Sprout Social (NASDAQ:SPT) reported third-quarter 2026 revenue of $125.1 million, up 8.3% from a year earlier, as the social media management software company continued to shift its business toward larger enterprise customers and expand its artificial intelligence offerings.
Chief Executive Officer Ryan Barretto said non-GAAP operating income reached $26.3 million, or a 21% margin, representing a 910-basis-point improvement from the prior year and an all-time quarterly high for the company. Non-GAAP free cash flow was $26.7 million, up 158% year over year. On a trailing 12-month basis, Sprout generated about $71 million in non-GAAP free cash flow, a 70% increase from the prior period.
“We currently expect Q4 to be our first-ever GAAP profitable quarter,” Barretto said, calling the anticipated milestone an indication of the company’s cost discipline. The company said it is targeting sustainable quarterly GAAP profitability going forward.
Enterprise customer mix continues to rise
Sprout’s strategy remains centered on larger and more sophisticated customers, which management said have stronger retention, expansion and unit economics. Approximated trailing-12-month subscription revenue from customers contributing at least $30,000 in annual recurring revenue, or ARR, increased 18% year over year and represented more than 62% of total subscription revenue.
The company ended the quarter with 3,925 customers contributing $30,000 or more in ARR, down one sequentially. Barretto said weaker net adds were concentrated in the $30,000 to $50,000 range, reflecting a cautious macroeconomic environment that has lengthened sales cycles and increased buyer scrutiny of budgets, return on investment and total cost of ownership.
However, customer retention in that group remained stable, according to management. The higher end of the customer base continued to grow: customers generating at least $50,000 in ARR increased 11% year over year to 2,155, while customers at $150,000 or more in ARR rose 22%. Sprout added more than 10 customers in the $150,000-plus cohort during the quarter, consistent with the prior quarter.
Average contract value increased 12.1% year over year. Barretto said the gain reflected both the mix shift toward larger customers and broader adoption of multiple products, including Listening, NewsWhip, Influencer Marketing, Employee Advocacy and Premium Analytics.
Among the quarter’s larger deals, Sprout cited an almost $250,000 ARR new-business agreement with a Fortune 500 technology company that adopted Trellis+, Premium Analytics, Listening, Employee Advocacy and Premier Success. The company also described an almost $200,000 ARR win with a major U.S. entertainment company and a six-figure expansion with a global manufacturer that renewed 10 months early, committed to a three-year term and more than doubled annual contract value.
Trellis adoption and monetization expand
Management highlighted progress for Trellis, Sprout’s AI offering, which became available to all customers and plans in July. Trellis is now incorporated across social listening, publishing, the Smart Inbox and reporting, and is also available in product trials for prospective customers.
Barretto said thousands of customers are using Trellis, which is designed to analyze and summarize social data. He said Sprout’s platform ingests more than 2 billion social messages daily across more than a dozen networks, providing the data foundation for its AI capabilities.
The company has introduced Trellis+ as a paid tier, initially using a per-user-seat model. Based on customer feedback, Sprout plans to introduce a shared credits option in the fourth quarter, allowing users and automations to draw from one common pool. Barretto said the option could be particularly useful for enterprises with large user counts and varied use cases.
Management said monetization remains early, although Trellis was included in each of the three customer deal examples discussed on the call. Barretto described the product as an important differentiator in sales discussions and said he expects it to become a foundational part of customer use of the platform.
Sprout also introduced AI sentiment analysis in NewsWhip and expanded influencer marketing brand-safety reviews to assess images, video and audio in addition to text. For enterprise users, the company added automated user-management capabilities with Okta and Entra ID, along with expanded data masking and approval workflows.
Lower-end customers and financial outlook
Customers below $30,000 in approximated subscription revenue represented 38% of the company’s trailing-12-month subscription revenue as of Sept. 30, compared with 59% in June 2022. Sprout is pursuing a more automated, self-service approach for that market, including its Essentials product, which became generally available in July.
Barretto said the company has been refining Essentials’ onboarding flow, website messaging and self-service experience. He said early conversion trends have shown progress, though Sprout continues to optimize the offering.
Vice President of Financial Planning and Analysis Erin Graupmann said the 21% third-quarter non-GAAP operating margin benefited from revenue outperformance, hiring timing and other one-time factors. The company expects a non-GAAP operating margin of about 18% in the fourth quarter, still roughly 800 basis points above the year-earlier period.
Total remaining performance obligations, or RPO, were $393.9 million, up 10.3% year over year. Current RPO, the portion expected to be recognized as revenue over the next 12 months, totaled $280.2 million, up 8.4%. Graupmann said the growth rates moderated as expected after the company lapped the NewsWhip acquisition and prior benefits from longer contract durations and renewal timing.
- Fourth-quarter revenue is projected at $124.2 million to $125.2 million.
- Fourth-quarter non-GAAP operating income is projected at $21.4 million to $22.4 million.
- Fourth-quarter non-GAAP earnings per share are expected to be $0.36 to $0.38.
- Full-year 2026 revenue is forecast at $494.7 million to $495.7 million.
- Full-year non-GAAP operating income guidance was raised to $77.8 million to $78.8 million.
Sprout ended the quarter with $103.7 million in cash and cash equivalents. During the quarter, it used more than $26 million of its $50 million share repurchase authorization to buy back 2.6 million shares at an average price of $10.25 per share, including commissions.
Management said its outlook assumes no improvement in the demand environment. While the company did not provide 2027 guidance, Graupmann noted that fourth-quarter bookings performance could have a greater effect on next year because of subscription revenue recognition. Sprout reaffirmed its goal of reaching 30% under its Rule of 40 framework by the fourth quarter of fiscal 2027, with the mix expected to be more heavily weighted toward profitability.
About Sprout Social (NASDAQ:SPT)
Sprout Social, Inc is a software company that provides a cloud-based social media management platform for businesses and organizations. Its platform helps customers manage social media publishing, engagement, customer care, analytics, listening and employee advocacy from a centralized environment.
The company’s products are designed to help marketing, communications, sales and customer service teams plan and publish content, monitor conversations, respond to audiences, evaluate social media performance and gain insights from online activity.
