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Schrodinger (SDGR) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Information Technology· Aug 5, 2026

Source: earnings call transcript

Executive summary

Schrodinger Q2 FY26 — Strong ACV Growth and Bunsen AI Co-Scientist Launch

Schrodinger delivered a strong Q2 FY26, marked by robust ACV growth and the official launch of Bunsen, its agentic AI co-scientist, which is already seeing adoption by key collaborators like Bristol Myers Squibb. The company is successfully executing its strategy to expand platform usage and unlock new budgets through product innovation and a shift to hosted licensing, while maintaining disciplined expense management. This quarter's results reflect the increasing industry recognition of computationally driven drug discovery.

Highlights

5

  • ACV grew 27% year-over-year to $29.6 million, driven by broad-based demand.

  • Hosted revenue percentage increased to 47% of total software revenue in Q2 FY26, up from 31% in Q2 2025.

  • Product discovery revenue increased to $23 million, up from $13.9 million in Q2 2025, primarily due to a $10 million milestone from Ajax.

  • Net income for the quarter was $6 million, compared to a net loss of $43 million in Q2 2025.

  • Ended the quarter with a strong balance sheet of $419 million in cash and marketable securities.

Concerns

2

  • Software gross margin decreased to 71% for the quarter, compared to 76% in Q2 2025, reflecting the planned accelerated transition to hosted software licensing.

  • Contribution revenue declined to $3.4 million, compared to $4.8 million in Q2 2025, due to the completion of initial Gates Foundation funding.

Guidance & targets

CategoryTargetConfidence
Full year 2026 ACV
$218M-$228M
high materiality
High
Full year 2026 drug discovery revenue
$65M-$75M
medium materiality
High
Full year 2026 operating expenses
less than in 2025
medium materiality
High
Q3 2026 ACV excluding contribution
$41M-$45M
medium materiality
High
Hosted revenue percentage
75%
high materiality
High

Product announcements

ProductTypeDetails
Bunsen, agentic AI co-scientistlaunch
Predictive Toxicology solutionupdate
RetroSynthupdate

Deals & partnerships

Bristol Myers Squibb (BMS) Strategic software agreement for deployment of Bunsen and expansion of platform use.

BMS, a longtime customer and collaborator, is deploying Bunsen and expanding their use of the platform across their research organization. This is viewed as a compelling model for large-scale deployment.

Simseer Pharmaceutical Group Global collaboration combining Schrodinger's predict-first design approach with Simseer's preclinical and clinical execution. Eligible for development and commercial milestone payments, as well as tiered royalties on net sales.

Collaboration announced in July, aims to rapidly translate discovery breakthroughs into clinical stage opportunities.

Eli Lilly (acquiring Ajax Therapeutics) Acquisition of Ajax Therapeutics, a co-founded company. $2.3B

Lilly's acquisition of Ajax contributed to over $750 million realized from Schrodinger's therapeutics activities since 2020.

Gates Foundation Extension of funding for Predictive Toxicology Initiative. $5M

Funding extended based on progress made in the Predictive Toxicology Initiative.

Gates Ventures Grant supporting continued work in battery research. $2M

Grant to develop and apply atomistic simulation methods to improve battery performance.

Risks & headwinds

Temporary negative impact on reported revenue from hosted license transition Ongoing during transition

Every 1% increase in hosted revenue results in a $2M-$3M reduction in reported revenue.

Mitigation:Planned accelerated transition, pleased with conversion dynamics, priority remains converting customers as their contracts renew.

Long lead time for new technology adoption and validation Quite a number of years

Not quantified, but implies delayed revenue recognition from new products.

Mitigation:Expects continued contribution to growth for years as customers evaluate and validate new technologies with experiments.

What to watch in Q3 FY26

Biotech sector health

next quarter
Current better this year than they were last year
Target Continued improvement in funding and customer activity

Why it matters

Biotech funding directly impacts Schrodinger's customer base and ACV growth.

We've noticed what I think a lot of other people have noticed, that certainly things are better this year than they were last year. I think a good reflection of that is the number of IPOs that we've seen this year compared to last year.

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Q&A highlights

Inquired about the health of the biopharma/biotech end market and the specific contribution of Predictive Tox to ACV.

Management noted an improved biotech sector compared to last year, with more IPOs and fewer companies struggling to raise funds. They confirmed Predictive Tox contributed to ACV and is part of full-year guidance but did not quantify its specific contribution.

“We've noticed what I think a lot of other people have noticed, that certainly things are better this year than they were last year. I think a good reflection of that is the number of IPOs that we've seen this year compared to last year.”

asked by Alexa Chan (Bank of America) · answered by Unknown Speaker

2 min read 6 chapters

Detailed narrative

Bunsen AI Co-Scientist Launch and Adoption

Schrodinger officially launched Bunsen, its agentic AI co-scientist, in early access, designed to execute complex multi-step workflows. This tool enhances efficiency for computational chemists and expands access to advanced simulations for a broader user base. Bristol Myers Squibb has already deployed Bunsen under a new strategic software agreement, demonstrating a model for large-scale platform integration and increased demand for Schrodinger's technology.

Strategic Software Expansion and Innovation

The company's growth strategy emphasizes introducing products that expand platform usage and access new budgets. Predictive Toxicology, which predicts off-target binding risks, is a key example, already contributing to 2026 ACV. The platform's differentiation lies in integrating rigorous first-principles physics with cutting-edge AI, generating accurate data for predictive models and continually expanding capabilities across biopharma and material science.

Therapeutics Portfolio Progress and Value Realization

The therapeutics team is experiencing increased productivity with Bunsen, accelerating workflows from target analysis to integrated data analysis. A new global collaboration with Simseer Pharmaceutical Group combines Schrodinger's design approach with Simseer's execution, offering potential milestone payments and royalties. Since 2020, the company has realized over $750 million from therapeutics activities, including Eli Lilly's $2.3 billion acquisition of Ajax Therapeutics.

Hosted Licensing Transition Progress

Schrodinger is actively transitioning customers to hosted licenses, with hosted revenue reaching 47% of software revenue in Q2 FY26, up from 31% in Q2 2025. This transition, while temporarily impacting reported revenue recognition due to ratable recognition, is progressing well towards the goal of 75% hosted by the end of 2028, driven by strong customer engagement and conversion dynamics.

Disciplined Expense Management

Total operating expenses decreased 6% year-over-year to $74 million in Q2 FY26, primarily due to reductions in headcount, CRO costs, and professional services fees. This reflects the company's commitment to disciplined expense management, which supports its strategic priorities and overall financial performance.

Biotech Sector Health

Management observed an improved biotech sector in 2026 compared to the previous year, evidenced by a higher number of IPOs and fewer biotech companies struggling to raise funds. This positive trend is consistent with broader market observations and is encouraging for Schrodinger's business, which serves many biotech customers.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.