Sprout Social, Inc. Q2 FY2026 earnings

Sprout Social posted revenue of $123.8 million for its fiscal 2026 second quarter, up 11% from $111.8 million in the prior-year quarter. For the six months ended June 30, 2026, revenue reached $245.3 million, up 11% from $221.1 million. Subscriptions did nearly all of the work, contributing 99% of revenue in the first half, with professional services and other making up the rest. Growth leaned on larger accounts rather than a bigger customer roster.

Gross profit rose to $96.1 million for the quarter from $86.8 million, and to $189.6 million for the first half from $171.3 million. Gross margin was 77.6% in the quarter, a touch below the 77.7% of a year earlier, and 77.3% year to date against 77.5%. Cost of subscription revenue climbed 11%, driven by higher data provider fees and hosting costs, with amortization tied to technology acquired with NewsWhip adding to the load. Profitability improved sharply below the gross line. The operating loss narrowed to $2.7 million from $12.3 million, moving operating margin to -2.2% from -11.0%. Net loss narrowed to $3.1 million from $12.0 million, and diluted EPS was -$0.05 against -$0.21.

The expense line carries much of the story. Stock-based compensation fell to $15.9 million in the quarter from $20.2 million, and to $34.0 million for the first half from $40.0 million, helped by equity award forfeitures and lower grant values. Sales and marketing slipped 2% to $47.4 million, and general and administrative dropped 7% to $24.7 million. Research and development went the other way, up 8% to $26.6 million, with headcount in that group up 18% as the company invests in its platform and its Trellis AI agent. Stripping out those items, non-GAAP operating income was $16.0 million for the quarter versus $10.3 million a year earlier, and non-GAAP net income was $15.6 million against $10.7 million. Non-GAAP net income per share was $0.26, up from $0.18.

Customer mix deserves attention. Accounts contributing $30,000 or more in annualized recurring revenue reached 3,926 as of June 30, 2026, up 11% from 3,538. Accounts at $50,000 or more in ARR reached 2,127, up 16% from 1,826. Total customer count declined, so the company is trading breadth for depth. Deferred revenue was $193.4 million, up 13.0% from $171.1 million, and remaining performance obligations were $400.8 million, up 15.5% from $347.0 million. Both measures support visibility into future revenue. Non-U.S. customers supplied roughly 26% of first-half revenue.

Cash generation held up. Operating cash flow was $8.5 million for the quarter, up 66.4% from $5.1 million, and $33.7 million for the first half, up 45.2% from $23.2 million. Capital expenditures were $0.6 million against $0.9 million. Cash and cash equivalents stood at $119.9 million at June 30, 2026, alongside $32.5 million drawn on the credit facility and net accounts receivable of $78.1 million.

On July 8, 2026, the board approved a workforce reduction plan that cuts roughly 20% of staff, or about 260 employees, to fund continued investment in AI-powered social intelligence. The company recorded $0.8 million of restructuring and related expense in the second quarter and expects total pre-tax charges of $18.0 million to $20.0 million, substantially all of it in the third quarter of 2026, with the plan largely complete by the end of that quarter. Management also expects research and development spending to be relatively flat or lower in the near term and sales and marketing costs to decline, excluding one-time items. No formal revenue or earnings guidance accompanied the filing.

Risks cluster around demand and execution. Management pointed to geopolitical instability, inflation, interest rates, tariffs and currency swings, and said customers have shown more measured buying behavior with longer average sales cycles, especially for prospective customers and expansion deals. That has already slowed revenue growth relative to historical levels and could recur. The push upmarket brings longer and more expansive sales cycles and pricing pressure. The NewsWhip acquisition, completed on July 30, 2025 for $52.3 million in upfront cash plus deferred and earnout consideration, left an $8.0 million contingent consideration liability at June 30, 2026, with the earnout tied to targets through June 30, 2027. Purchase commitments for data and services total $74.8 million, of which $53.1 million is due within the next twelve months. The board authorized a share repurchase program of up to $50 million on May 7, 2026, and no shares had been repurchased by June 30, 2026.