What Schrodinger (SDGR) Said on Its Q3 Earnings Call

Key Points

• Schrödinger raised its 2026 outlook, projecting annual contract value of $222 million–$232 million and drug discovery revenue of $75 million–$85 million; the latter increase reflects a milestone payment from Structure Therapeutics.
• Third-quarter revenue rose 19% year over year to $64.5 million, while the net loss widened to $38 million. Hosted software revenue jumped 49% to $17.2 million as customers shifted from on-premise contracts.
• The company highlighted progress in its AI and therapeutics pipeline: Bunsen remains in early access, Takeda’s application for zasocitinib received FDA priority review, and results from a Phase 1 study of zilemaltib are planned for December.

Schrodinger NASDAQ: SDGR raised its full-year 2026 outlook for annual contract value and drug discovery revenue after reporting third-quarter growth in both software demand and revenue from its therapeutics collaborations.

The company reported total revenue of $64.5 million for the quarter, up 19% from a year earlier. Annual contract value, or ACV, rose 17% to $44.7 million, while growth excluding contribution ACV was 24%, Chief Financial Officer Richie Jain said.

The net loss widened to $38 million from $33 million in the third quarter of 2025, despite lower operating expenses. Jain said $11.4 million in other expense was primarily due to changes in the mark-to-market value of the company’s public equity positions.

Higher Outlook for 2026

Schrodinger now expects full-year ACV of $222 million to $232 million, representing growth of 12% to 17% over 2025. The company also raised its drug discovery revenue forecast to $75 million to $85 million from $65 million to $75 million, citing a milestone payment from Structure Therapeutics.

Third-quarter drug discovery revenue was $24.2 million, up from $13 million a year earlier. Jain said the increase was primarily driven by the Structure milestone, which followed progress in a study of an oral amylin molecule being developed as a potential obesity treatment.

Jain said the company continues to expect 2026 operating expenses to be lower than in 2025. Third-quarter operating expenses fell 13% to $64 million, primarily because of lower clinical contract research organization costs and headcount-related expenses. Schrodinger ended the quarter with $373 million in cash and marketable securities.

Asked about planning for 2027, Jain said it was early to discuss specifics but that the company would continue to look for investments that support revenue growth. He said the team was “basically at scale” to deliver on its three-year objectives.

Hosted Software and AI Tools

Software revenue was $38.2 million in the third quarter. Hosted revenue increased 49% to $17.2 million and represented 45% of software revenue, compared with 32% a year earlier. Software gross margin declined to 75% from 77%, reflecting the transition to hosted licensing, Jain said.

Jain noted that the shift from on-premise to hosted contracts temporarily moderates reported software revenue because hosted contracts are recognized over their lives.

Chief Executive Officer Ramy Farid said adoption broadened among large pharmaceutical customers, biotech companies and materials science customers. He also pointed to new products, including Bunsen, which the company describes as an agentic AI co-scientist.

Farid said Bunsen remains in an early-access program, with an open beta expected this year. Within Schrodinger, it handles approximately 80% of high-throughput calculations on the company’s internal compute cluster, he said.

Jain said customer engagement with Bunsen was going well, but the company was not ready to disclose details about token usage or customers’ willingness to pay for additional tokens. He said the product could increase customers’ computational throughput and, under the company’s throughput-based pricing model, lead to greater use of its platform and licenses.

Schrodinger’s predictive toxicology tool can now evaluate more than 80 potential off-target proteins, Farid said. He added that the product has already contributed to ACV this year. Farid described it as a tool for screening molecules earlier in drug discovery, rather than as a replacement for the experimental testing performed later in development.

Therapeutics and Materials Progress

Karen Akinsanya, president and head of therapeutics research and development, said Schrodinger co-founded Tectora Therapeutics in September with NEA and RA Capital. Schrodinger contributed two early-stage immunology and inflammation programs in exchange for an equity stake and eligibility for development and commercial milestones and royalties.

Akinsanya also noted that Takeda’s application for zasocitinib, a drug Schrodinger co-invented with Nimbus, had been accepted by the U.S. Food and Drug Administration for priority review. Schrodinger remains eligible for sales-based milestones, she said.

Dose escalation is complete in a phase 1 study of Schrodinger’s MALT1 inhibitor zilemaltib, Akinsanya said. The company plans to present results in December at the American Society of Hematology annual meeting.

In materials science, Farid said customers in industries including chemicals, energy storage, semiconductors and electronics are increasing their use of the platform. He described the market as an early-stage growth opportunity but declined to forecast what share of future growth would come from materials science rather than life sciences.

About Schrodinger (NASDAQ:SDGR)

Schrödinger, Inc develops computational software and services designed to support pharmaceutical, biotechnology and materials research. Its platform uses physics-based modeling, machine learning and other computational methods to help scientists analyze molecular interactions, design compounds and prioritize candidates for experimental testing.

The company's software offerings include tools for molecular modeling, quantum chemistry, molecular dynamics, virtual screening, property prediction and free-energy calculations.

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