What They Do
nCino provides cloud-based banking software that digitizes and automates the entire loan lifecycle for financial institutions. Their platform helps banks and credit unions streamline everything from loan origination to account opening, serving over 1,800 customers globally. They generate revenue through subscription fees and professional services, increasingly monetizing AI-powered features through their Banking Advisor product.
Investment Thesis
**AI transformation driving accelerated growth** — Over 110 customers have purchased Banking Advisor AI units with early adopters moving to full deployment, creating a "halo effect" that's driving new wins and early renewals**Exceptional profitability inflection** — Operating margins expanded 600 basis points to 26% in Q3 with incremental margins near 90%, demonstrating significant operating leverage as the business scales**Durable subscription model with pricing power** — 87% of revenue is recurring subscription with 27% of ACV already converted to higher-margin platform pricing (up from 21% last quarter)Key Risks
**Mortgage market exposure** — While outperforming expectations, their mortgage business remains vulnerable to interest rate cycles and housing market downturns**International execution uncertainty** — Despite 13% growth, international expansion into Japan and retooled EMEA leadership are unproven strategies in competitive marketsGrowth Story
nCino is experiencing an AI-driven reacceleration with Q3 revenue growing 10% YoY to $152M and subscription revenue up 11% (7% organically). The company expects to reach Rule of 40 by Q4 FY27, driven by expanding AI capabilities (targeting ~100 Banking Advisor features by fiscal year-end vs. 18 in May) and platform pricing conversions. Management maintains confidence in full-year ACV guidance of $564-567M representing 10% constant currency growth.
Profitability Profile
The company has reached an inflection point in profitability with gross margins of 60% and operating margins expanding dramatically to 26% in Q3. With incremental operating margins near 90%, nCino is demonstrating the leverage inherent in their software model as they scale. Free cash flow generation is seasonal but expected to see meaningful improvement in Q1 FY27 as subscription renewals accelerate.
Competitive Position
nCino operates in the specialized vertical software market for banking technology, competing against legacy providers and newer fintech solutions. Their key differentiation lies in their comprehensive, cloud-native platform that covers the entire banking workflow, now enhanced by AI capabilities trained on their extensive customer usage data. The Banking Advisor AI product is creating competitive separation and customer stickiness.
Recent Momentum
Q3 results showed strong execution with revenue beating by 3.3% and EPS beating by $0.10, marking four consecutive quarters of revenue beats. The company raised guidance across multiple metrics and expressed high confidence heading into Q4. Operating margin expansion of 600 basis points both year-over-year and quarter-over-quarter surprised positively and demonstrated the scalability of the business model.
What Wall Street Thinks
Analysts are likely focusing on the sustainability of the margin expansion and the monetization potential of the AI strategy. With CY26 revenue estimates of $639M representing modest 7.8% growth, there may be debate about whether the AI transformation can drive meaningful acceleration beyond current conservative projections. The path to Rule of 40 by Q4 FY27 will be a key benchmark.
The Bottom Line
nCino is transitioning from a steady vertical software provider to an AI-powered platform company, with dramatic margin expansion proving the underlying leverage in their business model while Banking Advisor creates new growth vectors and competitive differentiation.
