Schrödinger — Third Quarter 2026 Earnings Summary

Financial Performance:

• Total revenue was $64.5 million, a 19% increase compared to $54.3 million in the third quarter of 2025.
• Software revenue was $38.2 million, a 6% increase year-over-year.
• Hosted software revenue was $17.2 million, a 49% increase year-over-year, representing 45% of total software revenue.
• Drug discovery revenue was $24.2 million, compared to $13.0 million in the prior year period, primarily driven by a milestone payment from Structure Therapeutics.
• Software gross margin was 75%, a 2% decrease from the prior year, reflecting the transition to hosted licenses.
• Operating expenses were $64.4 million, a 13% decrease compared to $74.0 million in the third quarter of 2025.
• Net loss was $37.7 million, compared to a net loss of $32.8 million in the prior year period.
• Other expense was $11.4 million, primarily due to changes in the fair value of equity investments.
• Cash, cash equivalents, restricted cash, and marketable securities totaled $373 million.
• Annual Contract Value (ACV) was $44.7 million, a 17% increase, with a trailing four-quarter ACV of $214 million.
• ACV excluding contribution increased 24% year-over-year.

Guidance and Future Outlook:

• Full-year 2026 ACV guidance was raised to a range of $222 million to $232 million, representing 12-17% growth over 2025, compared to the prior expectation of $218 million to $228 million (10-15% growth).
• Full-year 2026 drug discovery revenue guidance was raised to a range of $75 million to $85 million, compared to the prior expectation of $65 million to $75 million.
• Full-year 2026 operating expenses are expected to be less than 2025 levels.

Business Segments and Product Lines:

• The company highlighted a business model where software and drug discovery businesses reinforce each other through a continuous feedback loop.
• In October, Schrödinger scientists published research in Nature regarding machine learning force fields for lithium-ion battery electrolytes.
• Researchers published in JACS Au using Absolute Binding Free Energy Perturbation (AB-FEP) to predict small molecule interactions with integrin proteins.
• Scientists published in The Journal of Physical Chemistry C describing a computational method to predict the glass transition temperature of organic electronic materials.
• In September, Schrödinger announced a licensing and collaboration agreement with Tectora Therapeutics, a company co-founded by Schrödinger, New Enterprise Associates, and RA Capital Management, focused on immunology and inflammation.
• Schrödinger contributed two early-stage small molecule programs (SDGR-4594 and SDGR-8139) to Tectora in exchange for an equity stake and eligibility for future milestones and royalties.
• Takeda announced FDA acceptance of its New Drug Application under Priority Review for zasocitinib (TAK-279), an oral TYK2 inhibitor co-invented by Schrödinger and Nimbus.
• Schrödinger received a milestone payment from Structure Therapeutics related to the Phase 1/2a study of its amylin candidate ACCG-2671.
• Updated Phase 1 data for SGR-1505 will be presented at the American Society of Hematology (ASH) Annual Meeting in December 2026.

Market and Competitive Landscape:

• Management stated that the company's sustained track record of delivering high-impact programs gives partners confidence to expand software commitments.
• The company's computational platform is licensed by biotechnology, pharmaceutical, and industrial companies, as well as academic institutions globally.

Risks and Challenges:

• Forward-looking statements note risks including reliance on third-party cloud infrastructure providers, the ability to transition customers to hosted software deployments, and fluctuations in the value of the U.S. dollar.
• Risks also include the uncertainties inherent in drug development, reliance on third-party collaborators, and the ability to retain key personnel.
• Software gross margin decreased due to the ongoing transition to hosted licenses.

Management Commentary and Tone:

• CEO Ramy Farid, Ph.D., expressed pleasure with the third-quarter performance, citing 17% ACV growth and the raising of full-year guidance.
• Management emphasized the power of the industry-leading platform and the reinforcing nature of the software and drug discovery business models.
• The tone highlighted the building of durable value through a continuous feedback loop between platform insights and partner confidence.

Other Key Points:

• Schrödinger co-founded Tectora Therapeutics with New Enterprise Associates and RA Capital Management.
• The company reported a $11.4 million other expense driven by mark-to-market adjustments on equity investments.
• Adjusted EBITDA for the third quarter of 2026 was $(16.8) million, compared to $(33.6) million in the prior year period.
• The press release includes a reconciliation of GAAP net loss to Adjusted EBITDA, excluding stock-based compensation, changes in fair value of equity investments, and other non-recurring items.
• Schrödinger will host a conference call on November 4, 2026, at 4:30 p.m. ET to discuss results.