Schrödinger Earnings Call: Growth Amid Hosted Transition

Schrodinger, Inc. ((SDGR)) has held its Q4 earnings call. Read on for the main highlights of the call.

Schrödinger’s latest earnings call struck an optimistic tone despite clear near-term headwinds. Management highlighted 23% total revenue growth, accelerating drug discovery income and a scaled software business approaching $200M in ACV. They acknowledged margin compression, softer net dollar retention and accounting noise from a faster hosted shift, but stressed cost discipline, cash strength and a credible path to profitability by 2028.

Strong Full-Year Revenue Growth

Schrödinger reported 2025 total revenue of $256M, up 23% year over year, underscoring solid demand across its software and drug discovery businesses. The company framed this performance as validation that its physics-based platform can grow even in a tough biopharma spending environment.

Scaling Software Business and ACV

Software revenue reached $199.5M in 2025, with software ACV at $198.5M, effectively a $200M run-rate business. Full-year software sales grew about 11%, and management emphasized ACV as the more reliable indicator of underlying momentum as they pivot away from traditional license revenue.

Drug Discovery Revenue Momentum

Drug discovery revenue climbed to $56.4M in 2025, more than doubling from the prior year as partnered programs advanced. The company set 2026 drug discovery guidance at $55M–$65M and reiterated a long-term target of roughly $50M annually, signaling steady contribution from this higher-variance segment.

Improving Profitability and Cost Discipline

Net loss narrowed sharply to $103M in 2025, down from $187M in 2024, reflecting both revenue growth and tighter spending. Total operating expenses fell about 9% to $310M, as earlier cost reduction actions flowed through and management reinforced their commitment to a self-funding path.

Robust Cash Position Supports Strategy

The company ended 2025 with approximately $402M in cash, which management described as more than sufficient to fund its roadmap. That liquidity underpins ongoing product investments, internal pipeline development and the multi-year transition to a hosted software model without needing near-term capital raises.

Top Pharma and Commercial ACV Expansion

Total ACV rose to $198.5M from $190.8M, a 4% increase that masks stronger gains in strategic cohorts. ACV from the top 20 pharma customers grew 15%, while commercial ACV rose 7% to $177.4M and average ACV for the $1M-plus customer group increased 16% to $3.9M.

Product and Pipeline Advances

Management highlighted broader platform capabilities in biologics and materials and the beta release of a predictive toxicology product. Internally, Phase I trials for SGR-1505 and SGR-3515 are progressing, with initial Phase I data for the Wee1/Myt1 inhibitor expected in Q2 and continued advancement across collaborator programs.

Growing Partnership and Portfolio Value

Schrödinger’s partnered portfolio now includes 16 programs eligible for high-single to low-double-digit royalties and around seven clinical programs from Phase I to Phase III. Across more than 25 active ecosystem programs, the company has realized about $650M in cash, upfronts and milestones, with up to $5B in potential future milestone payments.

Strategic Hosted Transition and New KPIs

About 23% of 2025 software revenue came from hosted deployments, and the company plans to accelerate that mix to roughly 75% by 2028. To reflect this shift, Schrödinger introduced ACV-focused guidance, targeting 2026 ACV of $218M–$228M, representing 10%–15% growth and serving as the primary metric for software performance.

Q4 Software Revenue Decline and Accounting Impact

Fourth-quarter 2025 software revenue fell to $69.3M, a 13% decline versus Q4 2024, largely due to timing and revenue recognition effects as customers moved from on-premise to hosted deployments. Management stressed that this pressure is an accounting artifact of the transition rather than a sign of weakening demand.

Margin Compression and NDR Softness

Full-year software gross margin slipped to 74% from 80%, partly because of higher contribution revenue from grants and a changing mix. Net dollar retention dropped to 100% after several years above 110%, which the company attributed mainly to constrained pharma and biotech budgets limiting upsell opportunities.

Hosted Transition Headwinds and Customer Concentration

The company noted that each 1-point increase in hosted revenue mix will reduce current-year reported revenue by about $2M–$3M and weigh on near-term gross margin and adjusted EBITDA, though with no cash impact. Two large customers were acquired in 2025, trimming customer count and spotlighting some concentration risk, even as overall throughput and value were maintained.

Macro Uncertainty and Limited Revenue Visibility

Management underscored that tight pharma budgets and challenging biotech funding conditions constrained expansion in 2025 and are likely to persist. Reflecting both the macro backdrop and hosted accounting effects, Schrödinger provided detailed ACV guidance but declined to issue 2026 revenue guidance, leaving short-term reported numbers harder to forecast.

Guidance and Long-Term Outlook

For 2026, Schrödinger guided to ACV of $218M–$228M, implying 10%–15% growth, and Q1 ACV of $24M–$28M, roughly in line with the prior year’s pace. Management reiterated 2026 drug discovery revenue of $55M–$65M, a multi-year goal of 10%–15% annual software ACV growth, completion of the shift to about 75% hosted revenue by 2028, a return of gross margins to the high-70s and achieving positive adjusted EBITDA by the end of 2028.

Schrödinger’s earnings call painted a picture of a software and discovery platform in transition, balancing robust growth and maturing partnerships against near-term volatility. For investors, the key trade-off is accepting temporary pressure on reported revenue and margins in exchange for recurring hosted economics, expanding ACV and a clear, cash-backed path toward sustainable profitability.