Sprout Social (SPT) Q2 2026 earnings summary

Executive summary

• Revenue reached $123.8 million in Q2 2026, up 11% year-over-year, with software subscriptions comprising 98–99% of total revenue.

• Customer base of $30,000+ ARR grew 11% to 3,926, and $50,000+ ARR customers grew 16% to 2,127, now contributing over 61% of subscription revenue.

• Major restructuring reduced headcount by 20% to streamline operations, with estimated pre-tax charges of $18–$20 million and expected annualized cost savings of at least $50 million.

• AI investments, especially in Trellis, drove product innovation, higher customer retention, and expanded offerings through the NewsWhip acquisition.

• Net loss narrowed to $3.1 million from $12.0 million in Q2 2025, reflecting improved operating leverage and lower stock-based compensation.

Financial highlights

• Q2 2026 revenue: $123.8 million (+10.8–11% YoY); subscription revenue: $121.9 million (+9.7–10% YoY); professional services revenue: $2.0 million (+195% YoY).

• Non-GAAP operating margin improved to 12.9–13% (+370 bps YoY); non-GAAP gross margin steady at 78–79%.

• Non-GAAP free cash flow: $8.3–8.34 million in Q2, up ~60% YoY; trailing 12-month non-GAAP free cash flow: ~$54 million.

• Average contract value rose to $17,584 from $15,321 year-over-year.

• Ended Q2 with $119.9 million in cash and equivalents, up from $101.5 million a year ago.

Outlook and guidance

• Q3 2026 revenue expected between $123.3M–$124.1M; non-GAAP operating income $17.5M–$18.3M; non-GAAP EPS $0.29–$0.30.

• FY 2026 revenue guidance: $493M–$495.6M; non-GAAP operating income: $68.3M–$70.3M; non-GAAP EPS: $1.11–$1.15.

• Targeting 30% under Rule of 40 by Q4 2027; non-GAAP operating margin target raised to ~17% exiting Q4 2026.

• Guidance assumes no improvement in demand environment and excludes share repurchase impact on EPS.

• Management expects macroeconomic uncertainty and elongated sales cycles to persist, potentially impacting revenue growth.