Heat the olive oil and butter in a large skillet over medium heat until the butter melts.

Add the diced onion and cook for 3 to 4 minutes, stirring occasionally, until softened.

Stir in the garlic and cook for 30 seconds until fragrant.

Add the sliced mushrooms, salt, pepper, and thyme. Cook for 6 to 8 minutes, stirring occasionally, until the mushrooms release their moisture and begin to brown.

Pour in the vegetable broth and scrape up any browned bits from the bottom of the pan.

Stir in the heavy cream and bring the sauce to a gentle simmer.

Add the gnocchi to the skillet and cook for 4 to 5 minutes, stirring gently, until the gnocchi is tender and the sauce has thickened slightly.

Add the spinach and stir until wilted, about 1 minute.

Remove the skillet from the heat and stir in the Parmesan cheese and red pepper flakes, if using.

Taste and adjust seasoning with more salt and pepper if needed. Garnish with chopped parsley and serve immediately.