Social media management platform Sprout Social (NASDAQ: SPT) reported Q2 CY2026 results exceeding the market’s revenue expectations, with sales up 10.8% year on year to $123.8 million. The company expects next quarter’s revenue to be around $123.7 million, close to analysts’ estimates. Its non-GAAP profit of $0.26 per share was 62.5% above analysts’ consensus estimates.

Is now the time to buy SPT? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Sprout Social’s second quarter results were met with a positive market reaction, reflecting both top- and bottom-line outperformance against Wall Street expectations. Management attributed the growth primarily to ongoing momentum with larger enterprise customers and expanded product adoption, especially within the company’s $30,000-and-above annual contract value cohort. CEO Ryan Barretto emphasized that multi-year contracts now represent nearly half of new business, indicating greater customer confidence in Sprout’s platform. The quarter also saw improved retention rates, with Barretto highlighting that “customers using Trellis, our AI offering, retained at a higher rate than others.”

Looking ahead, Sprout Social’s updated guidance is underpinned by anticipated efficiency gains from recent organizational restructuring and continued investment in AI-powered product innovation. Management expects that headcount reductions and a more streamlined structure will support operating margin expansion and enable increased investment in high-return areas like Trellis and enterprise capabilities. Barretto noted that the company expects to see “continued growth in our $30,000-and-above customer segment and greater capacity to invest in the areas of the business with the highest return,” while also cautioning that demand headwinds remain for smaller customers. The company believes these efforts will enhance both growth durability and profitability.

Key Insights from Management’s Remarks

Management attributed the quarter’s results to successful upsell activity with large customers, strong adoption of AI features, and efficiency gains from targeted cost control measures.

• Enterprise customer expansion: The $30,000-and-above cohort contributed over 61% of recurring subscription revenue, with these customers adopting multi-year contracts and more advanced products like influencer marketing and NewsWhip, driving higher retention and expansion rates.
• AI feature adoption: Trellis, Sprout’s proprietary AI offering, saw rising usage across customer segments, with monthly active users retaining at a higher rate and early signals from the new paid Trellis Plus tier indicating willingness to upgrade for expanded access.
• Product innovation velocity: The launch of Trellis Studio—a no-code interface for building custom AI “skills”—and integration with platforms like Canva, Snapchat, and TikTok broadened the product ecosystem and improved workflow consolidation for enterprise clients.
• Workforce restructuring: The company reduced its workforce by about 20% to eliminate organizational layers and improve decision-making speed. Management expects this will yield at least $50 million in annualized cost savings and support further investment in high-return product areas.
• Improved retention and renewals: Higher renewal rates were reported, supported by a shift toward multi-product adoption and more robust customer engagement strategies, especially among large enterprise clients.

Drivers of Future Performance

Sprout Social’s guidance for the next quarter and year is shaped by a focus on scaling AI-driven offerings, operational streamlining, and a continued shift toward enterprise customers.

• AI monetization and adoption: Management believes expanded deployment of Trellis, including paid tiers, will help drive product upsell and improve customer retention, especially as customers seek faster social insight-to-action workflows.
• Organizational efficiency gains: The recent workforce reduction is expected to meaningfully lower the cost structure, enabling higher operating margins and freeing up resources for targeted investments in product development and go-to-market initiatives.
• Mixed demand environment: While larger customers are expected to remain a source of strength, management cautioned that demand from smaller customers (under $30,000 annual contract value) remains pressured, with stabilization efforts for this segment not expected to yield a turnaround until 2027.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will be tracking (1) customer adoption rates and upsell activity for Trellis, especially in the enterprise segment, (2) the pace and impact of organizational restructuring on operating margins and free cash flow, and (3) the stabilization and growth trajectory of the Essentials product for smaller customers. Additional attention will be paid to ongoing product launches and the integration of AI-driven capabilities across the platform.

Sprout Social currently trades at $8.99, up from $8.19 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free).

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