Schrödinger Lands BMS as Anchor Customer for New AI Co-Scientist Bunsen, Reaffirms Path to 75% Hosted Revenue by 2028
Q2 2026 earnings call, held August 5, 2026, detailed early traction for Bunsen and continued momentum in the core software business
Schrödinger used its second-quarter call to introduce the most significant product launch in the company's recent history: Bunsen, an agentic AI co-scientist designed to automate multi-step computational chemistry workflows. The headline news was not the launch itself, which had been previewed, but the immediate commercial validation. Bristol Myers Squibb, described by CEO Rami Farid as a "longtime customer and collaborator," signed a new strategic software agreement to deploy Bunsen alongside Schrödinger's existing computational chemistry tools, and in doing so significantly scaled up its access to the platform. Management framed this as the template for how Bunsen monetizes: not as a standalone product with its own price tag, but as a productivity multiplier that drives increased usage of the core throughput-based licensing model. "We view BMS's implementation as a compelling model for how large-scale deployment can expand platform usage and integration across the industry," Farid said.
The mechanics of Bunsen's value proposition became clearer during Q&A. Rather than replacing computational chemists, the tool is positioned as a force multiplier that lets each drug hunter run more parallel design projects and offload routine tasks. One executive offered a concrete example of the efficiency case: expensive supercomputing jobs that fail overnight or on weekends, previously requiring active human monitoring to salvage, can now be detected, diagnosed, and restarted autonomously by Bunsen. "AI doesn't sleep, but a lot of our users do," the executive noted, arguing that this kind of uptime recovery alone represents a meaningful throughput gain before accounting for any other benefits. President Karen Akin-Sania added that the technology is already accelerating structure-based drug design workflows internally, particularly around analyzing and refining the growing volume of protein structures now available industry-wide, and is being used across chemistry, DMPK, pharmacology, and toxicology analysis as programs mature.
Hosted Licensing Transition Ahead of Plan, With BMS Deal Skewing the Math
The company's multi-year shift from upfront to ratable hosted licensing continued to accelerate faster than the underlying trend line suggests. Hosted revenue reached 47% of software revenue in the quarter, up from 31% a year earlier and 27% last quarter, though CFO Richie Jain flagged that this figure was inflated by a handful of customers who converted ahead of their scheduled renewal dates, creating an "outsized impact" on the reported percentage this quarter. On a trailing four-quarter basis, hosted revenue is running at 30% of the software total, still up sharply from 23% a year ago. Management reiterated its target of reaching 75% hosted revenue by the end of 2028 and said engagement with customers has been strong enough to keep that timeline intact. Investors should note the mechanical drag this creates on reported revenue during the transition: every one-percentage-point increase in hosted mix reduces reported revenue by $2 million to $3 million depending on renewal timing and contract length, and software gross margin compressed to 71% from 76% a year ago as a direct consequence.
Ajax Milestone and Lilly Acquisition Validate the Therapeutics Flywheel
The quarter's financial results were meaningfully boosted by Eli Lilly's completed $2.3 billion acquisition of Ajax Therapeutics, a company co-invented using Schrödinger's platform. The deal triggered a $10 million collaboration milestone payment that lifted drug discovery revenue to $23 million from $13.9 million a year earlier, and drove a $48.9 million gain in other income that swung the company to net income of $6 million versus a $43 million net loss in the prior-year quarter. Management raised full-year drug discovery revenue guidance to a range of $65 million to $75 million from a prior $55 million to $65 million specifically to reflect this milestone. Since 2020, the company said it has realized over $750 million from therapeutics activities across collaborations and co-founded companies including Nimbus, Morphic, Structure, and now Ajax. Clinical data presented in June at the European Hematology Association for Ajax's lead asset, a Phase 1 selective JAK inhibitor, provided what the company described as initial evidence that the molecule's characteristics align with its target product profile, an early but tangible proof point for the platform's drug design claims.
New Product Cadence Remains the Core Growth Engine
Beyond Bunsen, the company pointed to predictive toxicology and a retrosynthesis tool as concrete examples of how new product launches continue to unlock incremental pharma budget, a strategy management described as central to sustaining growth. Predictive toxicology, which uses physics-based modeling to flag off-target binding risks before a molecule is even synthesized, has already begun contributing to 2026 annual contract value, though the company declined to break out the dollar contribution. Management was candid that technologies like this carry a long adoption curve, since customers need time to run their own validation calculations and confirm results experimentally before scaling usage, implying the ACV contribution should build over "quite a number of years" rather than showing up all at once. New products, together with expanding usage among existing customers, were cited as the primary drivers of the current growth trajectory, more so than net-new customer additions.
Underlying Financials Show Broad-Based Demand Alongside Disciplined Cost Control
Total ACV for the quarter came in at $29.6 million, up 27% year over year, with ACV excluding contribution revenue at $22.6 million, up 23% and at the high end of the company's own expectations. Trailing four-quarter ACV reached $208 million. Growth was broad-based across the top 20 pharma accounts as well as biotech and materials science customers, a signal that the industry funding environment has genuinely improved. Farid noted that biotech IPO activity is running at roughly twice last year's pace and that the wave of biotech customers struggling to pay for software, a real headwind in 2025, has largely abated. Total operating expenses fell 6% year over year to $74 million, driven by lower headcount, CRO spend, and professional services fees, and management reiterated that full-year 2026 opex will come in below 2025 levels. The balance sheet remains solid with $419 million in cash and marketable securities against a fully diluted share count of 75.8 million. Full-year ACV guidance was maintained at $218 million to $228 million, representing 10% to 15% growth, with management flagging that the fourth quarter typically represents more than half of annual ACV bookings, making the back half of the year the real test of whether Bunsen and predictive toxicology translate into the acceleration the company is projecting.