SDGR Stock: Schrödinger Hopes Its AI Agent Can Transform Drug Discovery

Focused on computational drug-discovery and materials science, Schrödinger [SDGR] is built around a physics-based software platform that uses molecular simulation, machine learning and artificial intelligence (AI) to identify and optimise potential compounds. 

Founded in 1990 by Richard Friesner and William Goddard, the company has spent more than three decades developing tools including Glide, Prime and WaterMap, and today sells its platform to pharmaceutical, biotechnology and industrial customers worldwide.

The business has two main components: software, which generates the bulk of its recurring revenue, and drug discovery, where Schrödinger applies its own technology to collaborative and proprietary programmes. Software revenue reached $199.5m in 2025, up 10.6% year-on-year, while total revenue rose 23.3% to $255.9m. The company had $198.5m of software annual contract value (ACV) at year-end, with ACV among its top 20 pharmaceutical customers rising 15.3% during the year.

Its longer-term track record is more unusual than that of a conventional software company. Schrödinger has used its platform to co-found and support biotechnology companies, generating a portfolio of royalty-eligible programmes and equity stakes alongside its software business. By the end of 2025, it had 16 ongoing programmes eligible for royalties and had worked with 20 collaborators since 2018. In 2026, Eli Lilly’s [LLY] $2.3bn acquisition of Ajax Therapeutics provided another high-profile validation of a molecule discovered using Schrödinger’s platform.

The company remains loss-making, however. It posted a $103.3m net loss in 2025, although this was materially narrower than the $187.1m loss recorded in 2024. With $402.3m of cash and marketable securities at the end of 2025, Schrödinger is now focused on converting its technological lead and growing customer base into a more predictable, scalable business.

SDGR stock has climbed significantly over the course of September, and was up 73.66% year-to-date as of 30 September. 

This stock analysis will unpack Schrödinger’s trajectory to date, its recent performance and short-term outlook, and how its recently launched agentic AI for molecular discovery could be a driver of growth. 

Recent news: Q2 results and AI agent launch

Schrödinger’s most recent earnings were Q2 2026 results, reported on 5 August 2026. The quarter was notable less for headline revenue growth than for the continued shift towards hosted software, the launch of its agentic AI product Bunsen and the contribution from its drug-discovery portfolio.

Schrödinger reported $58.9m of total revenue, up 8% y/y. Software revenue fell 10% to $32.5m, reflecting the company’s accelerated transition from traditional upfront, on-premise licences towards hosted software, which produces more ratable revenue. Management has warned that this transition will suppress reported software revenue in the short to medium term even though it does not affect ACV or cash flow. Software ACV, therefore, remains the more useful indicator of underlying demand: Q2 ACV rose 27% to $29.6m, while trailing four-quarter ACV reached $208m.

Drug discovery revenue jumped 65% to $23m, although the increase was largely driven by a $10m milestone associated with Eli Lilly’s acquisition of Ajax Therapeutics, rather than a recurring improvement in the underlying business. Schrödinger nevertheless moved into quarterly profitability, reporting net income of $6m compared with a $43.2m loss in the prior-year quarter, helped substantially by a $48.9m gain in other income related to its equity investments and the Ajax transaction.

The more strategically significant development was the launch of Bunsen, Schrödinger’s agentic AI co-scientist for molecular discovery. The company has subsequently signed a strategic software agreement with Bristol Myers Squibb [BMY] to deploy Bunsen across its research organisation, potentially expanding the addressable user base for Schrödinger’s computational platform.

Bunsen is designed to move beyond conventional AI-assisted drug discovery by acting as an agentic AI co-scientist. Rather than simply generating predictions or answering researchers’ questions, it can autonomously work through multi-step discovery tasks, analyse molecular data, formulate hypotheses and propose experiments. Schrödinger says Bunsen integrates its physics-based computational methods with AI agents, allowing researchers to delegate parts of the discovery workflow while retaining scientific oversight.

September brought another significant development. Schrödinger co-founded Tectora Therapeutics with New Enterprise Associates and RA Capital, contributing two early-stage small-molecule programmes in exchange for an equity stake plus potential milestones and royalties. Tectora raised $55m in Series A funding, providing capital to advance the programmes while allowing Schrödinger to retain economic exposure to their future development.

For 2026, management is targeting $218m-228m of ACV, representing 10-15% growth, and has raised its drug-discovery revenue guidance to $65m-75m following the Ajax milestone. Its Q3 results are slated for early November.

AI in drug discovery: SDGR vs RXRX vs TEM

Let’s have a look at how Schrödinger compares to two other stocks in the same space.

Recursion [RXRX] and Tempus AI [TEM] both apply AI to drug discovery, but they approach the opportunity from different directions. Recursion is closer to an AI-native biotech, using its Recursion OS to combine automated wet-lab experimentation, computational biology and proprietary datasets to discover and develop new medicines. It has a growing pipeline of wholly owned and partnered programmes, with partnerships including Roche [ROG], Sanofi [SAN] and Bayer [BAYN]. Revenue is consequently lumpy and largely collaboration-driven, while the investment case is tied heavily to clinical milestones and the potential value of successful drug candidates. 

Tempus AI, by contrast, has built a broader precision-medicine platform around clinical diagnostics and real-world patient data. Its oncology testing business generates substantial recurring revenue, while its data and applications division licenses datasets, models and software to pharmaceutical companies. In Q2 2026, Tempus generated $382.5m of revenue, up 22% y/y, with data and applications revenue rising 28%. It is also developing multimodal foundation models and expanding its genomic dataset, giving investors exposure to AI infrastructure for healthcare as well as drug development.

Source: Yahoo Finance

Conclusion: The investment case for SDGR stock

Schrödinger offers investors an unusual combination of recurring software revenue, exposure to AI-driven drug discovery and potential upside from a portfolio of partnered and proprietary medicines. Its physics-based platform has established a position with major pharmaceutical customers, while Bunsen could extend the opportunity by allowing researchers to delegate increasingly complex discovery tasks to AI agents. 

The bull case rests on sustained growth in software ACV, wider adoption of Bunsen and further milestones, royalties and equity gains from Schrödinger’s drug-discovery portfolio. Its cash position also provides a substantial buffer as the company invests for growth. 

The bear case is that the transition to hosted software continues to weigh on reported revenue, while drug-discovery income remains lumpy and dependent on milestones. 

Schrödinger is also still loss-making, leaving investors reliant on future growth to justify its valuation. The core question is whether Bunsen can turn Schrödinger’s technological advantage into a larger, more predictable software business.