Sprout Social — Third Quarter 2026 Earnings Summary

Financial Performance:

• Total revenue was $125.1 million, an 8% increase year-over-year compared to $115.6 million in Q3 2025.
• GAAP operating loss was $6.9 million, an improvement from a $9.1 million loss in Q3 2025.
• Non-GAAP operating income was $26.3 million, up from $13.7 million in Q3 2025, resulting in a 21% non-GAAP operating margin.
• GAAP net loss was $6.5 million, improving from a $9.4 million loss in Q3 2025.
• Non-GAAP net income was $26.7 million, up from $13.4 million in Q3 2025.
• Non-GAAP net income per share was $0.45, compared to $0.23 in Q3 2025.
• GAAP net loss per share was ($0.11), compared to ($0.16) in Q3 2025.
• Non-GAAP free cash flow was $26.7 million, a 158% increase year-over-year from $10.3 million in Q3 2025.
• Net cash provided by operating activities was $10.7 million, compared to $9.3 million in Q3 2025.
• Total remaining performance obligations (RPO) were $393.9 million, up 10% year-over-year.
• Current remaining performance obligations (cRPO) were $280.2 million, up 8% year-over-year.
• Cash and cash equivalents totaled $103.7 million as of September 30, 2026, down from $119.9 million as of June 30, 2026.
• Revolving credit facility balance was $32.5 million as of September 30, 2026, down from $40.0 million as of December 31, 2025.

Guidance and Future Outlook:

• Q4 2026 total revenue is expected to be between $124.2 million and $125.2 million.
• Q4 2026 non-GAAP operating income is expected to be between $21.4 million and $22.4 million.
• Q4 2026 non-GAAP net income per share is expected to be between $0.36 and $0.38.
• Full year 2026 total revenue is expected to be between $494.7 million and $495.7 million.
• Full year 2026 non-GAAP operating income is expected to be between $77.8 million and $78.8 million.
• Full year 2026 non-GAAP net income per share is expected to be between $1.29 and $1.31.
• The company targets GAAP profitability on a sustainable quarterly basis beginning in Q4 2026.
• The outlook for non-GAAP operating margin exiting Q4 2026 was raised from 17% to approximately 18%.
• The company reiterates a 30% target for the Rule of 40 framework (year-over-year revenue growth plus current quarter non-GAAP operating margin) by Q4 fiscal 2027.

Business Segments and Product Lines:

• Approximated trailing twelve-month (TTM) subscription revenue contribution from customers with $30,000+ ARR grew 18% year-over-year.
• Number of customers contributing $30,000 or more in ARR reached 3,925, up 6% year-over-year.
• Number of customers contributing $50,000 or more in ARR reached 2,155, up 11% year-over-year.
• The company replaced disclosure of customers with ARR of $10,000 or more with customers with ARR of $30,000 or more starting in Q4 2025.
• New and existing customers added during Q3 included U.S. Department of Transportation, Freddie Mac, Stanley Black & Decker, Sheetz, Banijay Entertainment, Premier Foods Group, Citizens Energy Group, and Pabst Brewing Company.
• The company released the second annual Social Media Dictionary and Q3 2026 Consumer Pulse Survey.
• The company announced winners of the Inaugural 2026 Social Intelligence Awards.
• The company featured its proprietary AI agent, Trellis, in "Breaking Ground."

Market and Competitive Landscape:

• Sprout Social positions itself as a leading AI-powered Social Intelligence Platform built on the belief that "All Business is Social."
• The platform is powered by Trellis, a proprietary AI agent designed to transform real-time social media signals into actionable insights.
• The company is consistently recognized as a top software by G2.
• The company's software operates across all major social networks and digital platforms.

Risks and Challenges:

• Risks include the inability to sustain revenue and customer growth rates, particularly regarding the strategic focus on enterprise customers.
• Price increases and packaging changes may negatively impact demand, customer acquisition, retention, and the total number of customers.
• Business could be harmed by significant interruptions, delays, or outages in services from the platform, API providers, or social media platforms.
• Inability to renew agreements governing access to data provided by social media APIs on acceptable terms could adversely impact the business.
• Technological advances in AI may disrupt the social media industry if the company cannot keep pace.
• Risks related to international expansion, compliance with international laws, and integration of acquired businesses.
• Unstable market, economic, and geopolitical conditions, including recession risks, inflation, tariffs, and trade tensions, could reduce demand.
• Potential inability to generate sufficient cash to service indebtedness or comply with credit agreement covenants.
• Workforce reduction plans may not achieve anticipated benefits.
• Cybersecurity attacks, data breaches, or IT system disruptions could negatively affect the business.
• Changing regulations relating to privacy, information security, and data protection could increase costs or limit data usage.
• Risks related to ongoing legal proceedings.

Management Commentary and Tone:

• CEO Ryan Barretto expressed pleasure with the quarter's performance, highlighting a record non-GAAP operating income of $26.3 million and a 21% non-GAAP operating margin.
• Management noted the 158% year-over-year increase in non-GAAP free cash flow.
• CEO Ryan Barretto stated the company is targeting GAAP profitability looking ahead, reflecting a focus on cost discipline.
• Management indicated that the shift to reporting customers with $30,000+ ARR better reflects the strategic focus on larger customers and aligns with resource allocation.

Other Key Points:

• The company initiated a $50 million stock buyback program.
• Over $26 million of repurchases were completed in Q3 2026.
• The buyback program is intended to return value to shareholders and offset dilution.
• The company does not provide guidance for GAAP operating loss, operating margin, or net loss per share due to the unavailability of reliable estimates for certain non-GAAP adjustments.
• Non-GAAP financial measures exclude stock-based compensation, amortization of acquired intangible assets, restructuring charges, and other items deemed unrelated to overall operating performance.