Sprout Social Q2 FY26 earnings call SPT

Sprout Social is increasingly focusing on larger, more sophisticated customers, where its platform breadth and product roadmap are best aligned. This strategy is evident in the growing contribution of customers with $30,000 or more in ARR, which now accounts for over 61% of total subscription revenue, up from 59% in Q2 FY22. This cohort exhibits stronger unit economics, better retention, and higher attach rates for premium products like Influencer Marketing and NewsWhip, driving overall ACV growth.

Q2 FY26 was a significant quarter for AI at Sprout, with expanded capabilities for Trellis, its proprietary agentic offering. Trellis now provides on-demand insights from social data using plain language queries and features Trello Studio for building custom skills. A paid tier, Trellis Plus, launched in July for higher usage needs. Early adoption trends show healthy growth in monthly active users, and customers with active Trellis usage demonstrated higher retention rates across all segments, indicating strong value proposition.

On July 15th, Sprout announced a workforce reduction of approximately 20% to streamline operations, improve decision-making, and build a more focused and durable company. This reorganization is expected to incur $18 million to $20 million in pre-tax restructuring charges in Q3 FY26 but will reduce the overall non-GAAP cost structure by at least $50 million on an annualized run rate, fully realized by 2027. This move is projected to deliver improved operating margins, stronger cash flow, and greater capacity for strategic investments.

For customers below $30,000 in ARR, Sprout is evolving its self-service motion with the Essentials product, which moved from limited release to general availability in April. This product aims to serve the lower end of the market with a simpler, purpose-built offering and a fully digital, no-sales-touch experience across the customer lifecycle. While still early, initial cohorts show positive demand trends, and the product is considered well-suited for non-US market expansion, with a goal to stabilize the sub-30K segment's performance by 2027.

Sprout emphasizes its strong competitive moat, built on 16 years of legal agreements, security certifications, and a track record of delivering customer value. The platform ingests over 2 billion real-time social interactions daily from hundreds of APIs across more than a dozen networks. This extensive data access and established trust enable Sprout to offer differentiated solutions for brands struggling to manage the explosion of social activity, providing clear ROI and high barriers to entry for competitors.

Sprout reported Q2 FY26 revenue of $123.8 million, up 10.8% year-over-year, with subscription revenue at $121.9 million, up 9.7%. Non-GAAP operating margin reached 12.9%, a 370 basis point improvement year-over-year. Non-GAAP free cash flow was $8.3 million, a 60% increase from the prior year, bringing the trailing 12-month total to $54 million. These results underscore the company's ability to drive leverage and financial discipline.