SDGR

SchrÃ¶dinger, Inc.

Next est. report 2026-11-04 · AMC

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Overview

Schrödinger, Inc. provides a physics-based computational platform for drug discovery and materials science. Its Software segment sells tools to accelerate molec

Schrödinger, Inc. provides a physics-based computational platform for drug discovery and materials science. Its Software segment sells tools to accelerate molecular discovery, while its Drug Discovery segment builds a portfolio of drug candidates. Software revenue is larger than drug discovery, and they sell to biopharma and materials science companies, including major players like Bristol Myers Squibb, leveraging new AI tools like Bunsen.

Key Inputs And Sourcing

1. Cloud Computing Resources (Google Cloud)

energy · Global · unknown

Source Schrödinger has an expanded five-year agreement with Google Cloud for hundreds of millions of GPU hours, forming the foundation of their computational platform.

Confidence: high

2. GPUs (NVIDIA)

component · Global · unknown

Source Strategic partnership with NVIDIA to optimize software for NVIDIA DGX SuperPOD systems and utilize NVIDIA Clara Discovery libraries, essential for high-performance computing in drug discovery.

Confidence: high

3. Labor (Computational Scientists/AI Engineers)

labor · Global · unknown

Source Specialized AI/ML talent and computational chemists are core to Schrödinger's business. Lower headcount contributed to decreased operating expenses. [cite: TRANSCRIPT]

Confidence: high

4. Contract Research Organization (CRO) Services

other · Global · unknown

Source CRO fees are explicitly mentioned as a component of operating expenses, indicating reliance on external R&D services for their drug discovery segment. [cite: TRANSCRIPT, 38]

Confidence: medium

5. Professional Services Fees

other · Global · unknown

Source Mentioned alongside CRO costs as decreasing operating expenses, these cover various external specialized services. [cite: TRANSCRIPT, 38]

Confidence: medium

6. Data (High-Quality for AI Models)

other · Internal/Global · unknown

Source High-quality data is critical for training AI models, which Schrödinger generates internally using physics-based methods. The cost is embedded in compute and labor. [cite: TRANSCRIPT]

Confidence: medium

7. Third-Party Software/Framework Licenses

component · Global · unknown

Source While Schrödinger develops its own software, it likely utilizes or licenses third-party AI frameworks or libraries, such as NVIDIA Clara Discovery, to enhance its platform.

Confidence: low

Industry Publications

Fierce Biotech (fiercebiotech.com) — Provides breaking news and analysis on the biotech industry, including drug development, clinical trials, IPOs, M&A, and AI-driven drug discovery, directly relevant to Schrödinger's market.
Nature Reviews Drug Discovery (nature.com/nrd) — Offers reviews, perspectives, and news articles on key topics in drug discovery of small and large molecules, highly relevant to Schrödinger's core business and scientific advancements.
Journal of Medicinal Chemistry (pubs.acs.org/journal/jmcmar) — Publishes case studies of high-impact small-molecule drug discovery programs and important reviews, directly aligning with Schrödinger's computational drug discovery efforts.
Computational Chemistry Highlights (compchemhighlights.org) — A resource for important recent papers in computational and theoretical chemistry, directly reflecting the scientific foundation of Schrödinger's platform.
Frontiers in Pharmacology (frontiersin.org/journals/pharmacology) — An interdisciplinary journal covering new research on drugs and their biological interactions, including peer-reviewed studies on AI for drug repurposing, relevant to Schrödinger's AI co-scientist, Bunsen.

Search Keywords Brand Product

Bunsen AI co-scientist
predictive toxicology solution
retrosynth software
AI drug discovery
computational chemistry
molecular simulation
materials science applications
biopharma software
drug development platform

Search Keywords Event Phrases

Schrödinger Q2 2026 earnings
Bunsen AI launch
Bristol Myers Squibb collaboration

Search Keywords Policy Regulatory

AI drug development guidance
biopharma AI ethics

What They Do (Plain English & Analogies): Schrödinger, Inc. acts like a super-smart virtual laboratory for discovering new medicines and advanced materials. Instead of scientists spending years in a physical lab mixing chemicals, Schrödinger provides a powerful computer platform that uses physics and artificial intelligence to simulate and predict how millions of different molecules will behave. This allows drug developers and material scientists to design and test potential new compounds much faster and more cost-effectively on a computer, significantly speeding up the discovery process. Their new 'Bunsen' AI acts like an expert co-scientist, automating complex tasks and making their powerful software even more accessible to a wider range of researchers.
Very Brief History: Schrödinger, Inc. was founded in 1990 and is based in New York, New York. The company pioneered the development of a physics-based computational platform for molecular discovery, which has evolved into a leading solution for AI-driven drug discovery and materials science applications.
"Street Stereotype": Schrödinger is generally perceived as a leading innovator and technology enabler in the rapidly growing field of AI-driven drug discovery and computational chemistry. Investors and analysts often view it as a key player transforming how new drugs and materials are discovered, particularly with its advanced software platform and recent AI innovations like Bunsen.
Subsidiaries On Linked In*: Faxian Therapeutics
Schrodinger, LLC
Schrodinger Korea LLC
Schrodinger Technologies Ltd.
Reo Discovery Ltd.
Schrodinger India Private Limited
Schrodinger KK
Synaptic Science, LLC
Customer Sectors & Example Clients: Schrödinger's customers are primarily in the life sciences, biopharma, biotech, and material science industries. Key clients and collaborators mentioned include Bristol Myers Squibb (BMS), Simcere Pharmaceutical Group, Novartis Pharma AG, and Eli Lilly (through its acquisition of Ajax Therapeutics). The company also receives funding from the Gates Foundation for predictive toxicology and Gates Ventures for battery research.
New Customers / Segments They'Re Targeting: The company is targeting a broader base of drug hunters and researchers by making its advanced software more accessible through new products like Bunsen, their AI co-scientist, which enables more users to run complex simulations. They are also focused on unlocking new budgets and expanding their user base across both the biopharma and material science industries with innovative solutions such as their predictive toxicology platform. Additionally, they are seeing and targeting growth within the improving biotech sector.
Sales Geographies And Expansion Plans: Schrödinger currently sells its software and services in the United States, the Asia-Pacific region, Europe, the Middle East, and Africa. The company has specific offices and subsidiaries in countries including South Korea, the United Kingdom, Ireland, India, and Japan. While no explicit new geographic expansion plans were disclosed in the recent earnings call, their 'global collaboration with Simcere Pharmaceutical Group' (based in China) indicates a continued focus on expanding their international reach and presence.
How Key Themes May Help/Hurt: The 'Biotech '26: AI Driven Drug Discovery' theme strongly benefits Schrödinger. As a leader in computational and AI-driven drug discovery, the widespread adoption and strategic investments in AI tools across the biotech value chain directly align with Schrödinger's business model and platform. The increasing industry recognition of a 'computationally driven predict-first approach' to accelerate drug discovery timelines and improve success rates serves as a significant tailwind. However, the theme also highlights potential challenges such as substantial upfront capital investment required for advanced AI platforms and an evolving regulatory landscape for AI-designed drugs. While Schrödinger is well-positioned, these broader industry hurdles could indirectly impact customer budgets or create uncertainty for the commercialization pathways of AI-driven solutions.

3 Main Long-Term Bull Details

Strong and Broad-Based Software Growth: The company demonstrated robust 27% year-over-year ACV growth in Q2 2026, driven by increased demand, scale-up within large existing customers, successful uptake of new products like predictive toxicology and retrosynth, and an improving biotech sector. This indicates a growing market recognition and adoption of their computational platform across the industry.
Pioneering AI-Driven Innovation: Schrödinger is at the forefront of AI in drug discovery with the launch of Bunsen, their 'agentic AI co-scientist.' This innovation is expected to significantly expand platform usage and broaden their user base by enabling more efficient workflows and making advanced simulations accessible to a wider range of drug hunters.
Validated Therapeutics Portfolio with Significant Value Realization: The company's internal drug discovery efforts and collaborations have a proven track record of success, having realized over $750 million from therapeutics activities since 2020. This includes substantial value from co-invented drugs and co-founded companies, notably the $2.3 billion acquisition of Ajax by Eli Lilly, validating the effectiveness of their platform and providing potential for future milestones and royalties.

3 Main Long-Term Bear Details

Temporary Revenue Headwinds from Hosted Software Transition: Schrödinger's strategic shift to hosted software licensing, while beneficial for long-term recurring revenue, temporarily negatively impacts reported revenue. Revenue for hosted licenses is recognized ratably over the contract life rather than mostly upfront, creating a short-to-medium term drag on reported revenue despite strong underlying ACV growth.
Long Lead Times for New Product Adoption and Validation: The introduction of transformative technologies, such as their predictive toxicology solution, requires a significant lead time for customer evaluation, running calculations, and experimental validation. This extended adoption cycle can delay the full revenue impact and market penetration of these innovative products.
Sensitivity to Biotech Sector Funding: Although the biotech sector is currently improving, Schrödinger's business remains sensitive to its overall health. Past periods of biotech funding struggles have impacted the company's sales to these customers, indicating that future downturns in biotech investment could pose a risk to their growth.

Competitors And Differentiation: Schrödinger competes with various companies in the computational drug discovery and scientific software space, including Exscientia, Insilico Medicine, Recursion, Dassault Systèmes, Certara, Chemical Computing Group, Cresset, OpenEye, Materials Design, Simulations Plus, Atomwise, ChemAxon, and Silicos Bio. Schrödinger differentiates itself through its foundation in 'rigorous first principles physics' to generate 'accurate, reliable data required for AI models'. This integration of 'the most advanced ground truth physics calculations and cutting-edge AI' forms the core of their computational molecular discovery platform. Their 'predict-first approach' and new 'agentic AI co-scientist,' Bunsen, which can execute complex multi-step workflows and even restart failed jobs, further enhance their competitive positioning. Additionally, their predictive toxicology solution offers early identification of safety liabilities, providing substantial time and cost savings.
Recent Performance & What The Market'S Focused On: Schrödinger demonstrated strong momentum in the second quarter of 2026, reporting 27% year-over-year ACV (Annual Contract Value) growth. Total revenue reached $58.9 million, with software revenue at $32.5 million and drug discovery revenue at $23 million, which included a $10 million collaboration milestone from Ajax Therapeutics. The company reported a net income of $6 million, a significant improvement from a net loss in the prior year, primarily due to a gain associated with Eli Lilly's acquisition of Ajax. Operating expenses decreased by 6% year-over-year, reflecting disciplined expense management. Schrödinger ended the quarter with a strong balance sheet of $419 million in cash and marketable securities. The market is currently focused on the company's continued robust ACV growth, the successful launch and adoption of its new AI co-scientist, Bunsen, and the progress of its therapeutics portfolio, particularly future milestones and royalties. Investors are also closely monitoring the ongoing transition to hosted software licensing and its temporary impact on reported revenue, as well as the contribution of new products like predictive toxicology to overall ACV.

Revenue Segments And Estimated Mix: Software — Mix: ~55%; Source: Q2 2026 transcript; Trend: Hosted revenue contributed $15.2 million, or 47% of the software total, compared to 31% in Q2 2025, reflecting a planned accelerated transition to hosted licenses.
Drug Discovery — Mix: ~39%; Source: Q2 2026 transcript; Trend: Increased from $13.9 million in Q2 2025 to $23 million in Q2 2026, primarily due to a $10 million collaboration milestone from Ajax Therapeutics.
Contribution — Mix: ~6%; Source: Q2 2026 transcript; Trend: Decreased from $4.8 million in Q2 2025 to $3.4 million in Q2 2026, driven by completion of initial Gates Foundation funding for predictive toxicology, partially offset by Gates Ventures grant for battery research.
Product Brands: Bunsen
Predictive Toxicology Solution
Retrosynth

Bull / Bear Details

Schrödinger's physics-based computational platform, enhanced by the launch of its agentic AI co-scientist Bunsen and new offerings like predictive toxicology, i

Thesis

Schrödinger's physics-based computational platform, enhanced by the launch of its agentic AI co-scientist Bunsen and new offerings like predictive toxicology, is accelerating drug discovery and materials science. Strong ACV growth, successful therapeutics collaborations, and a strategic shift to hosted licensing position SDGR for long-term value. While the hosted transition temporarily impacts reported revenue, the company's innovation and disciplined expense management make the bull case compelling. (September 4, 2026)

Bull case

Schrödinger's new AI co-scientist, Bunsen, is being rapidly adopted by major customers like Bristol Myers Squibb, significantly expanding platform usage and accelerating complex multi-step workflows. This, along with new products like predictive toxicology and retrosynth, directly reduces drug discovery timelines and costs by enabling early identification and resolution of safety liabilities.
The company's platform differentiates itself by integrating advanced ground truth physics calculations with cutting-edge AI, generating accurate and reliable data for AI models. Bunsen further enhances this by helping computational chemists work more efficiently, run more design projects, and expand the user base for advanced simulations, driving increased platform demand.
The therapeutics team is experiencing a boost in productivity from Bunsen's integration, accelerating target analysis, structural biology workflows, and integrated analysis of DMPK, pharmacology, and toxicology data. This enables rapid, data-driven decisions and accelerates the drug discovery cycle, validated by over $750 million realized from therapeutics activities since 2020.

Bear case

The development and integration of advanced AI platforms like Bunsen require substantial upfront capital investment. Additionally, the planned accelerated transition to hosted licenses, while strategic for long-term value, temporarily impacts reported revenue and software gross margin, delaying the full financial benefits of increased platform usage.
The effectiveness of AI in drug discovery is heavily reliant on the availability of high-quality, standardized, and comprehensive datasets. Despite Schrödinger's physics-based approach to generate accurate data, challenges in broader data curation, integration from disparate sources, and ensuring data privacy could still limit AI's utility.
The regulatory landscape for AI-designed drugs and AI-driven clinical decisions is still evolving, creating uncertainty for approval pathways. Upcoming specific guidance from bodies like the FDA and EMA on AI/ML quality considerations in pharmaceutical manufacturing and digital health technologies confirms this ongoing evolution, posing potential hurdles.

Bull / Bear Case

Bear Case: Despite strong ACV growth, Schrödinger faces temporary revenue headwinds and reduced software gross margins due to its strategic transition to hosted licensing, where revenue is recognized ratably rather than upfront. This delays the full financial benefits of increased platform usage. The adoption of transformative new products like predictive toxicology requires long lead times for customer evaluation and experimental validation, potentially slowing their revenue impact. While the biotech sector is currently improving, the company's business remains sensitive to funding fluctuations in this industry. Additionally, the development of advanced AI platforms demands substantial upfront capital, and the evolving regulatory landscape for AI-designed drugs introduces uncertainty regarding approval pathways and market acceptance.
Bull Case: Schrödinger is demonstrating robust growth, with Q2 2026 ACV up 27% year-over-year, driven by broad demand from top pharma, biotech, and materials science customers. The launch of Bunsen, their agentic AI co-scientist, and its rapid adoption by major players like Bristol Myers Squibb, is significantly expanding platform usage and accelerating drug discovery workflows. New products such as predictive toxicology and retrosynth are also contributing to ACV growth and unlocking new market segments. The company's therapeutics portfolio has a proven track record, realizing over $750 million from collaborations and acquisitions since 2020, validating the platform's effectiveness. Furthermore, disciplined expense management, evidenced by a 6% decrease in operating expenses, and a strong balance sheet provide financial stability for continued innovation and expansion.
More Compelling & Why: Bull. The market's strong positive reaction, with SDGR significantly outperforming the S&P 500 since the earnings call, indicates a compelling Bull Case. Anchored by a high Price/Sales (P/S) ratio, reflecting future growth potential in a transformative industry, the strongest argument is the rapid adoption of the Bunsen AI co-scientist by major customers like Bristol Myers Squibb. This validates Schrödinger's innovative platform and its ability to drive substantial, long-term ACV growth. My view would flip to Bear if the company consistently misses its ACV guidance or if the hosted transition significantly erodes profitability beyond current expectations, indicating a fundamental issue with their business model rather than a temporary accounting effect.

Key Factors5 rows

Key Factor	Why It Matters	What To Watch	What It Signals	Where/How To Track	Free Alt Data	Paid Alt Data
Hosted Software Revenue Percentage Progress	The transition to hosted licensing is a strategic priority for long-term value, despite temporary negative impacts on reported revenue. Progress towards the 75% target by 2028 indicates successful execution of this strategy.	Hosted revenue as a percentage of total software revenue. The company reported 47% in Q2 2026. Watch for continued sequential increases.	Hosted revenue percentage > 47% in Q3 2026 and management reiterating confidence in achieving 75% by end of 2028 = bullish. Hosted revenue percentage <= 47% in Q3 2026 or management expressing concerns about the 75% target = bearish.	Company earnings reports and conference calls. Next earnings call (Q3 2026) around November 2026.
Contribution of New Products (e.g., Predictive Toxicology, Retrosynth) to ACV	New products like predictive toxicology and retrosynth are key drivers for expanding the addressable market, unlocking new budgets, and sustaining ACV growth beyond core offerings.	Management commentary on the specific contribution and adoption rates of predictive toxicology, retrosynth, and other new products to ACV in future earnings calls.	Management explicitly stating that new products (e.g., predictive toxicology, retrosynth) are driving a material portion of ACV growth (e.g., >5% of total ACV growth) or announcing new significant customer wins specifically for these products = bullish. Lack of specific positive updates on new product contribution or slower than expected adoption = bearish.	Company earnings reports and conference calls. Next earnings call (Q3 2026) around November 2026.	Google Scholar/PubMed: Research papers mentioning 'Schrodinger predictive toxicology' or 'Schrodinger retrosynth' by external researchers.
Drug Discovery Collaboration Milestones & New Partnerships	Milestones and new collaborations validate the effectiveness of Schrodinger's platform in drug discovery and provide significant non-dilutive funding and future royalty potential, as evidenced by the Ajax milestone and Simcere partnership.	Announcement of new collaboration agreements (like Simcere Pharmaceutical Group) or achievement of specific development/commercial milestones from existing partnerships.	New significant collaboration announcements or receipt of a new collaboration milestone payment > $10 million = bullish. No new significant partnerships or milestones announced in the next quarter = bearish.	Company press releases, SEC filings, earnings call transcripts.	ClinicalTrials.gov: New drug candidates entering clinical trials from Schrodinger or its partners.	Pharma Intelligence (Citeline): 'Number of AI-Enabled Drug Candidates in Preclinical and Clinical Development' (for SDGR and partners).
Bunsen AI Co-Scientist Adoption & Large Software Agreements	Bunsen is a new, significant AI product expected to accelerate software business growth, expand platform usage, and access new budgets, validating SDGR's AI-driven drug discovery thesis. Its successful deployment by Bristol Myers Squibb serves as a compelling model for industry-wide adoption.	Number of new large-scale deployments of Bunsen, similar to the Bristol Myers Squibb agreement. Specific contract values or significant expansions of existing customer usage explicitly attributed to Bunsen.	New large-scale Bunsen deployments or significant customer expansions (e.g., public announcement of a new multi-year agreement with a top 20 pharma company for Bunsen, or a significant increase in ACV from an existing customer explicitly attributed to Bunsen) = bullish. No new major customer announcements or slower than expected adoption commentary = bearish.	Company press releases, earnings call transcripts, SEC filings (10-Q, 10-K). Next earnings call (Q3 2026) around November 2026.	Google Trends: 'Schrodinger Bunsen', 'AI drug discovery software'. Industry news sites for AI in pharma.	Thinknum: 'Schrodinger job postings for AI/ML roles' (growth/volume).
Software ACV (Annual Contract Value) Growth and Guidance Achievement	ACV is a primary indicator of software business health and future revenue potential, reflecting demand for Schrodinger's platform. Meeting or exceeding guidance confirms execution strength and investor confidence.	Q3 2026 ACV excluding contribution compared to guidance of $41 million to $45 million. Full year 2026 ACV compared to guidance of $218 million to $228 million.	Q3 2026 ACV ex-contribution >= $45 million or full year 2026 ACV >= $228 million = bullish. Q3 2026 ACV ex-contribution < $41 million or full year 2026 ACV < $218 million = bearish.	Company earnings reports and conference calls. Next earnings call (Q3 2026) around November 2026.

Key Reported Metrics, Reratings Triggers & Results3 rows

Reflects management's commitment to disciplined expense management and enhanced productivity, which is crucial for improving overall profitability and achieving

Upcoming print · 2026-11-04

Key reported metrics
Metric	Last period	Why it matters
Operating Expenses	-6%	Reflects management's commitment to disciplined expense management and enhanced productivity, which is crucial for improving overall profitability and achieving long-term financial targets.
Drug Discovery Revenue	65.47%	Validates the effectiveness of Schrodinger's platform in generating high-value therapeutic assets and collaboration milestones, directly impacting the company's financial performance.
ACV excluding contribution	23%	Signals demand for Schrodinger's platform and new products like Bunsen, driving long-term revenue. Investors will watch for continued strong growth and progress towards full-year guidance.

Key Questions

Will the adoption of the newly launched Bunsen AI co-scientist and other new products significantly accelerate software ACV growth, enabling Schrödinger to meet

Will the adoption of the newly launched Bunsen AI co-scientist and other new products significantly accelerate software ACV growth, enabling Schrödinger to meet or exceed its Q3 and full-year 2026 ACV guidance?

Question 2: Can Schrödinger continue to successfully transition customers to hosted software licensing at the targeted pace (47% in Q2, 75% by end of 2028) without further significant negative impacts on reported software revenue and gross margins in the near term?
Question 3: Beyond the one-time Ajax milestone, will Schrödinger demonstrate sustained growth in its drug discovery revenue and maintain disciplined operating expense management to improve overall profitability in the coming quarters?

Earnings Transcript SummaryTable

2026-08-05 · 2026Q2 Earnings Call

3 Things Management Is Most Focused On	Call Takeaway & Tone	Prior Quarter'S Y/Y Growth By Segment	3 Things Analysts Most Pressed On (And Mgmt Responses)	Revenue Segments
3 Things Management Is Most Focused On1. Accelerating software business growth and expanding platform usage with new products: Management highlighted the official launch of Bunsen, their AI co-scientist, and its deployment by Bristol Myers Squibb, as well as the contribution of predictive toxicology to ACV. They aim to unlock new budgets and broaden their user base across biopharma and material science industries. 2. Advancing the therapeutics portfolio: Management emphasized the boost in productivity from Bunsen's integration, the new global collaboration with Simcere, and the validation of their platform through significant milestones and acquisitions like Lilly's acquisition of Ajax, which has generated over $750 million from therapeutics activities since 2020. 3. Transitioning customers to hosted software licensing and disciplined expense management: Management is pleased with the progress in converting customers to hosted licenses, aiming for 75% hosted by the end of 2028, despite the temporary negative impact on reported revenue. They also noted a 6% decrease in operating expenses year-over-year due to lower headcount, CRO, and professional services fees, reflecting a commitment to disciplined expense management.	Call Takeaway & ToneThe overall takeaway of the call is that Schrodinger is executing well on its strategy, marked by strong momentum in both its software and drug discovery businesses. The tone was positive and confident, highlighting significant innovation with the launch of Bunsen, successful strategic collaborations, and disciplined financial management. Key themes included the increasing adoption of their computationally driven platform in drug discovery, the strategic shift to hosted software for long-term value, and the validation of their therapeutics portfolio through high-value collaborations and acquisitions.	Prior Quarter'S Y/Y Growth By SegmentIn Q1 2026, Software revenue decreased by 21% year-over-year to $35.6 million, reflecting the planned transition to hosted software licensing. Contribution revenue decreased by 97.67% year-over-year to $0.1 million (compared to $4.3 million in Q1 2025). Drug discovery revenue increased by 124.51% year-over-year to $22.9 million (compared to $10.2 million in Q1 2025). Compared to Q1 2026, the year-over-year decline in Contribution revenue significantly accelerated (less negative decline) in Q2 2026, while the year-over-year growth in Drug Discovery revenue decelerated in Q2 2026.	3 Things Analysts Most Pressed On (And Mgmt Responses)1. End market health in biopharma and biotech, and customer activity: Analysts inquired about the overall health of these sectors. Management (Ramy Farid) responded that the situation is better this year than last, evidenced by more IPOs and fewer biotech companies struggling to raise funds, which is consistent with broader market reports. 2. Bunsen's commercialization, pipeline, and pricing model: Analysts asked about the pipeline for Bunsen and its pricing. Management (Ramy Farid and Pat Lorton) explained that the value of Bunsen is recognized through increased demand and scaled-up usage of their technology, as demonstrated by the significant expansion of access by Bristol Myers Squibb. They also highlighted Bunsen's ability to accelerate workflows, perform routine tasks, and restart failed jobs, enhancing efficiency. 3. Progress on converting customers to hosted licensing and operating expense reduction: Analysts questioned the pace of hosted conversion and the reasons for reduced operating expenses. Management (Richie Jain) stated they are on track to achieve 75% hosted by the end of 2028, currently at 47%, with strong customer engagement. He attributed the 6% decrease in operating expenses to reductions in personnel, CRO, and professional services fees, reflecting disciplined expense management and enhanced internal productivity.	Revenue SegmentsSoftware revenue was $32.5 million in Q2 2026. Year-over-year growth for total software revenue was not explicitly stated, as it continues to be impacted by the planned accelerated transition to hosted licensing, which recognizes revenue ratably. Hosted revenue, however, increased to 47% of the software total in Q2 2026, compared to 31% in Q2 2025. Contribution revenue was $3.4 million, representing a 29.17% decrease year-over-year (compared to $4.8 million in Q2 2025). Drug discovery revenue was $23 million, representing a 65.47% increase year-over-year (compared to $13.9 million in Q2 2025).

Transcript TidbitsTable

2026-08-05

About Expanding Eligible Market	About Competition	About The Broader Industry	Where Things Are Headed	Updates On Theme	Broader Themes Emerging	Bullish-Leaning Quotes (Short)	Bearish-Leaning Quotes (Short)	Hiring
About Expanding Eligible MarketSchrodinger is introducing new products like Bunsen, an AI co-scientist, and predictive toxicology solutions to expand platform usage and provide access to new budgets, broadening their user base across biopharma and material science industries. Bunsen is expected to enable more drug hunters to access their software and run advanced simulations, expanding the user base over time. The company's commitment to scientific innovation, such as the predictive toxicology solution, is a key component of its strategy to expand its addressable market and access new budgets.	About CompetitionSchrodinger differentiates its platform by integrating advanced ground truth physics calculations and cutting-edge AI, which uses rigorous first principles physics to generate accurate, reliable data for AI models.	About The Broader IndustryThe biopharma industry is increasingly recognizing that a computationally driven predict-first approach is a critical driver for accelerating drug discovery timelines and improving probabilities of success. The biotech sector has improved this year compared to last, with a higher number of IPOs and fewer biotech companies struggling to raise funds. The promise of AI dominates the dialogue in both drug discovery and materials design. There is also an 'explosion' of structures available in the industry, which benefits structure-based drug design.	Where Things Are HeadedSchrodinger plans to accelerate the growth of its software business and advance its therapeutics portfolio, aiming for 75% hosted software by the end of 2028. The company expects Bunsen to drive significantly increased platform usage, and its implementation by Bristol Myers Squibb is seen as a model for industry-wide deployment. Schrodinger anticipates ACV to be in the range of $218 million to $228 million for the full year 2026, representing 10% to 15% growth over 2025. Drug discovery revenue is now expected to be between $65 million and $75 million, an increase from prior expectations. Operating expenses are projected to be less than in 2025, and predictive toxicology is expected to contribute to growth for several years. The company's pipeline continues to represent potential for substantial long-term value.	Updates On ThemeAI	Broader Themes EmergingMaterials Science, Battery Research	Bullish-Leaning Quotes (Short)We're very pleased with our momentum across the business in the second quarter. Our ACV growth of 27%, driven by broad-based demand, reflects this ongoing shift. We are excited about Bunsen, our AI co-scientist, which we officially launched in early access last week. We are very pleased that Bristol Myers Squibb, a longtime customer and collaborator, is deploying Bunsen and expanding their use of the platform across their research organization. The therapeutics team is experiencing a boost in productivity across our portfolio following the integration of our new agentic AI co-scientist, Bunsen. Since 2020, we have realized over $750 million from our therapeutics activities across collaborations, co-invented drugs, and co-founded companies. The first half of 2026 has been marked by innovation and strong execution. The throughput of work you're able to accomplish just from that optimization, ignoring all the other benefits of working with a co-scientist, is really incredible.	Bearish-Leaning Quotes (Short)Our year-over-year revenue growth continues to be impacted by our planned accelerated transition to hosted licenses, for which revenue is recognized ratably over the life of the contract rather than mostly upfront. Every 1% increase in hosted revenue resulting in a $2 million to $3 million reduction in reported revenue, depending on renewal quarter and contract length. Software gross margin was 71% for the quarter compared to 76% in Q2 2025, reflecting our planned accelerated transition to hosted software licensing. The decline is driven by the completion of the initial funding by the Gates Foundation in support of our predictive toxicology initiative, partially offset by the Gates Ventures grant supporting our battery research.	HiringTotal operating expenses for Q2 were $74 million, a decrease of 6% compared to $79 million in Q2 2025. The decrease was primarily driven by lower headcount, CRO, and professional services fees, and reflects our commitment to disciplined expense management. Operating expenses are down 6% year over year and also sequentially. We've seen some reductions in personnel costs as well as CRO costs and professional services.