SDGR · Schrodinger
Conviction · Medium · more likely to lead the S&P 500 over the next three months, by a modest margin
Wrong if: a daily close below $27.18
Note written ·
How this view changed
- · Rated Medium. Results, 4 November 2026: Q3 2026 revenue was $64.5M, up 19%, with software revenue up 6% to $38.2M, and FY26 ACV guidance was raised to $222-232M from $218-228M.
Price against the kill line
8.6% clear of its kill line on the 13 November 2026 close.
How to read this
The red mark is the price level of the published kill line: a close through it (a weekly close, on a weekly line) would prove the research note wrong on price. The dot is where the stock closed on 13 November 2026; a dot left of the mark has closed through its line.
The scale is stretched near the line, so close calls are easy to see. More than 8% from the line, the stock reads well clear, with a hollow dot to show the figure is off the drawn scale.
The kill line is the research note's own test. The portfolio sells on business facts, not on a price. How the portfolio decides
Three months against the kill line
Daily closes, to . Red: the kill line, a daily close below $27.18, on record since 11 November 2026. The shares are up 69.7% since the close; the S&P 500 is down 2.1% over the same sessions. Figures in the note can cover a different window.
Kill line
A daily close below $27.18, the 3 November 2026 close before the third-quarter report, which would erase the post-report gain. Full-year 2026 annual contract value below the $222 million low end of guidance would also break the case.
Research onlyNot in the portfolio.
Catalyst
Key figures from the filings · Health Care
Quarter to 30 September 2026, filed 4 November 2026; valuation at the 13 November 2026 close
- Revenue, latest quarter ($M)
- 64.5
- Revenue, change on a year (%)
- +18.7
- Gross margin (%)
- 59.3
- Operating margin (%)
- −40.5
- Free cash flow, four quarters ($M)
- −117
- Net cash, cash less debt ($M)
- 366
- Enterprise value to sales (×)
- 6.9
- Free-cash-flow yield (%)
- −5.3
All filed numbers
What Schrodinger reports to the SEC in its quarterly and annual filings. Each group states its period and filing date once; a figure dated otherwise says so. Built from the filings known on .
| Quarter to | Revenue ($M) | On a year (%) | Gross margin (%) | Operating margin (%) |
|---|---|---|---|---|
| first filed | 64.5 | +18.7 | 59.3 | −40.5 |
| first filed | 58.9 | +7.5 | 55.1 | −70.6 |
| first filed | 58.6 | −1.6 | 50.4 | −83.3 |
| first filed | 87.2 | −1.2 | 65.7 | −19.7 |
| first filed | 54.3 | +53.9 | 51.6 | −84.6 |
| first filed | 54.8 | +15.7 | 47.8 | −96.6 |
| Pre-tax income ($M) | −37.6 |
| Net income ($M) four quarters: −59.3 | −37.7 |
| Diluted shares, change on a year (%) against the quarter to 30 September 2025 | +1.7 |
| Operating cash flow ($M) | −113 |
| Capital spending ($M) | 4.2 |
| Free cash flow ($M) | −117 |
| Cash and short-term investments ($M) | 366 |
| Debt ($M) | None reported |
| Net cash, cash less debt ($M) no debt reported | 366 |
| Deferred revenue ($M) −13.4% on a year | 151 |
| Backlog, orders not yet delivered ($M) +250.6% on a year | 187 |
| Receivables ($M) | 48.4 |
| Inventory ($M) | Not reported |
| Shareholders' equity ($M) | 302 |
| Market value ($M) | 2,211 |
| Enterprise value, market value plus net debt ($M) no debt reported | 1,844 |
| Enterprise value to sales (×) no debt reported | 6.9 |
| Enterprise value to operating income (×) | Not meaningful |
| Price to earnings (×) | Not meaningful |
| Price to book value (×) | 7.3 |
| Free-cash-flow yield (%) | −5.3 |
Short interest (FINRA, settled 15 October 2026, published 26 October 2026): 13.9% of shares outstanding sold short, 3.4 days of average trading to cover, +2.7% since the previous report.
| Window | Bought | Sold |
|---|---|---|
| 90 daysfrom | $0 | $2.8M |
| 12 monthsfrom | $0 | $4.2M |
The thesis
Schrödinger's shares are modestly more likely to beat the S&P 500 over the next three months. The reason is the third-quarter report of 4 November 2026: software revenue grew again and full-year contract-value guidance went up. The fourth-quarter report, expected around late February 2027, settles the case. That quarter usually carries more than half of the year's annual contract value (ACV), the measure of recurring software spending the company tracks.
Third-quarter revenue was $64.5 million, up 19% from a year earlier. Software revenue rose 6% to $38.2 million (Form 8-K Exhibit 99.1, 4 November 2026). The company raised full-year ACV guidance to $222–232 million from $218–228 million. At the UBS Global Healthcare Conference on 10 November 2026, Chief Financial Officer Richie Jain described that range as 12–17% growth on $198 million of 2025 ACV (Investing.com transcript).
The price already reflects much of the good news. The shares closed at $30.85 on 12 November 2026, up 75.4% from $17.59 on 14 August 2026. Two insiders sold stock under pre-arranged trading plans into the rally on 9 November 2026 and 11 November 2026 (SEC Form 4 filings). The rating is Medium because the guidance raise is filed and dated, while the slower ACV growth rate and the milestone-driven beat keep the edge modest.
Bullish and bearish views on Schrodinger, Inc.
The bull case on Schrodinger, Inc. (SDGR), in brief: software revenue is growing again. The bear case: contract growth slowed.
Bull case
- Software revenue is growing again. Software revenue rose 6% to $38.2 million in the third quarter of 2026. Hosted software revenue, which books over the life of a contract, rose 49% to $17.2 million and made up 45% of software revenue (Form 8-K, 4 November 2026).
- Contract guidance went up. Full-year ACV guidance is $222–232 million, up from $218–228 million. Trailing four-quarter ACV reached $214 million (Form 8-K, 4 November 2026).
- The beat was large. Revenue of $64.491 million compared with a $47.258 million estimate, and the adjusted loss of $0.50 per share compared with a $0.70 estimate (Benzinga, 4 November 2026).
- Costs are falling. Third-quarter operating expenses were $64.4 million, down 13% from a year earlier, and the company expects full-year operating expenses below 2025 (Form 8-K, 4 November 2026).
- Drug-discovery guidance rose. The company raised its 2026 drug-discovery revenue guidance to $75–85 million from $65–75 million (Form 8-K, 4 November 2026).
- One analyst raised the bar after the report. TD Cowen kept a Buy rating and raised its price target to $36 from $31 on 5 November 2026 (Benzinga; fiscal.ai).
Bear case
- Contract growth slowed. Third-quarter ACV was $44.7 million, up 17%, against 27% growth in the second quarter. Excluding contribution revenue, ACV grew 24% (Form 8-K, 4 November 2026).
- A milestone drove the beat. Drug-discovery revenue rose to $24.2 million from $13.0 million, mainly on a milestone from Structure Therapeutics tied to the Phase 1/2a study of its obesity candidate ACCG-2671 (Form 8-K, 4 November 2026).
- The loss widened and cash fell. The third-quarter net loss was $37.7 million against $32.8 million a year earlier. Cash, restricted cash and marketable securities fell to $373 million on 30 September 2026 from $418.8 million on 30 June 2026 (Form 8-K).
- Bunsen is not yet a paid product at scale. On 10 November 2026 the CFO said beta customers of Bunsen, the AI research assistant, are still in security reviews and have not necessarily transacted. Bristol Myers Squibb remains the only named customer (Investing.com transcript).
- Insiders sold into the rally. Yvonne Tran, executive vice president and chief legal officer, sold 32,000 shares at an average $32.85 on 9 November 2026. Robert Abel sold 23,605 shares at $34.00 on 11 November 2026. Both sales followed option exercises at $17.00 and were made under Rule 10b5-1 trading plans (SEC Form 4 filings).
Price setup
The shares closed at $33.39 on 9 November 2026 and touched an intraday 52-week high of $34.00 on 11 November 2026. They then closed lower for three straight sessions, at $32.41, $31.52 and $30.85 on 12 November 2026, 9.3% below that high. The pullback leaves most of the post-report move intact: the shares closed at $28.77 on 5 November 2026, the day after the report.
As of 12 November 2026, the 50-day moving average is $26.74 and the 200-day moving average is $17.37, both well below the last close. The 52-week closing low is $11.07 on 30 March 2026. The level the case turns on is the close before the third-quarter report: a return below it would show the market giving back the entire reaction to the guidance raise.
Catalysts ahead
- 12 December 2026: American Society of Hematology annual meeting opens (12–15 December, New Orleans); updated SGR-1505 Phase 1 data in an oral session. The next public test of the wholly owned clinical pipeline, separate from the software business; strong data would add a second leg of value beyond software contracts.
- ~25 February 2027 (est.): Fourth-quarter and full-year 2026 results. The fourth quarter usually carries more than half of annual contract value, so it shows whether the raised $222–232 million guidance is met.
What would change the view
A daily close below $27.18, the 3 November 2026 close before the third-quarter report, which would erase the post-report gain. Full-year 2026 annual contract value below the $222 million low end of guidance would also break the case.
The risks this note tracks, each with what would confirm it:
- Annual contract value growth keeps slowing after falling to 17% in the third quarter from 27% in the second. Confirmed by: full-year 2026 annual contract value below $222 million at the fourth-quarter report.
- The third-quarter beat depended on a one-off milestone and drug-discovery income does not repeat. Confirmed by: full-year drug-discovery revenue below the $75–85 million guided range.
- Cash burn erodes the balance sheet while losses widen. Confirmed by: a further sharp fall from the $373 million cash and securities level at the fourth-quarter report with no new partnership payment.
- Bunsen stays in beta without paying enterprise customers. Confirmed by: no disclosed paid Bunsen contract beyond the Bristol Myers Squibb beta by the fourth-quarter report.
- SGR-1505 data disappoint and the market marks down the clinical pipeline. Confirmed by: updated Phase 1 data at the December 2026 ASH meeting showing weaker responses or new safety issues.
- The AI drug-discovery group sells off and takes the shares with it. Confirmed by: Absci and Recursion falling sharply while Schrödinger has no company news.
What it trades with
Schrödinger trades with the AI drug-discovery group, including Recursion and Absci, and with the broader biotech index. Benzinga flagged heavy options activity across health-care names on 28 October 2026, before company news took over as the driver on 4 November 2026. A sharp fall in those peers with no Schrödinger news would show the shares trading on the group rather than on the software results. Milestone and clinical news ties part of the price to partners such as Structure Therapeutics and to the SGR-1505 cancer drug readout at the American Society of Hematology (ASH) meeting in December 2026, which moves independently of the software business.
The evidence, claim by claim (8)
- Third-quarter 2026 revenue $64.5 million, up 19% from a year earlier; software revenue $38.2 million, up 6%; hosted software revenue $17.2 million, up 49%. Third-quarter 2026 results, Form 8-K Exhibit 99.1 · as of
- Third-quarter 2026 annual contract value $44.7 million, up 17% (24% excluding contribution); trailing four-quarter annual contract value $214 million. Third-quarter 2026 results, Form 8-K Exhibit 99.1 · as of
- Full-year 2026 annual contract value guidance raised to $222–232 million from $218–228 million; drug-discovery revenue guidance raised to $75–85 million from $65–75 million. Third-quarter 2026 results, Form 8-K Exhibit 99.1 · as of
- Third-quarter drug-discovery revenue $24.2 million against $13.0 million a year earlier, mainly from a Structure Therapeutics milestone. Third-quarter 2026 results, Form 8-K Exhibit 99.1 · as of
- Cash, restricted cash and marketable securities $373 million, down from $418.8 million on 30 June 2026; third-quarter net loss $37.7 million. Third-quarter 2026 results, Form 8-K Exhibit 99.1 · as of
- The CFO said Bunsen beta customers are still in security reviews and that the company targets 75% hosted deployment by 2028. UBS Global Healthcare Conference fireside chat, Investing.com transcript · as of
- TD Cowen kept a Buy rating and raised its price target to $36 from $31. Benzinga; fiscal.ai, 5 November 2026 · as of
- Executive Yvonne Tran sold 32,000 shares at an average $32.85 on 9 November 2026 and Robert Abel sold 23,605 shares at $34.00 on 11 November 2026, both under Rule 10b5-1 plans after option exercises at $17.00. SEC Form 4 filings, 10 November 2026 and 12 November 2026 · as of
Sources
- Schrodinger, Inc. - Form 8-K - FY2026 · sec.gov ·
- Schrödinger at UBS Global Healthcare Conference: ai push gains traction · investing.com ·
- Finviz ·
- Finviz
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