Schrodinger (SDGR) Earnings Date & Reports

Key Takeaways

• Total revenue rose 19% year over year to $64.5 million, driven by software growth and a milestone payment in drug discovery.
• Software revenue reached $38.2 million, with hosted revenue climbing 49% to $17.2 million.
• Drug discovery revenue jumped to $24.2 million from $13.0 million in the prior-year quarter.
• Net loss was $38 million, or $0.50 per share, compared with a net loss of $33 million, or $0.45 per share, a year earlier.
• Management raised its full-year 2026 annual contract value (ACV) and drug discovery revenue guidance.
• Annual contract value grew 17% year over year to $44.7 million, reflecting broad-based customer demand.
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Earnings Context and Why It Matters

Schrödinger occupies a distinctive position at the intersection of computational science, software, and drug discovery, which makes its quarterly results a window into two different businesses at once. Investors watch its software segment for evidence of durable subscription growth, while the drug discovery line reflects milestone payments and the value of its physics-based platform in generating clinical candidates. The third quarter of 2026 carried particular weight because it tested whether the company's ongoing transition from on-premise licenses to hosted (cloud-based) contracts could sustain momentum without pressuring reported revenue. Broader industry demand for AI-enabled and physics-based discovery tools has also kept the company in focus.

Reported Results

Schrödinger reported total revenue of $64.5 million for the third quarter of 2026, a 19% increase from $54.3 million in the same period a year earlier and comfortably above consensus estimates of roughly $48 million. Software revenue was $38.2 million, with hosted revenue of $17.2 million up 49% year over year and representing 45% of the software total, up from 32% in the third quarter of 2025. Drug discovery revenue was $24.2 million, compared with $13.0 million a year ago, driven primarily by a milestone payment tied to Structure Therapeutics' oral amylin program.

The company reported a net loss of $38 million, or $0.50 per share, versus a net loss of $33 million, or $0.45 per share, in the prior-year quarter. The per-share loss was modestly better than consensus, which had anticipated a loss of roughly $0.55 per share. Total operating expenses declined 13% to $64 million, reflecting lower clinical contract research organization (CRO) costs and headcount-related expenses. Schrödinger ended the quarter with $373 million in cash and marketable securities.

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Market Reaction and Investor Sentiment

Schrödinger entered the report with mixed sentiment, as analysts had projected a year-over-year decline in earnings on lower expected revenue, reflecting the near-term revenue-recognition drag from the hosted-software transition. The reported 19% revenue increase and the upward revision to full-year guidance therefore ran counter to that cautious backdrop. Investors were also watching the drug discovery line closely, since milestone payments from partners such as Structure Therapeutics can create lumpy quarter-to-quarter results. The combination of stronger-than-expected top-line performance, disciplined expense management, and raised guidance provided a clearer signal of business momentum heading into year-end.

Forward Outlook and Key Factors to Monitor

Looking ahead, several themes will shape how investors interpret Schrödinger's trajectory. First, the hosted-software transition remains the central dynamic in the software segment. Because hosted contracts are recognized ratably over the life of the agreement rather than upfront, continued migration can temporarily moderate reported revenue even as underlying demand improves. Monitoring the mix of hosted versus on-premise revenue will be essential to separating accounting effects from real growth.

Second, management's guidance update is worth tracking. The company now expects full-year 2026 ACV in the range of $222 million to $232 million, implying 12% to 17% growth, and drug discovery revenue of $75 million to $85 million, up from a prior range of $65 million to $75 million following the Structure milestone. Whether those targets hold through the fourth quarter will test management's visibility.

Finally, the therapeutics portfolio and co-founding strategy remain catalysts. The quarter included the launch of Tectora, a discovery-stage company funded with $55 million, while partner Takeda's FDA (Food and Drug Administration) acceptance of a new drug application for Zascitinib under priority review highlighted progress across partnered assets. Milestones, equity-method value changes, and clinical updates can all introduce volatility into non-operating results, so investors should watch those items alongside core software demand and cost discipline.

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