Sprout Social Q2 2026 Earnings: 11% Revenue Growth and Wider Margins

Sprout Social (NASDAQ: SPT) reported Q2 fiscal 2026 revenue of $123.8 million, up 11% year over year, while GAAP diluted loss per share narrowed to $0.05 from $0.21; non-GAAP diluted EPS increased to $0.26 from $0.18. Expense discipline supported a wider non-GAAP operating margin, while positive cash flow and faster growth among larger customers provided additional support.

Core financial results

Revenue growth translated into a substantially smaller GAAP operating loss because gross profit increased while total operating expenses remained roughly flat. Non-GAAP operating income rose about 55%, and its margin expanded by approximately 3.7 percentage points.

Cash generation also improved. Operating cash flow increased to $8.5 million, while non-GAAP free cash flow reached $8.3 million.

Larger customers are becoming more important

Subscription revenue was $121.9 million, up about 10% from $111.1 million. Professional services and other revenue increased to $2.0 million from $0.7 million, although it remained a small portion of total revenue.

The more significant business trend was continued expansion among larger customers. Customers generating at least $50,000 in annual recurring revenue grew faster than the broader $30,000-plus cohort, while the latter represented a larger share of approximated subscription revenue.

The trailing-12-month customer contribution is an approximation based on average ARR rather than actual revenue generated by the cohort. Even with that limitation, its increase from 56.9% to 61.4% of subscription revenue illustrates Sprout Social’s growing reliance on larger accounts. RPO and cRPO growth also remained slightly ahead of reported revenue growth.

Expense discipline converted growth into wider margins

GAAP gross margin was essentially unchanged at 77.6%, so the main profitability improvement occurred below gross profit. Total operating expenses declined slightly to $98.8 million from $99.2 million even as revenue grew 11%.

Research and development expense increased to $26.6 million from $24.6 million. That increase was offset by sales and marketing expense declining to $47.4 million from $48.2 million and general and administrative expense falling to $24.7 million from $26.4 million.

Stock-based compensation declined to $15.9 million from $20.2 million, contributing to the narrower GAAP loss. It nevertheless remained the largest adjustment between the $2.7 million GAAP operating loss and $16.0 million of non-GAAP operating income. Other adjustments included $2.3 million of acquired-intangible amortization and $0.8 million of restructuring-related charges, partly offset by a $0.4 million contingent-consideration fair-value change.

CEO Ryan Barretto said non-GAAP operating income finished $6.1 million above the company’s guidance range, attributing the result to profitability discipline alongside revenue and larger-customer growth.

Cash flow and balance sheet

Positive operating cash flow exceeded the GAAP net result partly because of non-cash expenses, including $15.9 million of stock-based compensation and $7.4 million of deferred-commission amortization. These benefits were partially offset by a $9.5 million use of cash from accounts receivable and an $8.4 million increase in deferred commissions.

Cash and cash equivalents rose to $119.9 million at June 30 from $111.6 million at March 31. The revolving credit balance stood at $32.5 million, down from $40.0 million at the end of 2025 after $7.5 million of repayments during the first six months of 2026.

Guidance

Sprout Social issued Q3 and full-year 2026 guidance while raising its targeted non-GAAP operating margin exiting Q4 to approximately 17% from 15%. The company also reiterated its goal of reaching 30% under its Rule of 40 definition by Q4 fiscal 2027.

The Q3 EPS outlook assumes approximately 60.7 million weighted-average diluted shares, while the full-year outlook assumes approximately 60.6 million shares.

Recent insider transactions

The supplied six-month insider summary reports 882,052 shares purchased across 12 transactions and 296,135 shares sold across nine transactions, resulting in net purchases of 585,917 shares. Total insider holdings were listed at approximately 1.38 million shares.

The most recent detailed records included several sales by Justyn Russell Howard and equity grants to the CEO and directors. The reported values below are transaction values rather than share quantities; grants should not be interpreted as open-market purchases.

These transactions do not by themselves establish insiders’ views on Sprout Social’s future performance.

Risks investors should monitor

• GAAP and non-GAAP profitability remain far apart. Sprout Social still posted a GAAP operating loss, and stock-based compensation of $15.9 million was nearly equal to reported non-GAAP operating income.
• Growth increasingly depends on larger customers. The $30,000-plus ARR cohort accounted for an approximated 61.4% of subscription revenue, making successful enterprise acquisition, retention, and expansion increasingly important.
• Pricing and packaging changes can affect demand. The company disclosed that price increases have negatively affected demand and warned that future pricing or packaging changes could pressure customer acquisition and retention.
• The workforce reduction introduces execution risk. Sprout Social approved a workforce reduction plan in July 2026 and cautioned that it might not produce the anticipated benefits or could adversely affect the business.

Summary

Sprout Social’s Q2 2026 results combined 11% revenue growth with tighter operating spending, producing a much smaller GAAP loss, a wider non-GAAP operating margin, and improved free cash flow. Larger customers continued to grow in importance, while RPO growth remained slightly above reported revenue growth. The main issues to watch are execution against the raised margin outlook, the durability of larger-customer expansion, and whether the company can continue narrowing the gap between GAAP and non-GAAP profitability.