Sprout Social, Inc. (SPT) - Q2 2026 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended June 30, 2026. Sprout Social, Inc. operates a centralized software platform for social media management, analytics, and action. The company operates as a single segment and generates revenue primarily through subscription fees (99% of total revenue). The company is headquartered in Chicago, Illinois, and serves customers in over 100 countries.
Key Financial Metrics
| Metric | Q2 2026 (3 Months) | Q2 2025 (3 Months) | YTD 2026 (6 Months) | YTD 2025 (6 Months) |
|---|---|---|---|---|
| Total Revenue | $123.8 million | $111.8 million | $245.3 million | $221.1 million |
| Gross Profit | $96.1 million | $86.8 million | $189.6 million | $171.3 million |
| Gross Margin | 78% | 78% | 77% | 77% |
| Net Loss (GAAP) | $(3.1) million | $(12.0) million | $(9.4) million | $(23.2) million |
| Non-GAAP Net Income | $15.6 million | $10.7 million | $29.2 million | $23.2 million |
| Operating Cash Flow (YTD) | $33.7 million | $23.2 million | $33.7 million | $23.2 million |
| Cash & Equivalents | $119.9 million | $95.3 million (Dec 2025) | $119.9 million | $95.3 million (Dec 2025) |
| Debt (Revolving Credit) | $32.5 million | $40.0 million (Dec 2025) | $32.5 million | $40.0 million (Dec 2025) |
Material Changes vs. Prior Period
- Revenue Growth: Total revenue increased 11% year-over-year for both the quarter and the six-month period. Subscription revenue grew 10%, driven by increased revenue from high-tier customers.
- Profitability Improvement: GAAP net loss narrowed significantly to $3.1 million in Q2 2026 from $12.0 million in Q2 2025. Non-GAAP operating income improved to $16.0 million from $10.3 million.
- Expense Management: Sales and marketing expenses decreased 2% year-over-year in Q2, while General and Administrative expenses decreased 7%. Stock-based compensation expense declined across all categories due to equity award forfeitures and lower grant values.
- Customer Metrics: The number of customers contributing $30,000+ in ARR grew 11% to 3,926, and those contributing $50,000+ grew 16% to 2,127.
- Acquisition Impact: The company completed the acquisition of NewsWhip in July 2025. Amortization of acquired intangible assets from this deal contributed to increased costs of revenue and operating expenses.
Guidance, Outlook, and Risks
- Workforce Reduction Plan: On July 8, 2026, the Board approved a plan to reduce the workforce by approximately 20% (260 employees). The company expects to incur total pre-tax restructuring charges of $18.0 million to $20.0 million, primarily in Q3 2026. This is intended to align costs with strategic priorities, including AI investments.
- Share Repurchase Program: A $50 million share repurchase program was authorized on May 7, 2026. No shares have been repurchased as of June 30, 2026.
- Legal Proceedings: The company is defending against consolidated securities class action lawsuits and derivative actions alleging misrepresentations regarding enterprise sales strategy and financial guidance. No accrual has been established as the outcome is uncertain.
- Outlook: Management expects revenue growth to continue but notes that macroeconomic conditions may lead to measured buying behavior and lengthened sales cycles. The company anticipates R&D and S&M costs to decrease in the near term due to the workforce reduction.
Investor Verification Checklist
- Restructuring Execution: Verify the timing and actual cost of the $18M-$20M workforce reduction charges in Q3 2026 and the resulting impact on operating leverage.
- Enterprise Sales Cycle: Monitor the conversion rate and sales cycle length for enterprise customers, as legal filings allege challenges in this specific segment.
- NewsWhip Integration: Assess the revenue contribution and earnout performance of the NewsWhip acquisition against the $10M contingent consideration target.
- Liquidity Position: Confirm that the $119.9M cash balance and $100M credit facility (with $32.5M drawn) are sufficient to cover the upcoming restructuring cash outflows and ongoing operations.
- Share Repurchase Activity: Track actual buyback execution under the new $50M authorization to gauge management's confidence in capital allocation.