nCino reported fiscal second-quarter 2027 results showing a rebound in subscription revenue growth and improved profitability margins. Total revenues for the quarter ended August 25 reached $161.0 million, an 8% increase from the prior-year period. Subscription revenues, which accounted for 89% of total revenue, rose 10% to $143.5 million, including a 12% increase when excluding the U.S. mortgage segment.
The company highlighted a reacceleration in core subscription growth, with core subscription revenues excluding U.S. mortgage increasing to $123 million from $110 million in the same quarter of fiscal 2026. International subscription revenues grew 13% year-over-year to $30.9 million, representing 22% of total subscription revenue. U.S. mortgage subscription revenues declined 1% to $20.6 million.
Profitability metrics improved significantly. Non-GAAP operating income rose 36% to $40.8 million, while free cash flow surged 170% to $34.0 million. Non-GAAP operating margin expanded by 500 basis points to 25%, and free cash flow margin increased to 21% from 8% in the prior-year period. Gross margins also strengthened, with the overall non-GAAP gross margin improving to 68% from 66%, while subscription gross margin remained steady at 76%.
Expense discipline contributed to margin gains. Sales and marketing expenses fell to 18% of revenue from 19%, research and development costs declined to 16% from 18%, and general and administrative expenses decreased to 8% from 9%.
Key performance indicators reflected sustained momentum. Annual contract value reached $602.4 million in fiscal 2026, up 17% year-over-year with 13% organic growth in constant currency. Subscription revenue net retention stood at 110%, while ACV net retention reached 112%.
Management raised full-year fiscal 2027 guidance, projecting total revenues of $644.0 million to $647.0 million and subscription revenues of $573.5 million to $576.5 million. Non-GAAP operating income guidance was increased to $171.0 million to $174.0 million. For the third quarter ending October 31, 2026, nCino forecast total revenues of $161.25 million to $163.25 million and subscription revenues of $143.25 million to $145.25 million.
The company also noted that Q2 subscription revenues exceeded the high end of guidance by $1.2 million, while non-GAAP operating income surpassed expectations by $3.3 million, driven by higher subscription gross profit and expense management.
