Sprout Social Q3 Revenue Rises 8%, Operating Margin Hits 21%

Sprout Social Inc. reported an 8% year-over-year increase in fiscal third-quarter revenue while its non-GAAP operating margin expanded to 21%, highlighting stronger profitability as the social-media software provider concentrates investment on larger customers and seeks greater spending within existing accounts.

Revenue for the quarter ended September 30, 2026, was $125.1 million, up from $115.6 million a year earlier. Subscription revenue represented 99% of the total. Non-GAAP operating margin increased from 12% in the prior-year quarter, while non-GAAP free cash flow margin rose to 21% from 9%.

Non-GAAP gross margin was 78%, compared with 79% a year earlier. The company’s non-GAAP measures exclude items including stock-based compensation, acquisition-related expenses, acquired-intangible amortization, restructuring charges and certain other costs.

Larger customers support contract growth

Average contract value increased 12% to $18,009 from $16,064, reflecting Sprout Social’s focus on midmarket and enterprise customers. The number of customers contributing at least $30,000 in annual recurring revenue reached 3,925, up from 3,711. Customers contributing at least $50,000 rose to 2,155 from 1,947.

Remaining performance obligations increased to $393.9 million from $357.1 million, while current remaining performance obligations—contracted revenue expected to be recognized within 12 months—rose to $280.2 million from $258.5 million.

Sprout Social said its growth strategy centers on winning enterprise accounts, improving customer onboarding and adoption, and selling premium modules and professional services into existing accounts. It also plans to continue working with partners such as Amazon Web Services and Salesforce to reach larger strategic customers.

The presentation highlighted customer adoption across social intelligence, employee advocacy, listening, influencer marketing, analytics and customer-care products. Examples included a Fortune 500 technology company consolidating several social-media tools on Sprout’s platform, an entertainment company adopting publishing and influencer-marketing capabilities, and a global paper manufacturer expanding into predictive media-risk intelligence.

For customers with at least $30,000 in ARR, Sprout plans to continue investing in research and development and go-to-market activities while expanding its share of customer spending. For accounts below that threshold, the company is pursuing new packaging and product approaches and intends to use AI and automation to improve lifetime value relative to customer-acquisition costs.

Fiscal 2026 outlook

Sprout Social expects fourth-quarter revenue of $124.2 million to $125.2 million and non-GAAP operating income of $21.4 million to $22.4 million. Non-GAAP net income is projected at $0.36 to $0.38 per share, based on 59 million basic weighted-average shares outstanding.

For the full fiscal year, management forecasts revenue of $494.7 million to $495.7 million and non-GAAP operating income of $77.8 million to $78.8 million. Full-year non-GAAP net income is expected to range from $1.29 to $1.31 per share, based on 59.7 million basic weighted-average shares.

The company is targeting a 30% Rule of 40 measure by the fourth quarter of 2027, defined as year-over-year revenue growth plus the current quarter’s non-GAAP operating margin. Its medium- to longer-term goals include revenue above $1 billion, non-GAAP gross margin above 80%, non-GAAP operating margin above 20%, and non-GAAP free cash flow margin of 20% to 22%.

Sprout Social cautioned that its outlook is subject to risks including the execution of its July 2026 workforce reduction plan, the effects of pricing and packaging changes on customer demand and retention, dependence on social-media platforms and API providers, and the challenge of sustaining customer and revenue growth while shifting toward larger accounts. The company also identified AI-related disruption, cybersecurity and privacy risks, acquisition integration, indebtedness, legal proceedings, and uncertain economic and geopolitical conditions as potential constraints on performance.