Sprout Social’s second quarter results were met with a negative market reaction, despite the company surpassing Wall Street’s expectations for both revenue and non-GAAP profit. Management highlighted that enterprise customer wins and growing adoption of premium offerings, such as influencer marketing and customer care modules, were key drivers of performance. CEO Ryan Barretto pointed to continued progress in expanding relationships with large global brands, pointing out that the number of customers spending over $50,000 annually increased by 18%. At the same time, management acknowledged operational discipline contributed to margin improvement, with non-GAAP operating margin expanding nearly 400 basis points year over year.
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Sprout Social (SPT) Q2 CY2025 Highlights:
- Revenue: $111.8 million vs analyst estimates of $110.9 million (12.5% year-on-year growth, 0.8% beat)
- Adjusted EPS: $0.18 vs analyst estimates of $0.15 (19% beat)
- Adjusted Operating Income: $10.33 million vs analyst estimates of $9.03 million (9.2% margin, 14.4% beat)
- The company slightly lifted its revenue guidance for the full year to $454.4 million at the midpoint from $451.4 million
- Management reiterated its full-year Adjusted EPS guidance of $0.73 at the midpoint
- Operating Margin: -11%, up from -16.6% in the same quarter last year
- Customers: 9,517 customers paying more than $10,000 annually
- Annual Recurring Revenue: $458.4 million vs analyst estimates of $457.9 million (15.8% year-on-year growth, in line)
- Billings: $109 million at quarter end, up 7.3% year on year
- Market Capitalization: $799.3 million
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Sprout Social’s Q2 Earnings Call
- Arjun Bhatia (William Blair) asked about the impact of the NewsWhip acquisition on guidance. CFO Joseph Del Preto explained that the updated outlook includes a modest contribution from NewsWhip, reflecting prudence given the short operating history post-acquisition.
- Robert Morelli (Needham) inquired about integration timelines and customer feedback on NewsWhip. CEO Ryan Barretto responded that early internal and customer reactions have been positive, with product integration planned over the coming quarters.
- Adam Hotchkiss (Goldman Sachs) questioned the effect of rising digital advertising costs on customer behavior. Barretto noted that brands are increasingly shifting focus to social channels to reclaim lost traffic and optimize spend.
- Jack McShane (Stifel) sought clarity on macro conditions and how renewal conversations were affected. Barretto stated that demand and renewals remained steady, with stable retention metrics and continued focus on customer value.
- Raimo Lenschow (Barclays) asked about the gross margin implications of scaling NewsWhip’s AI infrastructure. Del Preto emphasized that the technology is scalable and should not materially impact cost structure as usage grows.
Catalysts in Upcoming Quarters
Looking ahead, the StockStory team will be monitoring (1) the pace and effectiveness of NewsWhip’s integration into Sprout’s platform, (2) the rate at which enterprise customers adopt premium modules such as Guardian and influencer marketing, and (3) signs of improved sales productivity following enablement efforts. Progress in international markets and the response to evolving social search trends will also be important indicators of future performance.
Sprout Social currently trades at $13.85, down from $16.03 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free).
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