Schrödinger plans to increase hosted software revenue to 75% by 2028, shifting recognition patterns that will impact reported revenue and margins through 2026–2028. This discussion details hosted revenue targets, revenue recognition effects, and financial modeling guidance.
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Please provide quarterly hosted revenue percentage targets (2026–2028) and the modeled revenue recognition impact per year.
Schrödinger, Inc. (SDGR) Quarterly Hosted Revenue Percentage Targets (2026–2028) and Modeled Revenue Recognition Impact
Current baseline (2025): Hosted revenue accounts for approximately 23% of software revenue as of 202512.
3-Year Objective: Schrödinger aims to transition approximately 75% of its software revenue to hosted contracts by 2028312.
Transition Characteristics:
Summary of Hosted Revenue Mix by Year:
| Year | Hosted Revenue % Target | Commentary |
|---|---|---|
| 2026 | Modest increase from 23% (exact figure not specified) | Limited progress expected; bulk of business booked in Q431 |
| 2027 | Significant acceleration expected | Accelerated hosted adoption with growing percentage1 |
| 2028 | Approximately 75% | Target hosted mix; results in more predictable revenue profile12 |
Nature of hosted revenue recognition:
Mathematical effect on revenue:
Impact by year:
Financial metrics influenced:
| Metric | Details |
|---|---|
| 2025 Hosted % | 23% of software revenue12 |
| 2026 Hosted % | Small increase expected (no specific % provided); transition progress limited by Q4 bookings31 |
| 2027 Hosted % | Noticeable acceleration in hosted mix; transition activity increases1 |
| 2028 Hosted % | Target approximately 75% hosted revenue31 |
| Revenue impact per 1% hosted incr. | $2M to $3M reduction in revenue recognized in the year of increase31 |
| Revenue vs. ACV | Revenue recognized will be lower than ACV during transition years; alignment expected by 202815 |
| Deferred revenue and backlog | Increase in deferred revenue balances with shift to hosted contracts; reflects future recognition31 |
| Impact on margins & EBITDA | Compression expected in gross margin and adjusted EBITDA due to deferment of revenue1 |
| Cash flows and ACV | No impact on cash flows or ACV figures due to hosted transition31 |
Schrödinger is undergoing a strategic and accounting transition from predominantly on-premise software contracts with upfront revenue recognition to a hosted delivery model with ratable revenue recognition. This shift aims to reach 75% hosted software revenue by 2028. The transition causes:
This framework allows investors and analysts to model revenue recognition with the hosted percentage targets and apply the $2–3 million revenue impact per hosted percentage point to estimate annual revenue shifts over 2026–2028.
References:
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