers at $150,000 or more are up 22% year-on-year, and we added over 10 in Q3, which was consistent with last quarter. So we don't anticipate this trend to continue for that $30,000 to $50,000 range, and we expect improvement here in Q4.

Operator

Your next question is from Matt VanVliet with Cantor.

Matthew VanVliet

I guess as you look at the 12% gain in average ACV, I guess how much of that is just attributed to the mix shift of larger customers in the total count versus some of those small customers? And then what's not explained by that, be curious on how much uplift you've actually seen to-date on the paid Trellis versus just traditional cross-sell?

Ryan Barretto

Yes. Thanks, Matt. Yes. I mean on the ACV side, I mean, there's some mix shift here, but I would also call out that we're seeing ACV gains across all the cohorts here. And this is sort of a combination of we're seeing these deeper use cases. We're seeing multiproduct. We talked a lot about the customer stories in the prepared remarks. We're seeing multiproduct with customers buying for not just marketing use cases or care, but they're adding in social intelligence through things like Listening and NewsWhip as well as Influencer Marketing and Advocacy. And we see this opportunity across the board, not just in the largest customers. So that's a little bit of background on the ACV.

And then on the Trellis monetization side, I'd say we're still pretty early here. What we are seeing, again, is just really good adoption and usage from the time that we deployed to GA in the summer. We're clearly starting to have our first customers in this past quarter as we released the Trellis Plus coming in and buying. The 3 customer stories that we shared here all had Trellis as a part of that, which we view as an important differentiator for us and a driver in that ACV conversation. And again, here, as we roll out the pool credits model in Q4, we believe we'll have more to talk about in the next call just in terms of our progress with larger customers choosing that monetization approach.

Matthew VanVliet

Very helpful. And then you mentioned some of the margin upside in the third quarter had some benefits from just hiring timing. Curious on how the total amount of hiring in the third quarter compared to your internal plans? How much of that was truly kind of in just the last couple of weeks of the quarter? And how does that portend into like fourth quarter hiring and expectations for the rest of the year?

Erin Graupmann

I'll take this one. This is Erin. I think in terms of the timing of hiring in Q3, we saw it across the quarter in which hiring was a little bit beyond what we had anticipated from a plan perspective. We are seeing some momentum heading into Q4 in terms of catching up on some of that hiring. We aren't going to quantify the impact from the timing of hiring, but I will say there were a couple of onetime factors that impacted it, which is part of why we were at the 21% for Q3. That said, we do expect about 18% for Q4, which is still up about 800 basis points versus last Q4, and we don't expect that to have the same onetime impact.

Operator

Your next question is from the line of Parker Lane with Stifel.

J. Lane

Ryan, going back to the $150,000 cohort, really solid growth that you saw there. I was just wondering if you could comment on the opportunity set you see around those particularly large deals? Like how much social maturities or social media maturity is taking place inside of the enterprise still? Is there still a fair number of opportunities to go out there and land at that level? Or is the primary way that you're seeing growth in that channel through expansion of existing customer relationships?

Ryan Barretto

Yes, Parker, I appreciate the question. It's really both. I mean I think the thing that we get excited about here, and you heard it in some of the stories that we've shared today, it's a combination of new business as well as expansion.

From a new business perspective, we feel really great in terms of how we're competitively positioned. These larger enterprises are looking to consolidate. That first example we gave, they're buying 5 products and displacing many other competitors at that organization because they really want their social strategy executed on from one vendor, one vendor that they trust. And so that piece from a new business perspective has been really helpful.

And then from an expansion perspective, as we've continued to bolster our product suite here and added products like our Influencer Marketing and our NewsWhip, as well as the other ones that we have like Employee Advocacy, it allows our sales team to go back and have great conversations with customers where we're able to displace, in some cases, other competitors. In some cases, it's greenfield, and there's a new opportunity. And the beauty of those in that latter example is that we're already in through procurement and legal. They are customer. Oftentimes, we have the stakeholder that we're working with today walking us over to a new department to introduce us.

So I'd say that it's really both. And we see this as an opportunity from both a new business perspective and then a chance to go back and expand the many tens of thousands of customers that we have today.

J. Lane

Understood. And then on the macro pressures, I was wondering if you can go a little bit deeper on exactly what you've seen there, different dynamics, whether it be the tougher consumer markets, the crowding outs from AI and just the optimization of budgets around AI. What exactly are you seeing and hearing from customers about the macro environment beyond the high-level commentary?

Ryan Barretto

Yes, I appreciate it. I think it comes down to for so many of these companies today, certainly, they're thinking about AI spend and that spend is coming from somewhere and it's putting pressure in certain parts of the business. I think just generally, these organizations are all looking at the places in which they're investing and they want to see more ROI and TCO business cases.

We personally feel very good about the business cases that we're putting in front of customers today, but it still requires more time and effort. We're seeing in many of these organizations because of the pressure that they have on their own budgets that they're creating new evaluation processes and oftentimes new folks that are involved in the approval process, which can elongate sales cycles. And so those are some of the things that we're hearing and seeing from customers today.

From a playbook perspective, as we think about our go-to-market, for us, it's making sure that we are multi-threaded at the organization and have many contacts that we're working with across many different parts of the business from the practitioner up to the executive. We're ensuring that our business cases are strong and that we're able to really quantify the value of what we're delivering as well as the total cost of ownership. And then we're making sure that the customers are getting their hands on the product.

So again, that trial model for us is really important. That's a big reason why we've got Trellis in the trial as well. We are strong believers that if our customers and our prospects get access to our technology that they will see the differentiation that exists here and the fit.

So these are all things that are -- we're experiencing in the environment, but I'm feeling very good about the way the teams are approaching these opportunities and engaging with customers.

Operator

Your next question is from the line of Raimo Lenschow with Barclays.

Raimo Lenschow

Ryan, can I stay on that subject? So from what you see in the market, like, the big debate is are people kind of rethinking how they do social? Or is it -- and that's the problem? Or is it more like priorities are slightly different. So can you speak to that because that's kind of obviously one thing that investors are worried about a lot? And I have one follow-up.

Ryan Barretto

Yes. I wouldn't call it rethinking social. I mean, I would say that the need for social continues to be mission critical. As we're spending time with customers, we are seeing this. And as we look around and we think about just social itself, we are continuing to see a ton of gravity around it. If we look at social today, it is a primary place that people are going to do product discovery, to build a brand, to drive awareness, to engage with customers for commerce.

So there's still a ton of gravity around this. Brands need to be engaged and involved in the conversations on social. And our customers are consistently coming to us trying to figure out how to make sure that they're optimizing on that channel. How are they driving the right marketing campaigns? How are they ensuring that they're showing up to customers when questions are coming up. We know that there's so much risk also wrapped up in social that these really challenging moments can be viral and can be devastating for a company as well.

So I wouldn't say that it's about rethinking social. I think it's more about there's just general pressure in this environment across a lot of categories. And I think CFOs and lots of organizations are asking all of their teams to really scrutinize budget and costs, and they're putting them through their paces as they're going through the evaluation. And so that's all contributing to the types of conversations we're having. And on our side, we're controlling what we can control and making sure that we're showing up with a playbook that's going to add a lot of value to customers, the trial-led motion, the ROI, TCO models, making sure that we're engaged with customers across a variety of use cases.

Raimo Lenschow

Okay. Perfect. Yes. That makes sense. And then there's obviously, one of the things that is going on is the mix effect of like you're doing much better on the higher end of the market and you still have the headwinds from below. And if you think about that trajectory for you, like how do you feel about that inflection point because you did 8% this quarter, having -- like if you look at Q4, it ticks down a little bit again. How do you think about it coming out the other end at some point? Like how do you think a time frame there?

Ryan Barretto

Yes. No, I appreciate it. I mean, for us, the way that we think about this is we still see a lot of opportunity across the market. We've got the focus here on the $30,000 plus where we're continuing to see progress and success, good ARR growth here, great ACV growth. These are customer opportunities where they're multiproduct, they have stronger GRR and NRR profiles, and there's a lot of market for us to go address. And as we continue to add more products to our suite on top of selling the products that we have, we feel like there's plenty of opportunity there.

On the sub-$30,000 piece of the market, we've been spending a lot of time on that as well, really turning it into a place where we're removing a lot of the cost to acquire and the cost to serve and really driving up the amount of automation that we have in that part of the market. And we've talked in the past a little bit about Essentials as a purpose-built product for that part of the market. But our belief here is as we do those things and execute on that strategy, that there's plenty of opportunity ahead for the company.

Operator

Your next question is from the line of Arjun Bhatia with William Blair & Company.

Willow Miller

Okay. I'm Willow on for Arjun Bhatia. Ryan, I appreciate there's variability on the new business front market. But despite this, is Essentials resonating as you expected in the S30,000 cohort based on early data? And are there any adjustments you need to make to better address this group of customers?

Ryan Barretto

Yes, Willow, I appreciate the question. Yes, we're making progress there. As you might imagine, when we went GA this summer and since then, we've been spending a lot of time on a variety of things, right, working on the onboarding flow, working on the website and the messaging, making sure that the self-serve experience continues to get better. We've also included Trellis now across all of our products.

So we are seeing good progress there. We're seeing good progress on the conversion rates, and we continue to see opportunities to optimize that part of the market. And then just as we look at that part of the market, it's still a really large amount of addressable opportunity, and these companies all need to figure out how to execute on social. And our value prop here for these companies is that we can allow them to punch above their weight class. We can allow them to have enterprise-grade software in the use cases that they need to really help them grow their business.

And with Sprout, they have the opportunity to actually get their hands on the keyboard and experience the product before they ever make a commitment. And again, that's a pretty differentiated thing for us in this market. So we're making progress here and continuing to optimize for that part of the market.

Operator

Your next question is from the line of Scott Berg with Needham & Company.

Scott Berg

I have 2 here. On the demand side, RB, is there any difference domestically versus some of the international regions that you typically serve? Or is it pretty -- some of the challenges you're facing, are they pretty broad-based still?

Ryan Barretto

Yes, Scott, I appreciate it. I don't know that I would call out any major deltas in terms of the demand environment that we're seeing. I think that this is something that there's pressure being felt across the board here. But I would also say that it's the same sort of opportunity that we've seen across the board. And so for us, when I think about the playbook that I shared before and what I'm seeing from the go-to-market teams and the conversations that we're having with customers, the value of social and gravity around social is critically important, arguably more in the international markets where social is even more used.

But then on top of that, it's the same thing, right? It's making sure that we get customers into the product. It's making sure that we are getting across and spending time with multiple stakeholders. It's making sure that we are addressing many different use cases, especially with the variety of products that we have. So I'd say it's pretty comparable across all of our markets today.

Scott Berg

Got it. Helpful. And then with what you've seen with Trellis so far is how are you thinking about the upgrade path for a new customer coming on? Do you think that Trellis is high on the priority list in terms of once that customer deploys your core platform? Or is some of the more premium modules like Listening, is that higher priority? Just trying to understand how all the things you have to sell, what that kind of stack rank looks like on an average customer?

Ryan Barretto

Yes. My belief here is that Trellis is going to quickly become just a core part of how customers think about using our products. And so if I think about it, it's cutting across so many different parts of the solution today, right, whether that's on the marketing side and how customers are creating campaigns and publishing or customer care or reporting or listening. And so it becomes one of these things where it's truly helping customers, in many cases, do work that they couldn't do before. It's helping customers do work that they couldn't do before faster and smarter than they had the opportunity to.

So my belief here, it becomes a core part for us in every single customer conversation. And I spent a little bit of time with our sales leadership team today who are in the office, so I shout out to them as they're listening in on the call. But a huge part of our conversation today was the fact that our customers can get tremendous value through Trellis. It's becoming a core part of how they should be using the platform. And so for us, I see it as foundational.

And then on top of that, obviously, our premium modules and the other products here all have elements of Trellis weaved into them. So hopefully, that's helpful just in terms of how we think about it.

Operator

[Operator Instructions] Our next question is from the line of Jackson Ader with KeyBanc.

Jackson Ader

Great. The first one was on -- if we look at either billings or remaining performance obligations, you mentioned the impact of contract terms. And I'm just curious, either can you size the impact of those -- of the impacts from contract terms? Or just tell us what -- do we expect this to normalize and kind of flatten out as we move into '27?

Erin Graupmann

Thanks for the question, Jackson. This is Erin. So as we had outlined on our last call, we did expect growth in RPO and cRPO to moderate in Q3, and they did. So RPO and cRPO grew 10% and 8%, respectively, which is a much smaller step down from Q1 when both metrics were growing at 10%. As a reminder, Q2 RPO skewed high because it carried a mix of longer contract durations and it also benefited from the timing of renewals. We also lapped the NewsWhip acquisition in Q3. So now the growth rates are reflecting only the organic performance.

To your point, we did see shorter contract durations in Q3. And so some of the RPO metrics like cRPO bookings, for example, you get kind of the impact of the longer durations in Q2 and the shorter durations in Q3. But this isn't something that we see as kind of an ongoing challenge from a contract duration perspective. We see it as more of a Q3 blip.

Jackson Ader

Got it. Okay. And my follow-up was on like the outlook for the fourth quarter, and I understand it's like, hey, it's our biggest bookings quarter for the year. And so we can't -- 2027 will really depend on how things finish up. But I'm just curious, like, what could the swing factor be? If some of these trends, some of the negative trends that you're seeing maybe actually turn around and move in your favor, like, what could -- what would the materiality be of like maybe a step-up in growth as we head into next year from a really strong fourth quarter?

Erin Graupmann

Yes, thanks for the question. I think as it relates to the range that we're thinking about for Q4, we did share a range of outcomes that we expect. What I would say is given sort of the ratable nature of our revenue recognition, the impact of Q4 performance is going to be more felt in FY '27 than it will in Q4. So there are a range of outcomes in Q4. And as a result, we've taken a measured approach, but the larger impact of Q4 performance, as you would expect, would be seen in FY '27.

Operator

Your next question is from Elizabeth Porter with MS.

Elizabeth Elliott

Great. So my question is just with all the AI-driven changes to traditional search and SEO, we've been seeing brands increasingly diversify how they engage and reach customers, including more of an emphasis on social channels. So just curious if you are seeing this come up specifically in customer conversations that relates to traditional search and SEO, and how that translates to a business opportunity for social?

And then as a follow-up, maybe just putting that future opportunity in context with the slower bookings growth this quarter and understanding you're not giving guidance for 2027 quite yet, but any way to interpret the current trajectory and the potential for next year?

Ryan Barretto

Yes. Thanks, Elizabeth. I'll start on the first one. Yes, this is certainly a hot topic for a lot of customers with the impact of AI answers and AEO or GEO. And this is another value prop for the work that we are doing. More and more, the work that our customers are doing on social is having a huge impact on the way that they perform on these LLMs. And so our customers creating incredible content, ensuring that they're engaged in conversations, ensuring that they're across many of these platforms is having a big impact on the way that they're showing up and ultimately driving demand. And they're all thinking about this right now, to your point, because of the impact that they've felt on SEO.

The other thing that we think about here as well is just the access that we have for our customers across so many different networks to be able to execute, the data that we have and the platform to help them understand where they're performing and then the opportunity for them to be engaging on social from both a marketing perspective outbound as well as responding to customers. So this is definitely coming up in conversations today with customers. We see it as another value prop for the work that we're doing every day with customers.

And then on the secondary piece about just trajectory and the focus as we think about the future here, obviously, the team is heads down here, focused in on executing on Q4. As we look forward, we are really, really excited about the opportunities that we see, especially in that $30,000-plus cohort. These are opportunities with customers, as I mentioned a little bit earlier, both from a new business perspective as well as an expansion perspective. These are opportunities for us that are multiproduct, which also provides opportunities on the ACV side, and we know that the GRR and NRR related to these customers is stronger. We are doing a lot of work on the sub-$30,000 to really improve the execution in that part of the business, while also removing the cost from it.

And then when I just overall think about the financial foundation of the business, you've seen it here in the op margin and the free cash flow and the profitability from a GAAP perspective, these are all things that we think are really important as we move forward into next year. So hopefully, that helps with just some of the thinking here and where the teams are really focused over at Sprout.

Operator

There are no further questions at this time. I will now turn the call back to Ryan Barretto for closing remarks.

Ryan Barretto

Thanks very much, and thank you, everybody, for joining us this evening. Before we close, I want to leave you with a few takeaways. First, we delivered a quarter ahead of expectations. Revenue grew 8.3% year-over-year, and we currently expect Q4 to be our first GAAP profitable quarter. And looking ahead, we're targeting GAAP profitability on a sustainable quarterly basis. We also deployed over $26 million of our $50 million buyback in the quarter, which reflects our confidence in the durability of our business and our ability to generate free cash flow.

Second, our focus on larger customers is continuing to make progress. Approximated trailing 12-month subscription revenue for customers contributing $30,000 or more in ARR grew 18% year-over-year and now contributes over 62% of total subscription revenue, and customers at $150,000 or more in ARR grew 22% year-over-year. We believe these customers value social intelligence, which helps them understand what is happening and allows them to act on it in earlier ways that were not possible before.

And on that note, Trellis, our agentic offering that is built on more than 2 billion social messages we ingest every day is now available to every customer in every plan, including new prospects who start in our trial. And we're really excited about the potential impact this can make in delivering more value to our customers.

On that note, I also want to thank our customers for their continued trust and partnership, and our Sprout team for their focus and discipline. We appreciate your time tonight. Have a good evening, everyone. Thank you.

Operator

This concludes today's call. Thank you for attending, and you may now disconnect.