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Schrodinger, Inc. (SDGR)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered a revenue and EPS beat vs consensus: total revenue of $54.8M vs ~$52.0M consensus and non-GAAP EPS of -$0.65 vs -$0.77 consensus; GAAP EPS was -$0.59. Management reaffirmed FY25 revenue guidance and lowered full-year OpEx outlook, citing May cost actions and disciplined spend . Values retrieved from S&P Global.*
  • Software revenue grew 15% YoY to $40.5M; drug discovery revenue grew 19% YoY to $14.2M. Software gross margin fell to 68% (from 80% YoY) due to predictive toxicology initiative costs and revenue mix .
  • Q3 2025 software revenue guidance was set at $36–$40M; FY25 guidance maintained: software growth +10–15%, drug discovery $45–$50M, software gross margin 74–75%, and 2025 OpEx now expected to be lower than 2024 (previously <5% growth) .
  • Liquidity strong at ~$462M cash, restricted cash, and marketable securities as of June 30, 2025, supporting runway through pipeline and platform investments; other income swung to +$10.0M on equity marks and interest .
  • Post-quarter development risk emerged: SDGR discontinued SGR-2921 (CDC7) after two treatment-related deaths in Phase 1 AML, despite early activity—an overhang for therapeutics narrative near term .

What Went Well and What Went Wrong

What Went Well

  • Strong top-line and segment growth: total revenue +16% YoY to $54.8M; software +15% to $40.5M; drug discovery +19% to $14.2M, driven by hosted contracts and contribution revenue, plus collaboration execution (including Novartis amortization) .
  • Management reiterated confidence in 2025 outlook and customer demand for validated computational approaches: “our ability to deliver solid second quarter results and maintain our 2025 revenue growth guidance is a testament to our strong customer relationships and the demand for proven computational technologies” — CEO Ramy Farid .
  • Pipeline momentum: encouraging initial Phase 1 data for MALT1 inhibitor SGR-1505 with Fast Track for Waldenström macroglobulinemia; plans to complete Phase 1 package and meet FDA for Phase 2 dose; initial data for SGR-3515 and SGR-2921 was expected in Q4 (timing clarity) .

What Went Wrong

  • Margin compression: software gross margin fell to 68% (vs 80% YoY, 72% in Q1) due to predictive toxicology costs and revenue mix; margin headwind expected to persist through the grant schedule (roughly two-year cadence starting Q3’24) .
  • Continued GAAP losses albeit improved YoY: net loss -$43.2M (vs -$54.0M YoY); operating expenses still high at $79.1M despite sequential reduction from Q1, indicating ongoing investment intensity .
  • Macro and cohort headwinds: biotech demand remains challenging; on-prem revenue down YoY due to timing/size of renewals; growth driven by expansions in large pharma while SMID-biotech churn and industry restructuring temper broader uptake .

Financial Results

Headline P&L Comparison (oldest → newest)

MetricQ4 2024Q1 2025Q2 2025
Total Revenue ($USD Millions)$88.3 $59.6 $54.8
Software Revenue ($USD Millions)$79.7 $48.8 $40.5
Drug Discovery Revenue ($USD Millions)$8.7 $10.7 $14.2
Software Gross Margin %83% 72% 68%
Operating Expenses ($USD Millions)$84.8 $82.0 $79.1
Other Income (Expense) ($USD Millions)$(18.5) $(8.9) $10.0
Net Loss ($USD Millions)$(40.2) $(59.8) $(43.2)
GAAP EPS ($)$(0.55) $(0.82) $(0.59)

Segment Revenue Breakdown

SegmentQ1 2025 ($USD Millions)Q2 2025 ($USD Millions)YoY Commentary
Software Products & Services$48.8 $40.5 +15% YoY (Q2’25 vs Q2’24), driven by hosted contracts and contribution revenue
Drug Discovery$10.7 $14.2 +19% YoY (Q2’25 vs Q2’24), supported by Novartis amortization and collaboration execution

EPS (GAAP and Non-GAAP)

EPS MetricQ1 2025Q2 2025
GAAP EPS ($)$(0.82) $(0.59)
Non-GAAP EPS ($)$(0.64) $(0.65)

Selected KPIs and Balance Items

KPIQ1 2025Q2 2025
Weighted Avg Shares (Basic & Diluted)73.06M 73.43M
Cash & Cash Equivalents ($M)$326.0 $219.9
Restricted Cash ($M)$11.8 $12.1
Marketable Securities ($M)$174.3 $230.3
Total Cash, Restricted, Marketable ($M)$512.1 ~$462.3
Deferred Revenue – Current ($M)$105.5 $94.5
Deferred Revenue – Long-term ($M)$104.5 $92.0
Software Customer Retention (> $0.5M ACV)—100% (management comment)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Software Revenue GrowthFY 2025+10% to +15% +10% to +15% Maintained
Drug Discovery RevenueFY 2025$45M–$50M $45M–$50M Maintained
Software Gross Margin %FY 202574%–75% 74%–75% Maintained
Operating ExpensesFY 2025Growth <5% vs 2024 Lower than 2024 Lowered
Cash Used in Operating ActivitiesFY 2025Significantly lower vs 2024 Significantly lower vs 2024 Maintained
Quarterly Software RevenueQ2 2025$38M–$42M (issued in Q1 release) Actual $40.5M Met
Quarterly Software RevenueQ3 2025—$36M–$40M New issuance

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Predictive Toxicology InitiativeProject ramp with Gates-funded contribution; margin headwind noted; most grant revenue recognized in 2025 Beta released; adoption interest high; separately priced; margin impact persists per grant timing Continued build; monetization to follow; margin drag near term
Hosted vs On-PremHosted revenue growing; gradual transition cadence; Q4 weighting expected to decline over time On-prem down YoY due to prior multi-year deals; hosted growth strong; scale-ups at renewal in Q4 Hosted mix rising; Q4 still key renewal season
Macro/Tariffs/RegulatoryChina exposure low single digits; NIH/government exposure <1% Management cites tariff/regulatory uncertainties; demand from large pharma resilient; biotech cohort challenged Macro mixed; large pharma supportive; SMID-biotech weak
Pipeline (SGR-1505/2921/3515)Initial SGR-1505 data slated for Q2 2025; initial data for 2921/3515 in 2H 2025 Encouraging SGR-1505 Phase 1 data; 2921/3515 initial data expected Q4; later noted 2921 discontinued post-quarter 1505 positive; 3515 pending; 2921 negative post-quarter
R&D Execution/OpExFY25 OpEx growth <5%; cost-shift to COGS from initiatives; strong platform updates May RIF (~7%); ~$30M annualized OpEx reduction; FY25 OpEx now lower vs 2024 Cost discipline improved; OpEx outlook reduced

Management Commentary

  • CEO: “our ability to deliver solid second quarter results and maintain our 2025 revenue growth guidance is a testament to our strong customer relationships and the demand for proven computational technologies to accelerate molecular discovery” .
  • CFO: “Broadly, the industry is navigating a complex macroeconomic landscape… Notwithstanding this backdrop, we are very pleased to deliver strong results… We remain well capitalized with $462,000,000 in cash and equivalents as of June 30” .
  • Therapeutics lead: “We are very pleased with the initial Phase 1 SGR-1505 data… we plan to complete the Phase 1 package and meet with the FDA later this year to discuss the recommended Phase 2 dose” . “We expect to report initial Phase I data from our other two clinical programs, SGR2921 and SGR3515 in the fourth quarter” .

Q&A Highlights

  • Demand and renewals: Large pharma conversations constructive; Q4 is key renewal/scale-up season; biotech cohort remains challenged by macro/regulatory backdrop .
  • Predictive tox beta: High interest; collaborators using it; separately priced add-on; feedback cycle ongoing; margin impact tied to grant timing (~2 years from Q3’24) .
  • Cost discipline and OpEx: May RIF and expense initiatives driving lower 2025 OpEx vs 2024; sequential OpEx reductions visible in Q2 .
  • Pipeline timing: Initial data for SGR-2921 and SGR-3515 clarified as Q4; exploration of strategic opportunities likely for mid/late-stage development across programs .
  • Retention: “100% retention rate with customers greater than half a million dollars” reinforcing stickiness at scaled accounts .

Estimates Context

MetricQ2 2025 ConsensusQ2 2025 Actual
Revenue ($USD)$51.98M*$54.76M
Primary EPS (non-GAAP) ($)-$0.77*-$0.65
  • Beat/miss assessment: Bold revenue and EPS beats vs consensus. The beat was driven by hosted/software contribution revenues and collaboration execution; EPS benefited from reduced R&D OpEx and a swing to other income (equity marks, interest) . Values retrieved from S&P Global.*
  • Q3 2025: Consensus total revenue ~$49.62M*; company guided software revenue $36–$40M and expects remaining drug discovery to be roughly evenly split between Q3 and Q4 (definitions differ; total revenue consensus is not directly comparable to software-only guidance) . Values retrieved from S&P Global.*

Guidance Changes

(see table above)

Key Takeaways for Investors

  • SDGR delivered a clean beat on revenue and non-GAAP EPS; reaffirmed FY software/drug discovery guidance and lowered OpEx outlook, a positive setup into Q4 renewal season where scale-up discussions are ongoing .
  • Expect continued near-term software margin pressure (68% in Q2) as predictive tox contribution revenue carries higher COGS; margin drag should persist through the grant period (~two years from Q3’24) .
  • Liquidity (~$462M) provides ample runway for platform and pipeline; other income turned positive on equity marks/interest, partially offsetting operating losses .
  • Pipeline narrative bifurcated: SGR-1505 looks promising with Fast Track and initial efficacy signals; however, post-quarter discontinuation of SGR-2921 introduces therapeutics risk and may weigh on sentiment until clarity on 3515 and broader pipeline emerges .
  • Trading implications: Near-term, stock likely reacts to the beat and improved OpEx outlook; watch for any pressure from SGR-2921 discontinuation headlines. Q3 software guide ($36–$40M) aligns with seasonal cadence; the stock could hinge on Q4 renewal scale-ups and 3515 data timing .
  • Medium-term thesis: Hosted adoption and enterprise-scale deployments at large pharma should structurally reduce Q4 concentration over time; predictive tox monetization and biologics/formulation enhancements broaden TAM despite SMID-biotech headwinds .
  • Monitor catalysts: Strategic transaction(s) around SGR-1505, Q4 initial data for SGR-3515, progress in predictive tox commercialization, and late-year renewal outcomes at top accounts .

Disclaimer: Consensus estimates marked with an asterisk (*) are Values retrieved from S&P Global.