Schrödinger's Bunsen: AI Co-Scientist Launch and BMS Deployment Drive a Record Quarter

ACV growth of 27% and accelerating hosted adoption mark a strategic inflection point.

SDGR · Earnings Call · 2026-08-05

Introduction

The second quarter of 2026 was a standout for Schrödinger, Inc. (SDGR). The company reported annual contract value (ACV) growth of 27% year-over-year, driven by broad-based demand across large pharma, biotech, and materials science. "ACV growth of 27%, driven by broad-based demand, reflects this ongoing shift," said CEO Ramy Farid. The stock has rallied 73% over the past 90 days, a signal that investors are taking notice of the company's new agentic AI co-scientist, Bunsen, and its early commercial traction.

Bunsen and BMS: A Company-Unique AI Moment

The launch of Bunsen is a company-unique theme, distinct from generic AI hype. Bunsen is an agentic AI co-scientist that automates complex multi-step workflows, enabling computational chemists to work far more efficiently. The company has optimized it to execute its validated computational methods, and it is already being deployed by a marquee customer, Bristol Myers Squibb.

Our new strategic software agreement with BMS, announced earlier today, allows us to deploy Bunsen in conjunction with our computational technologies designed to enable large-scale chemical exploration.
Ramy Farid, CEO · 2026-08-05

This is a landmark endorsement. "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," Farid said. The deal underscores the throughput-based licensing model, which ensures Schrödinger captures value as usage scales. Prior to this quarter, Bunsen was still in internal development; in May, Farid noted, "We have already been using Bunsen internally for a number of months." The rapid ramp to a top pharma partner validates its potential.

Predictive Tox: From Beta to Contribution

Another new product, predictive toxicology, is also gaining traction. "Commercial evaluations are going well, and predictive tox has already contributed to our 2026 ACV," Farid said. This physics-based solution predicts off-target binding risks before synthesis, addressing safety liabilities early in discovery. It taps into new budgets within existing customers and reaches toxicology groups that are new to Schrödinger. The transition from beta to revenue has been swift; in the May call, Farid said "the feedback from the beta has been very positive." Now, predictive tox is a real growth contributor.

Hosted Transition: Progress and Financial Impact

The company continues its deliberate shift to hosted software, which now accounts for 47% of software revenue, up from 31% a year ago. "We were 47% hosted this quarter," CFO Richie Jain said. While this transition temporarily depresses reported revenue due to ratable recognition, it improves revenue predictability and aligns with the industry standard. The company remains on track to reach 75% hosted by 2028. This hosted revenue growth is a key metric for investors to watch, as each 1% increase in hosted percentage reduces reported revenue by $2–3 million but builds a stronger recurring base.

Financial Discipline and Balance Sheet Strength

Despite the revenue headwind, Schrödinger posted net income of $6 million, versus a loss of $43 million a year ago, helped by a gain from the Lilly acquisition of Ajax. Operating expenses declined 6% to $74 million, reflecting disciplined cost management. Effective SG&A fell to $23 million, down 11% year-over-year, a clear sign of execution on efficiency. The company ended the quarter with $419 million in cash, providing ample runway. Schrödinger is riding the broader wave of AI in drug discovery while leveraging its unique physics-based approach. The launch of Bunsen and its adoption by BMS, combined with early predictive tox revenue and a disciplined hosted transition, position the company for sustained ACV growth. The stock's 73% rally in 90 days suggests the market is beginning to price in this inflection.