Schrödinger's 2025 Results Show Software Growth Meets Lowered Guidance, Burn Concerns Persist

What happened

Schrödinger announced its Q4 and full-year 2025 financial results on February 25, 2026, reporting 23% total revenue growth and 11% software revenue growth, which aligns with the previously reduced guidance range of +8% to +13%. The company's software performance reflects ongoing challenges with pharma budget cycles delaying scale-ups, as highlighted in the DeepValue report, rather than a meaningful re-acceleration. Management emphasized resilience, but the results underscore that cost-saving initiatives from the May 2025 restructuring, targeting ~$70 million, are critical to address the persistent cash burn. With Q3 2025 free cash flow at -$62.4 million and $241.1 million remaining on the ATM, operational leverage remains unproven despite the positive spin. Investors should view this as a validation of the base case, where software growth hovers in the low-double-digits, but the path to reduced dilution and improved fundamentals is still uncertain.

Implication

The 11% software growth for 2025 confirms that scale-ups are progressing slowly, aligning with the base case scenario of 10-12% growth, but it does not trigger the bull case catalyst of ≥13% guidance. Without a significant re-acceleration in the FY2026 outlook, the stock's upside remains capped, relying on cost savings to mitigate burn. Persistent cash burn, despite restructuring efforts, indicates that margin stabilization and operating leverage are not yet assured, increasing dilution risk from the ATM facility. Management's execution on the $70 million savings plan over the next 3-6 months will be crucial to preserve liquidity and shift the narrative towards improving fundamentals. Investors should prepare for volatility and adjust positions based on upcoming checkpoints, such as any ATM selling or opex trends, which could signal further thesis deterioration.

Thesis delta

The thesis does not shift materially, as the 11% software growth for 2025 meets the lowered guidance but falls short of the ≥13% threshold needed to increase conviction. If the full 2026 outlook, hinted in the news, indicates re-acceleration or continued stagnation, the call could lean towards the base or bear scenarios respectively, but based on available data, the investment case remains dependent on unproven scale-ups and burn reduction.