Schrodinger, Inc. (SDGR) Stock Analysis and Metrics

Schrodinger

NASDAQ: SDGR

$14.97 ▼ -0.16 (-1.06%)

At close: Jul 24, 2026 · 3:59 PM UTC

Financial Ratios

Market Cap1.12 Bn

P/E-10.82

P/S4.39

Div. Yield0.00

Revenue Growth (1y) (Qtr)-1.62

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About

Schrödinger, Inc. transforms therapeutics and materials discovery through a physics based computational platform. The company licenses its software to biopharmaceutical and industrial companies, academic institutions, and government laboratories worldwide. It also uses the platform to advance collaborative drug discovery programs with partners and to develop a pipeline of proprietary drug candidates. The platform’s ability to predict molecular properties with high accuracy reduces reliance on costly trial and error experiments.

The company generates revenue primarily from licensing its computational software and from drug discovery collaborations. Software licensing provides recurring fees based on number of calculations and access to tools such as Free Energy Perturbation and virtual screening. Drug discovery revenue comes from upfront payments, milestone payments and royalties under agreements with partners, as well as occasional equity proceeds. In 2025 software revenue reached $199.5 million and drug discovery revenue was $56.4 million, contributing to total revenue of $255.9 million. The software business benefits from high renewal rates and expanding contracts with existing customers, which drives steady growth in annual contract value.

The company operates through the following segments: Software and Drug Discovery.

• Software: Provides a suite of computational tools that accelerate molecule discovery, design and optimization for drug development and materials science applications. The platform includes virtual screening, free energy calculations, protein structure optimization and data visualization, and is licensed to biopharmaceutical, industrial, academic and government customers.

• Drug Discovery: Conducts collaborative research with biopharma partners and advances a proprietary pipeline of therapeutic candidates. Activities include target identification, hit to lead optimization, preclinical studies and early phase clinical trials for programs such as SGR 1505 and SGR 3515.

Schrödinger, Inc. holds a leading position in physics based computational drug discovery and is considered ahead of many peers that rely primarily on machine learning approaches. Its platform combines physics based methods with machine learning to deliver speed scale and accuracy that traditional methods lack. Competitors include BIOVIA Chemical Computing Group Cresset Biomolecular Discovery Cadence Design Systems Optibrium and others, but the company’s deep expertise in physics and its integrated platform give it a distinct advantage.

The company serves a diverse customer base that includes all of the top twenty pharmaceutical companies by revenue, major biopharma firms such as Novartis, BMS, Lilly and Otsuka, numerous biotech partners like Ajax Therapeutics and Bright Angel Therapeutics, academic institutions worldwide and government laboratories. It also supplies software to materials science customers in sectors such as aerospace, energy, semiconductors and consumer goods.

Investment Thesis

▲ Bull case

Schrödinger's transition to hosted licensing, while creating near-term revenue recognition headwinds, is establishing a more predictable and scalable revenue model that will significantly improve long-term financial visibility and customer retention, with hosted revenue already reaching 34% of software revenue in Q1 FY26 compared to 24% in Q1 FY25 and 27% on a trailing four-quarter basis, indicating accelerating adoption that aligns with the company's three-year target of 75% hosted penetration, which will transform revenue lumpiness into steady annuity streams and enhance customer lifetime value through deeper platform integration and reduced churn risk as organizations become increasingly dependent on the hosted infrastructure for their R&D workflows.
The launch of Bunsen, Schrödinger's agentic AI co-scientist, represents a substantial hidden catalyst that management underemphasized, as it directly addresses the critical bottleneck of scarce computational chemist expertise by enabling existing expert users to multiply their throughput and lowering the barrier for non-experts to leverage the platform's full capabilities, which will drive significant expansion in utilization-based licensing revenue beyond current forecasts, particularly since the company confirmed it is seeing customers already using general agentic AI tools with higher throughput of Schrödinger's technology, indicating pent-up demand that Bunsen is specifically designed to capture through its tool-optimized architecture.
Schrödinger's wholly owned therapeutic pipeline, particularly SGR3515 (WE1 inhibitor) and SGR1505 (MORT1 inhibitor), is generating meaningful clinical validation that remains underappreciated by the market, with SGR3515 demonstrating a 65% disease control rate in evaluable patients at 100mg+ doses in Phase 1 and SGR1505 showing a 100% response rate with durable responses in Waldenstrom's macroglobulinemia patients, both of which are derisking assets that increase the likelihood of high-value partnership deals for mid- and late-stage development, creating optionality for significant milestone and royalty income that is not fully reflected in current guidance which assumes only $10-15 million of R&D spend for wound-down activities in FY26.
The improving biopharmaceutical funding environment, evidenced by increased new customer acquisition and reduced biotech shutdowns compared to the prior year, is creating a structural tailwind for Schrödinger's software business that goes beyond cyclical recovery, as management noted they are seeing a pickup in new customers and improved engagement from both biotech and pharma companies actively reaching out for collaborations, which, combined with the platform's predictive toxicology initiatives gaining traction with FDA's focus on reducing animal testing, positions the company to benefit from a sustained shift toward computational-first R&D models that could drive multi-year ACV growth above the current 10-15% FY26 guidance range.
Schrödinger's balance sheet strength, with $406 million in cash and marketable securities at Q1 FY26 end, provides substantial optionality that management is underutilizing in their commentary, as the anticipated cash inflow from the Lilly-Ajax transaction (where SDGR holds ~6% equity) will further bolster liquidity without being incorporated into guidance, creating potential for strategic acquisitions, accelerated investment in high-return areas like Bunsen go-to-market, or shareholder returns that could catalyze a re-rating of the stock as the market recognizes the company's de-risked path to profitability and its ability to invest through cycles while maintaining discipline.

Schrödinger's transition to hosted licensing, while creating near-term revenue recognition headwinds, is establishing a more predictable and scalable revenue model that will significantly improve long-term financial visibility and customer retention, with hosted revenue already reaching 34% of software revenue in Q1 FY26 compared to 24% in Q1 FY25 and 27% on a trailing four-quarter basis, indicating accelerating adoption that aligns with the company's three-year target of 75% hosted penetration, which will transform revenue lumpiness into steady annuity streams and enhance customer lifetime value through deeper platform integration and reduced churn risk as organizations become increasingly dependent on the hosted infrastructure for their R&D workflows.
The launch of Bunsen, Schrödinger's agentic AI co-scientist, represents a substantial hidden catalyst that management underemphasized, as it directly addresses the critical bottleneck of scarce computational chemist expertise by enabling existing expert users to multiply their throughput and lowering the barrier for non-experts to leverage the platform's full capabilities, which will drive significant expansion in utilization-based licensing revenue beyond current forecasts, particularly since the company confirmed it is seeing customers already using general agentic AI tools with higher throughput of Schrödinger's technology, indicating pent-up demand that Bunsen is specifically designed to capture through its tool-optimized architecture.
Schrödinger's wholly owned therapeutic pipeline, particularly SGR3515 (WE1 inhibitor) and SGR1505 (MORT1 inhibitor), is generating meaningful clinical validation that remains underappreciated by the market, with SGR3515 demonstrating a 65% disease control rate in evaluable patients at 100mg+ doses in Phase 1 and SGR1505 showing a 100% response rate with durable responses in Waldenstrom's macroglobulinemia patients, both of which are derisking assets that increase the likelihood of high-value partnership deals for mid- and late-stage development, creating optionality for significant milestone and royalty income that is not fully reflected in current guidance which assumes only $10-15 million of R&D spend for wound-down activities in FY26.
The improving biopharmaceutical funding environment, evidenced by increased new customer acquisition and reduced biotech shutdowns compared to the prior year, is creating a structural tailwind for Schrödinger's software business that goes beyond cyclical recovery, as management noted they are seeing a pickup in new customers and improved engagement from both biotech and pharma companies actively reaching out for collaborations, which, combined with the platform's predictive toxicology initiatives gaining traction with FDA's focus on reducing animal testing, positions the company to benefit from a sustained shift toward computational-first R&D models that could drive multi-year ACV growth above the current 10-15% FY26 guidance range.
Schrödinger's balance sheet strength, with $406 million in cash and marketable securities at Q1 FY26 end, provides substantial optionality that management is underutilizing in their commentary, as the anticipated cash inflow from the Lilly-Ajax transaction (where SDGR holds ~6% equity) will further bolster liquidity without being incorporated into guidance, creating potential for strategic acquisitions, accelerated investment in high-return areas like Bunsen go-to-market, or shareholder returns that could catalyze a re-rating of the stock as the market recognizes the company's de-risked path to profitability and its ability to invest through cycles while maintaining discipline.

▼ Bear case

Schrödinger's reported software revenue decline to $35.6 million in Q1 FY26 from $44.97 million in Q1 FY25, despite ACV growth of 12%, reveals a concerning disconnect between leading indicators and actual revenue recognition, suggesting that the transition to hosted licensing may be causing more significant and persistent revenue drag than acknowledged, as the shift to ratable recognition is not merely a timing issue but could reflect underlying weakness in new bookings or expansion revenue that is being masked by ACV metrics, raising doubts about the sustainability of growth in the core software business.
The company's reliance on collaboration and milestone-driven drug discovery revenue introduces substantial volatility and execution risk that is inadequately priced into the stock, as evidenced by the Q1 FY26 drug discovery revenue jump to $22.9 million from $10.2 million in Q1 FY25 being driven by accelerated recognition of deferred revenue and discontinuation of one program—a non-recurring boost that makes the full-year guidance of $55-65 million highly dependent on unpredictable milestone achievements, with management offering no visibility into the timing or likelihood of future milestones beyond stating they do not guide to specific BD events, leaving investors exposed to potential revenue cliffs if anticipated milestones slip or collaborations fail to progress.
Despite management's optimism about the biopharmaceutical funding environment, Schrödinger continues to operate with significant operating losses, reporting a net loss of $60 million in Q1 FY26 and an adjusted EBITDA loss of $37.7 million, with no clear near-term path to profitability as the company maintains its target of EBITDA profitability only by 2028, indicating a prolonged period of cash burn that could be exacerbated if the anticipated Lilly-Ajax upfront payment is delayed or smaller than expected, or if software revenue recovery lags due to slower-than-anticipated hosted adoption or pricing pressure in a competitive market.
The predictive toxicology initiative, while positioned as a regulatory tailwind, shows signs of diminishing returns, as contribution revenue plummeted to $0.1 million in Q1 FY26 from $4.3 million in Q1 FY25 due to the completion of initial Gates Foundation funding, and management provided no update on new grant renewals or commercial traction for this business, suggesting it may have been a temporary boost rather than a sustainable growth engine, with the lack of discussion on future contribution ACV in full-year guidance implying the company does not expect meaningful renewal or expansion of this revenue stream.
Schrödinger's high operating expense base, particularly in R&D at $43.8 million in Q1 FY26, remains a significant overhang, as the company continues to fund extensive internal discovery efforts despite its stated strategy of not taking internally discovered molecules into the clinic beyond existing programs, with Karen Akinsanya acknowledging that the vast majority of R&D efforts are allocated to collaborations while admitting they will not expand the pre-LO portfolio without transacting programs, yet the expense base remains elevated, indicating potential inefficiency in R&D spending that could delay margin improvement and raise questions about capital allocation discipline as the company pursues multiple speculative internal programs alongside its partnership model.

Schrödinger's reported software revenue decline to $35.6 million in Q1 FY26 from $44.97 million in Q1 FY25, despite ACV growth of 12%, reveals a concerning disconnect between leading indicators and actual revenue recognition, suggesting that the transition to hosted licensing may be causing more significant and persistent revenue drag than acknowledged, as the shift to ratable recognition is not merely a timing issue but could reflect underlying weakness in new bookings or expansion revenue that is being masked by ACV metrics, raising doubts about the sustainability of growth in the core software business.
The company's reliance on collaboration and milestone-driven drug discovery revenue introduces substantial volatility and execution risk that is inadequately priced into the stock, as evidenced by the Q1 FY26 drug discovery revenue jump to $22.9 million from $10.2 million in Q1 FY25 being driven by accelerated recognition of deferred revenue and discontinuation of one program—a non-recurring boost that makes the full-year guidance of $55-65 million highly dependent on unpredictable milestone achievements, with management offering no visibility into the timing or likelihood of future milestones beyond stating they do not guide to specific BD events, leaving investors exposed to potential revenue cliffs if anticipated milestones slip or collaborations fail to progress.
Despite management's optimism about the biopharmaceutical funding environment, Schrödinger continues to operate with significant operating losses, reporting a net loss of $60 million in Q1 FY26 and an adjusted EBITDA loss of $37.7 million, with no clear near-term path to profitability as the company maintains its target of EBITDA profitability only by 2028, indicating a prolonged period of cash burn that could be exacerbated if the anticipated Lilly-Ajax upfront payment is delayed or smaller than expected, or if software revenue recovery lags due to slower-than-anticipated hosted adoption or pricing pressure in a competitive market.
The predictive toxicology initiative, while positioned as a regulatory tailwind, shows signs of diminishing returns, as contribution revenue plummeted to $0.1 million in Q1 FY26 from $4.3 million in Q1 FY25 due to the completion of initial Gates Foundation funding, and management provided no update on new grant renewals or commercial traction for this business, suggesting it may have been a temporary boost rather than a sustainable growth engine, with the lack of discussion on future contribution ACV in full-year guidance implying the company does not expect meaningful renewal or expansion of this revenue stream.
Schrödinger's high operating expense base, particularly in R&D at $43.8 million in Q1 FY26, remains a significant overhang, as the company continues to fund extensive internal discovery efforts despite its stated strategy of not taking internally discovered molecules into the clinic beyond existing programs, with Karen Akinsanya acknowledging that the vast majority of R&D efforts are allocated to collaborations while admitting they will not expand the pre-LO portfolio without transacting programs, yet the expense base remains elevated, indicating potential inefficiency in R&D spending that could delay margin improvement and raise questions about capital allocation discipline as the company pursues multiple speculative internal programs alongside its partnership model.

Geographical Breakdown of Revenue (2025)

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Investment Thesis

Product and Service Breakdown of Revenue (2025)

Geographical Breakdown of Revenue (2025)

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Investment Thesis

Product and Service Breakdown of Revenue (2025)

Geographical Breakdown of Revenue (2025)

Peer Comparison

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