Schrodinger’s 2026 Q2 Call: Predictive Tox Timelines, Bunsen Collaboration Clarity, and Hosted Revenue Shifts at Odds

Date of Call: Aug 5, 2026

Financials Results

• Revenue: $58.9M
• Gross Margin: Software gross margin was 71% for the quarter compared to 76% in Q2 2025

Guidance:

• Full-year 2026 ACV expected to be in the range of $218 to $228M, representing 10 to 15% growth over 2025.
• Full-year 2026 drug discovery revenue expected to be in the range of $65 to $75M (prior expectation was $55 to $65M).
• Full-year 2026 operating expenses expected to be less than in 2025.
• Q3 2026 ACV excluding contribution expected to be $41 to $45M, compared to $38.3M in Q3 2025.

Business Commentary:

Revenue Growth and Software Expansion:

• Schrodinger reported ACV growth of 27% year-over-year, with ACV excluding contribution at $22.6 million, and a 23% increase compared to Q2 2025.
• Growth was driven by large customer scale-ups, uptake of new products, improved biotech sector conditions, and new customers in life sciences and materials science.

Hosted Revenue and Licensing Model:

• Hosted revenue comprised 47% of software revenue in Q2 2026, up from 31% in Q2 2025 and 27% last quarter.
• The increase in hosted revenue is attributed to the company's strategic shift to a throughput-based licensing model, enhancing platform usage and capturing increased value.

Operational Efficiency and Expense Management:

• Total operating expenses decreased by 6% year-over-year to $74 million, driven by lower headcount, CRO, and professional services fees.
• The reduction reflects disciplined expense management and planned operational efficiencies.

Therapeutics Productivity and AI Integration:

• The therapeutics team's productivity increased following the integration of Bunsen, the agentic AI co-scientist, contributing to more efficient workflows and accelerated decision-making.
• Bunsen's ability to execute complex multi-step workflows and enable broader drug hunter access to advanced simulations is enhancing platform usage and productivity.

Predictive Toxicology and New Product Impact:

• Predictive toxicology solution contributed to 2026 ACV, with commercial evaluations progressing well.
• The solution addresses safety liabilities early in discovery, offering customers time and cost savings, and is expected to continue contributing to growth over the long term.

Sentiment Analysis:

Overall Tone: Positive

• Management expressed being 'very pleased with our momentum across the business' and stated 'our performance in the second quarter reflects continued momentum across our business, backed by a strong balance sheet.' They noted 'robust ACV growth,' 'strong execution,' and that they are 'very well positioned to execute on our strategic priorities.'

Q&A:

• Question from Michael Riskin (Bank of America): Can you give a bit more color on end market health in biopharma and biotech, as well as customer activity overall? And can you talk about how much Predictive Talks has contributed to ACV so far, and what are the expectations for that going forward?
  Response: The biotech sector is healthier this year with more IPOs and less funding strain. Predictive Talks has contributed to 2026 ACV and is part of the full-year guidance, but specific contribution is not disclosed. Evaluations are going well with real demand, and it is expected to contribute to growth for quite a number of years.

• Question from Matt Hewitt (Craig Hallam Capital Group): What is the pipeline and pricing model for the Bunsen collaboration with Bristol Myers Squibb? And what is the feedback on converting customers to hosted licensing, and could a lion's share be converted within the first two years?
  Response: The BMS agreement significantly scaled up their access to Schrodinger's technology, reflecting the value of Bunsen through increased demand. Customer conversion to hosted licensing is on track towards the goal of 75% by end of 2028, with strong engagement and the company currently at 47% hosted.

• Question from Scott Schoenhaus (KeyBank): How much is ACV growth as a function of new product launches, and what are areas for the next wave of product launches to unlock more budget?
  Response: New products, including Predictive Talks and RetroSynth, are a major contributor to growth, with expectations continuing in the second half. The strategy involves unlocking more pharma budgets by expanding product scope and capabilities based on R&D breakthroughs and customer feedback.

• Question from Scott Schoenhaus (KeyBank): You noted a reduction in operating expenses. Maybe talk about the areas where you're able to gain efficiencies.
  Response: Operating expenses are down 6% year-over-year due to reductions in personnel costs, CRO costs, and professional services, reflecting disciplined expense management and execution of plans.

• Question from Evan Siegerman (BMO Capital Markets): Can you speak to the specific areas of your workflows where you're seeing the greatest benefits from Bunsen?
  Response: Bunsen accelerates workflows in structure-based drug design, including structure preparation and analysis, and enables parallel task execution, significantly improving efficiency and productivity by acting as an AI co-scientist.

• Question from Brendan Smith (TD Cowan): How should we think about the 10 to 15% medium-term growth expectations regarding Predictive Talks, and how does it compare to the core software business?
  Response: Predictive Talks is a major source of demand due to addressing safety issues in drug discovery, but specific contribution to growth is not broken down. It is expected to contribute to growth for quite a number of years, with a long lead time for technology introduction and validation.

Contradiction Point 1

Predictive Tox Contribution and Growth Expectations

Contradiction on the timeline and nature of Predictive Tox's contribution to ACV growth.

Alexa Chan (Bank of America, on behalf of Michael Riskin) - Alexa Chan (Bank of America, on behalf of Michael Riskin)

2026Q2: Predictive Tox has contributed to 2026 ACV growth, and its contribution is included in the full-year guidance. - Rami Fareed(CEO)

Can you provide more details on the health of the biopharma and biotech markets, overall customer activity, and the contribution of Predictive Toxicology to ACV to date along with future expectations? - Mani Foroohar (Leerink Partners)

20260226-2025 Q4: Growth expectations for the 3-year period include the impact of new products, such as predictive toxicology. - Richie Jain(CFO)

Contradiction Point 2

Bunsen AI Collaboration with Bristol Myers Squibb (BMS)

Contradiction on the nature and visibility of the BMS collaboration.

What are your thoughts on the company's Q4 financial performance? - Matt Hewitt (Craig Hallam Capital Group)

2026Q2: The BMS collaboration significantly scaled up their access to Schrödinger's technology. The value of Bunsen is realized through increased platform usage and demand, which is reflected in the expanded agreement. - Rami Fareed(CEO)

What is the pipeline and pricing model for the Bunsen AI co-scientist collaboration with Bristol Myers Squibb (BMS), and what is the feedback and timeline for converting customers to hosted software licensing? - Brendan Smith (TD Cowen)

2026Q1: Regarding Bunsen, the strategy is to democratize access... It will first be rolled out in early access with close partners to work out integration and optimize performance. - Ramy Farid(CEO) and Pat Lorton(CTO)

Contradiction Point 3

Impact of Hosted Model Transition on Revenue

Contradiction on the financial impact of transitioning to hosted software licensing.

Matt Hewitt (Craig Hallam Capital Group) - Matt Hewitt (Craig Hallam Capital Group)

2026Q2: The Bunsen AI co-scientist collaboration... The value of Bunsen is realized through increased platform usage and demand, which is reflected in the expanded agreement. - Rami Fareed(CEO) and Richie Jain(CFO)

What is the pipeline and pricing model for the Bunsen AI co-scientist collaboration with Bristol Myers Squibb (BMS), and what is the feedback and timeline for converting customers to hosted software licensing? - Scott Schoenhaus (KeyBanc)

20260226-2025 Q4: The transition to hosted (targeting 75% by 2028) will create a smoother revenue profile. - Richie Jain(CFO)

Contradiction Point 4

Hosted Software Conversion Timeline and Progress

Contradiction on the timeline for achieving the 75% hosted software target.

What is Craig Hallam Capital Group's perspective on the earnings results? - Matt Hewitt (Craig Hallam Capital Group)

2026Q2: The company is on track to reach its goal of 75% hosted software by the end of 2028. - Richie Jain(CFO)

What is the pipeline and pricing model for the Bunsen AI co-scientist collaboration with Bristol Myers Squibb (BMS), and what is the feedback and timeline for converting customers to hosted software licensing? - Matt Hewitt (Craig-Hallum Capital Group)

2026Q2: The target remains 75% hosted by end of 2028. Progress is on track, with Q2 hosted revenue at 47%. - Richie Jain(CFO)

Contradiction Point 5

Predictive Tox Contribution to Full-Year Guidance and Growth Expectations

Different statements on whether Predictive Tox is included in the full-year guidance.

Alexa Chan (Bank of America, on behalf of Michael Riskin) - Alexa Chan (Bank of America, on behalf of Michael Riskin)

2026Q2: Predictive Tox has contributed to 2026 ACV growth, and its contribution is included in the full-year guidance. - Rami Fareed(CEO)

Can you provide more details on the health of the biopharma and biotech markets, overall customer activity, and the contribution of Predictive Toxicology to ACV along with future expectations? - Alexa Chan (Bank of America)

2026Q2: Specific ACV contribution is not disclosed, but Predictive Tox has contributed to 2026 ACV and is part of the full-year guidance. - Ramy Farid(CEO)