Sprout Social Q1 Earnings Call Highlights

Key Points

• Sprout Social posted Q1 fiscal 2026 revenue of $121.5 million, up 11.2% year over year, while non-GAAP operating margin expanded to 11.6% and free cash flow hit a record $24.7 million.
• The company announced its first share repurchase program, authorizing up to $50 million, citing strong cash generation and a valuation gap versus its long-term outlook.
• Growth was driven increasingly by larger enterprise customers and AI adoption: customers with $30,000+ in annual recurring revenue topped 60% of subscription revenue, and Trellis AI moved out of beta and is now expanding across the platform.

Sprout Social NASDAQ: SPT reported first-quarter fiscal 2026 revenue growth of 11.2% year over year and announced its first share repurchase authorization, as management emphasized larger enterprise customers, artificial intelligence initiatives and continued margin expansion.

Chief Executive Officer Ryan Barretto said Sprout generated revenue of $121.5 million in the quarter and posted a non-GAAP operating margin of 11.6%. The company also reported current remaining performance obligations of $281.7 million, up 10% year over year, while total remaining performance obligations increased approximately 10%.

“We’re also seeing customers making longer-term commitments to Sprout, with multi-year contracts now representing nearly half of our contract mix, up from about one-third two years ago,” Barretto said. He said the trend reflects growing customer confidence in Sprout as a strategic platform, particularly among larger and more sophisticated customers.

Free Cash Flow Reaches Record Level

Sprout reported non-GAAP free cash flow of $24.7 million in the first quarter, up approximately 27% from a year earlier and described by Barretto as the company’s largest quarterly non-GAAP free cash flow result to date. On a trailing 12-month basis, Sprout generated more than $51 million in non-GAAP free cash flow.

The company also announced that its board authorized a share repurchase program of up to $50 million. Barretto said the authorization reflects management’s confidence in Sprout’s free cash flow generation and long-term business opportunity, as well as the company’s view that there is “a meaningful disconnect” between current valuation levels and the long-term value it expects to create.

Alex Kurtz, Sprout’s vice president of investor relations and corporate development, said the program gives the company flexibility to act on that valuation view while continuing to invest in product development and selective strategic opportunities.

Enterprise Customer Segment Drives Mix Shift

Management highlighted continued momentum among customers contributing $30,000 or more in annual recurring revenue. Barretto said approximated trailing 12-month subscription revenue from that group grew 21% year over year and exceeded 60% of total subscription revenue for the first time.

Sprout ended the quarter with 3,875 customers contributing at least $30,000 in ARR, up 12% annually, and 2,085 customers above $50,000 in ARR, up 18%. Kurtz said Sprout has added more than 1,800 customers contributing $30,000 or more in ARR and 1,100 customers contributing $50,000 or more in ARR since the fourth quarter of 2022.

Barretto said larger customers typically have stronger unit economics, better retention and expansion profiles, and higher multi-product attach rates. He cited several new business wins during the quarter, including a seven-figure deal with a Fortune 500 multinational financial services company, a six-figure deal with a global product design and technology company, and a $900,000 deal with a Fortune 500 software company.

In response to an analyst question about consolidation trends, Barretto said larger customers are increasingly using Sprout to consolidate fragmented social technology stacks and adopt multiple products across publishing, care, listening, advocacy and engagement. He also said Sprout’s trial-based model remains a differentiator because enterprise buyers are focused on quick return on investment and speed to value.

Trellis AI Moves Out of Beta

Sprout spent much of the call discussing Trellis, its AI orchestration framework. Barretto said Trellis moved out of beta during the first quarter and is now live for customers across Listening and NewsWhip. He said adoption has scaled “quickly across thousands of customers” and that Trellis has become the most-used AI feature across the Sprout platform.

Barretto said half of Sprout’s Listening customers have already discovered Trellis in the product. He described the tool as designed to help users interpret real-time social signals and move from insight to action with governance and business context.

Management provided examples of Trellis use cases, including a large broadcasting organization using the tool to support content strategy and identify story angles, and a hospitality and entertainment company using it to assess the source, sentiment and themes behind an emerging pricing-related reputational issue.

Sprout plans to introduce what Barretto called “the largest AI release in Sprout’s history” at its Breaking Ground event on May 13. He said the company will bring Trellis beyond listening and into workflows across the Sprout ecosystem, and will share a usage-based pricing and packaging framework.

During the question-and-answer session, Barretto said Trellis initially will use a hybrid model combining user access and usage-based monetization. He said Sprout’s goal is first to drive adoption, with usage and monetization expected to scale as customers apply Trellis across more capabilities.

Essentials Targets Smaller Customers

Sprout also outlined its strategy for customers below $30,000 in approximated subscription revenue. Barretto said that cohort represented 40% of approximated subscription revenue in the trailing 12 months ended March 31, 2026, down from 61% for the comparable period ended March 31, 2022.

Management said the segment has been a drag on growth in recent years and requires a different product and go-to-market approach than larger customers. During the first quarter, Sprout introduced Essentials on its pricing page, a focused entry point built around publishing workflows for smaller customers.

Barretto said Essentials is aimed at net new customers and is designed around the features, pricing and packaging that smaller customers need. Kurtz said many of the related changes to pricing, packaging and self-service are only now being implemented, and the company expects modest deceleration in the sub-$30,000 segment this year before looking to stabilize it next year.

Guidance Calls for Continued Operating Leverage

For the second quarter of fiscal 2026, Sprout guided for revenue of $121.7 million to $122.5 million, non-GAAP operating income of $9.5 million to $10.3 million, and non-GAAP net income per share of $0.15 to $0.16.

For fiscal 2026, the company expects revenue of $492.5 million to $495.5 million, non-GAAP operating income of $54.9 million to $60.4 million, and non-GAAP net income per share of $0.88 to $0.97. Kurtz said the guidance assumes approximately 60.7 million weighted average basic shares outstanding and does not include assumptions for share repurchases.

Kurtz said Sprout expects to exit the fourth quarter with a non-GAAP operating margin close to 15%. The company also reaffirmed its target of reaching 30% under its Rule of 40 framework by the fourth quarter of fiscal 2027, with management pointing to growth among $30,000-plus customers, a more efficient motion for smaller customers and ongoing operating leverage as key drivers.

Asked about the spending cadence after a strong first-quarter margin performance, Kurtz said part of the quarter’s upside came from expense timing and investment pacing, particularly hiring. He said Sprout remains committed to operating discipline while preserving flexibility to invest behind Trellis, AI product expansion and the self-serve motion for smaller customers.

About Sprout Social NASDAQ: SPT

Sprout Social NASDAQ: SPT is a Chicago-based software company specializing in social media management solutions for businesses of all sizes. The company provides a cloud-based platform designed to help organizations improve their social media presence through a suite of tools for content scheduling, community engagement, social listening and analytics. Sprout Social's platform is built to streamline the workflows of marketing, customer care and public relations teams by providing a centralized hub for managing multiple social channels.

The company's product offerings include publishing and scheduling capabilities that allow users to plan and automate social content across networks such as Facebook, Instagram, Twitter, LinkedIn and Pinterest.

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