How to spot pricing power in AI customer software before it shows up in price lists

The read in plain words

Customer-engagement software is showing pricing power, but you won't find it in price lists. It shows up when customers buy more, stay longer and take on AI add-ons, and when profit grows faster than revenue.¹ The clearest case comes from $TWLO, where management tied its pricing power to 17% year-over-year organic revenue growth and 29% year-over-year growth in non-GAAP income from operations.¹

The other three companies support the same story from different directions. Zeta Global points to higher net revenue retention among customers who adopt its AI.³ Braze points to enterprise customers adopting its AI tools for ROI.⁴ Sprinklr gives the most modest number: a subscription net dollar expansion rate of 102% in Q2.²

What this means for investors: in this group, pricing power comes from showing customers a return. Raising list prices is not how it shows up.

Twilio: pricing power shows up in the margin line

Twilio is the lead case here because its management connected pricing power directly to the numbers. On its Q2 call, it said 17% organic revenue growth and 29% non-GAAP operating income growth were evidence that its pricing power is strong.¹ When operating income grows faster than revenue, each extra dollar of sales is bringing in more profit than the last.

Two details explain where that comes from. The company says software upsells are growing at 25% plus.⁵ It is also making signing up and setting up campaigns easier, and it says this is lifting conversion rates.⁶

Those two levers do different jobs. Easier onboarding brings more customers through the door. Upsell lets the company charge more to customers it already has. Pricing power usually needs both: a steady stream of new buyers, and existing buyers who see enough value to pay for more.

The test for the coming quarters is simple. If upsell keeps outgrowing the core business and operating income keeps growing faster than revenue, the pricing-power claim holds up. If the two growth rates come back together, it would look more like a cyclical good quarter.

Zeta Global: selling a return, not a feature

Zeta Global, second in our data, makes its pricing argument through customer returns. Management says its marketing use cases deliver a 600 to 700% return on marketing spend effectively from day 1.⁷ That is the company's own figure from its Q2 call, and investors should treat it as a claim to test.

The link to pricing power runs through retention. Zeta says its platform is becoming the system of intelligence for customers, which drives demand and net revenue retention.⁸ It also says AI adoption is turning into stronger, more durable expansion and higher net revenue retention among the customers who adopt it.³

Management also describes Zeta as a company gaining share, generating free cash flow and positive GAAP earnings, with AI moats proven by results.⁹ For the pricing-power story, the key point is the gap between AI adopters and everyone else. If adopters keep expanding faster, AI is more than a feature on the price list. It becomes the reason customers renew at higher spend.

Braze and Sprinklr: adoption first, then retention

Braze, third in our data, is at an earlier stage of the same story. On its Q2 call, management described strong net customer additions and growth in its large-customer group.¹⁰ It named three AI capabilities, Agent Console, Decisioning Studio and Operator, that enterprise customers are adopting to realize a return on their spend.⁴

That order matters. A company has to win large customers and get them using AI tools before it can charge more for them. Braze's facts show the first steps, adoption and growth among large customers. Its next calls will show whether that turns into higher spend per customer.

Sprinklr leads our score, and its retention number is the most measured of the four. Its subscription net dollar expansion rate was 102% in Q2.² Above 100% means existing subscription customers spent slightly more than a year earlier, after accounting for those who cut back or left. It is positive, but it shows little expansion beyond that.

Our peer set lists PagerDuty as a fundamental peer of Sprinklr in application software and a possible competitor. That is a TradeStory estimate, not a company statement. It is a useful benchmark to keep in mind when reading Sprinklr's expansion rate next quarter.

How to read pricing power from here

Across all four companies, the clearest sign of pricing power is not a price increase. It is evidence that customers spend more without needing a discount: upsell growth, net revenue retention and margins rising faster than revenue. Twilio has the strongest numbers on two of those, with 25%-plus software upsell growth⁵ and operating income growing faster than revenue.¹

Three things to watch on the next calls. First, whether Twilio's upsell and margin growth keep running ahead of revenue.¹ Second, whether Zeta keeps reporting higher retention among AI adopters.³ Third, whether Sprinklr's expansion rate moves further above 100%.²

For Braze, the question is whether enterprise adoption of its AI tools⁴ shows up as larger customers spending more. That would turn adoption into the pricing power the others are already reporting. Where AI tools can show customers a measured return, they give these companies a reason to charge more.