Table of Contents
Sinch posted another quarter of stable gross profit growth and record profitability. Gross profit rose 5% organically YoY to SEK 2.3B (~$246M), with gross margin expanding to 35%. Adjusted EBITDA grew 8% organically to SEK 915M (~$87M), a 14% margin, the highest since 2019.
Editor’s Note: Yesterday, we discussed Klaviyo’s Q3 results, today we discuss Sinch. Signup here to get LINK tomorrow in your inbox.
Sinch is executing with discipline in a slowing market. Margins are at record highs, AI is embedding deeper across its platform, but growth remains lacking.
The Good: Profit Discipline and Resilience
The Americas led with 8% organic GP growth helped by a turnaround in US network voice. EMEA softened as Sinch continued sunsetting fixed-price contracts, while APAC grew 7% in net sales and 1% in GP, balancing India SMS pressure with OTT and email growth.
In the Q&A, Jonas Dahlberg confirmed the network connectivity margin improvement was sustainable directionally, though Q3’s peak included an accrual release, meaning cash was set aside for a bill that ended up smaller than expected and flowed back into profit.
Laurinda Pang added that the recovery in US voice stemmed from carrier repricing, customer increases, and infrastructure migration.
Cash generation stayed strong with SEK 1.4B (~$148M) in operating cash flow (30% conversion) and leverage at 1.4x net debt/EBITDA, even after repurchasing 1.8% of shares (SEK 519M, ~$55M).
Sinch also remained a Gartner CPaaS Leader for the third straight year. When asked about midterm targets, management reiterated confidence: EBITDA margins are already at the top of their 2027 range, with gross profit growth now the next milestone.
The Interesting: Conversational Momentum Meets AI
CEO Laurinda Pang called Q3 a milestone of disciplined execution. Sinch is reshaping its mix for higher-margin, sustainable growth—less reliance on traditional messaging, more enterprise diversification and conversational channels.
RCS traffic tripled YoY, with full coverage across all US Tier 1 carriers. India, Latin America, and early EMEA adopters (like France) are volume leaders. Customers such as Clarins and Picard are winning awards for high-performing RCS campaigns that combine design, data, and measurable ROI.
In the Q&A, Laurinda described Sinch’s strategy as “diversifying the customer base and accelerating leadership in conversational messaging.”
AI contracts, though small today, are expected to ramp up as use cases scale. Chatlayer conversational volume is up 41% YTD, with AI agents in Engage entering closed beta this quarter.
The Unknown: Flat Sales, Competitive Pressure, and the Path to Growth
Revenue growth remains anemic. There is no sugarcoating this: Despite record margins, net sales were flat YoY at SEK 6.7B (~$707M).
Two structural challenges define the near term:
- Competitive pricing pressure within large messaging accounts in the Americas and India.
- The sunset of fixed-price contracts in EMEA depresses short-term growth.
None of these are surprises, but the India story deserves more context. Here, pressure is structural as much as it is competitive.
Over the past year, ILD pricing reforms and DLT regulation have reshaped the market. Indian telcos like Jio and Airtel are now handling domestic enterprise traffic directly, reducing aggregator volume and compressing margins.
It’s the same ILD dynamic I spoke of earlier: A national handoff from global aggregators to domestic carriers, as India increasingly treats messaging as regulated infrastructure rather than open market traffic.
Analysts attempted Twilio comparisons on the call, and there was strategic deflection from management. But nothing succeeds like success, and the only way to silence that line of questioning would be to get growth humming again.
Finally
Sinch’s transformation is working. It’s hitting record margins, generating solid cash, and leading in next-gen channels like RCS and WhatsApp. But flat revenue and persistent price pressure undercut the turnaround story. Trading near-term volume for long-term quality is sensible, but investors still reserve the top prize for growth.
There’s also a bigger question here.
If dominant, disciplined, and diversified Sinch can’t grow fast enough, what does that signal for everyone else in 2026?