Summary of Schrodinger (SDGR) Q2 2026 Earnings Call

1Key Financial Results and Metrics

Annual Contract Value (ACV): $29.6 million for Q2 2026, up 27% year-over-year. Excluding contributions, ACV was $22.6 million, a 23% increase.

Total Revenue: $58.9 million, with software revenue at $32.5 million (hosted revenue contributing $15.2 million, or 47% of software revenue).

Drug Discovery Revenue: $23 million, up from $13.9 million in Q2 2025, driven by a $10 million milestone from Ajax Therapeutics.

Operating Expenses: $74 million, down 6% from $79 million in Q2 2025.

Net Income: $6 million, a significant improvement from a net loss of $43 million in Q2 2025.

Cash and Marketable Securities: $419 million.

Fully Diluted Share Count: 75.8 million.

2Strategic Updates and Business Highlights

Product Launch: Introduction of Bunsen, an AI co-scientist, aimed at enhancing drug discovery efficiency and expanding user access to Schrodinger's software.

Collaboration with Bristol Myers Squibb (BMS): A new strategic software agreement to deploy Bunsen, enhancing large-scale chemical exploration.

Predictive Toxicology Solution: Early commercial evaluations are positive, contributing to ACV growth and aimed at addressing safety liabilities in drug discovery.

Market Conditions: Improved health in the biopharma and biotech sectors, with increased IPO activity and funding availability compared to the previous year.

3Forward Guidance and Outlook

Full-Year 2026 ACV Guidance: Expected to be between $218 million and $228 million, representing 10% to 15% growth over 2025.

Drug Discovery Revenue Guidance: Revised upward to $65 million to $75 million, reflecting the milestone payment from Ajax.

Q3 2026 ACV Forecast: Expected to be $41 million to $45 million, compared to $38.3 million in Q3 2025.

4Bad News, Challenges, or Points of Concern

Revenue Recognition Impact: Transition to hosted licensing is expected to have a temporary negative impact on reported revenue, with a $2 million to $3 million reduction for every 1% increase in hosted revenue.

Contribution Revenue Decline: Contribution revenue decreased to $3.4 million from $4.8 million in Q2 2025, primarily due to the completion of initial funding from the Gates Foundation.

Market Risks: While the biotech sector shows improvement, ongoing economic uncertainties and competitive pressures in the biopharma space remain potential risks.

5Notable Q&A Insights

Market Health: Management noted a significant improvement in the biotech sector compared to the previous year, with a doubling of IPOs and better funding conditions.

Predictive Toxicology Contribution: While specific contributions to ACV from predictive tox were not disclosed, management indicated strong demand and positive evaluations.

Bunsen Pricing Model: The pricing for Bunsen is expected to align with existing software models, with increased demand anticipated from large customers like BMS.

Customer Transition to Hosted Licensing: The company aims for 75% of revenue to come from hosted contracts by the end of 2028, with strong engagement from customers during the transition process. Overall, Schrodinger's Q2 2026 results reflect strong growth and strategic advancements, particularly with the launch of Bunsen and improvements in the biotech market, despite challenges related to revenue recognition and ongoing market risks.