Last Update 23 Feb 26

Fair value Decreased 2.08%

SPT: AI Features And 2026 Software Setup Will Support Re Rating

The blended analyst price target for Sprout Social has edged down by about $0.33 per share, as analysts recalibrate their models on software valuations and long term P/E assumptions following recent sector wide target cuts from firms such as Morgan Stanley and Barclays.

Analyst Commentary

Bullish Takeaways

Bullish analysts still see a favorable setup for software into 2026, which they view as supportive for Sprout Social if the company can execute against sector level expectations.
Stable macro and IT spending assumptions in recent research suggest that end market demand for software budgets is not under clear pressure. This can help support Sprout Social's growth plans if it maintains its competitive position.
Some analysts highlight that software stock valuations are currently viewed as low and out of favor. They see this as an opportunity for investors who are comfortable with near term volatility and longer term execution risk.
Maintaining positive ratings alongside reduced targets signals that certain analysts still view the business model and category as attractive, even as they reset valuation frameworks and P/E inputs.

Bearish Takeaways

Bearish analysts have cut price targets, including one move to US$13 from US$26. This reflects a more cautious stance on how much investors are willing to pay for Sprout Social relative to prior P/E assumptions.
The broad reset across the software group suggests concern that earlier valuation levels may have been too rich. This can limit upside in the near term even if company execution is steady.
Target reductions tied to sector wide reviews indicate that sentiment toward software is still fragile, and Sprout Social may be sensitive to any disappointment on growth or margins versus these updated models.
Recalibration of long term P/E assumptions points to a tighter margin for error on execution, with less room for missteps in areas like sales efficiency, product investment, or path to profitability.

What's in the News

Sprout Social announced a set of new AI driven features and an expanded partnership framework aimed at helping brands reach audiences in what it calls the Answer Engine era, with a focus on content that both consumers and AI answer engines treat as trustworthy and useful (Key Developments).
The company expanded its Reddit partnership, adding tools that let brands manage brand owned subreddits from Smart Inbox, publish to brand profiles and relevant subreddits, and refine Listening data. The company also outlined plans to enable engagement with wider public conversations on Reddit directly from the Sprout platform later in the year (Key Developments).
Sprout introduced Recruit, an AI powered creator management tool that helps brands build no code landing pages to capture, vet and match with creators based on qualitative data and fit with brand goals (Key Developments).
The Trellis Monitoring Agent was rolled out within NewsWhip by Sprout Social as an always on system that flags emerging stories, filters noise and provides structured updates so teams can respond faster with tailored messaging (Key Developments).
Additional platform updates included advanced moderation for TikTok ad campaigns, customizable reporting metrics that tie social data to broader business goals, and expanded predictive monitoring for newer networks such as Bluesky, featured at Sprout Social’s Breaking Ground product event (Key Developments).

Valuation Changes

Fair Value: trimmed slightly from $16.00 to about $15.67 per share, reflecting a modest reset in the modeled intrinsic value.
Discount Rate: inched up from 8.73% to about 8.78%, indicating a slightly higher required return in the updated model.
Revenue Growth: kept broadly in line at about 11.92% in the refreshed assumptions.
Net Profit Margin: nudged higher from about 1.36% to 1.44%, pointing to a small adjustment in long term profitability assumptions.
Future P/E: reduced from about 153.14x to 139.19x, indicating a lower valuation multiple applied in the forward earnings framework.

AI-powered innovation and acquisitions are driving adoption of premium offerings, deeper enterprise integration, and more stable, diversified revenue streams.
Global expansion and advanced compliance solutions position Sprout Social to capture regulated industries and mitigate region-specific risks.
Heavy reliance on upmarket expansion, North American revenue, and platform integrations exposes Sprout Social to growth volatility, regulatory pressures, and intensified competition.

Catalysts

About Sprout Social

Designs, develops, and operates a web-based social media management platform in the Americas, Europe, the Middle East, Africa, and the Asia Pacific.What are the underlying business or industry changes driving this perspective?

The ongoing AI-driven expansion of Sprout Social's platform-including the NewsWhip acquisition-positions the company to address rising demand for predictive media intelligence and automated workflow, which should boost adoption of premium modules, ARPU, and long-term revenue growth.
Heightened complexity in digital marketing, coupled with the proliferation of new social channels and real-time engagement needs, is making centralized, cloud-based SaaS platforms indispensable for enterprises, supporting continued upmarket penetration, higher retention rates, and gross margin expansion.
Global brands' growing reliance on social media as the front door for discovery, engagement, and customer service is fueling expanded budgets for social media management, which, combined with Sprout's enhanced influencer marketing and care offerings, can drive accelerated top-line growth.
Launches of AI-powered compliance and governance tools (like Guardian) and the ability to securely manage social data position Sprout to capture share in regulated industries, mitigating churn risk and supporting more stable, diversified revenue streams.
Ongoing international expansion and increasingly sophisticated partnerships are opening new markets outside North America, supporting future revenue diversification and reducing the impact of region-specific slowdowns on total earnings.

Sprout Social Earnings and Revenue Growth

Sprout Social Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Sprout Social's revenue will grow by 12.3% annually over the next 3 years.
Analysts are not forecasting that Sprout Social will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Sprout Social's profit margin will increase from -12.7% to the average US Software industry of 13.1% in 3 years.
If Sprout Social's profit margin were to converge on the industry average, you could expect earnings to reach $79.8 million (and earnings per share of $1.27) by about September 2028, up from $-54.7 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 23.0x on those 2028 earnings, up from -16.4x today. This future PE is lower than the current PE for the US Software industry at 36.6x.
Analysts expect the number of shares outstanding to grow by 2.47% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.5%, as per the Simply Wall St company report.

Sprout Social Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Sprout Social's increasing focus on expanding into large enterprise clients via NewsWhip and premium modules carries execution risk; if integration and upmarket expansion stall, the company may remain overly reliant on SMBs, exposing revenue and net margin to higher volatility and lower customer lifetime value.
There is still limited traction and distribution in international markets, with the majority of revenue concentrated in North America-this geographic concentration leaves Sprout Social vulnerable to slower growth rates and increases the risk that revenue growth will decelerate if U.S. demand fluctuates.
The company's dependency on integrating with major social platform APIs (Facebook, Instagram, Reddit, TikTok, LinkedIn, etc.) means any restriction or policy changes by these networks could jeopardize product differentiation, disrupt service offerings, or create barriers to new features, potentially impairing both revenue and gross margin.
The evolving regulatory landscape around digital privacy (such as GDPR and CCPA), especially as Sprout Social expands into highly regulated industries and global markets, may increase compliance costs, restrict access to valuable data, or limit analytics functionality, weighing on net margins and future earnings.
Intense competition-from larger marketing-technology vendors and social networks adding native AI and automation features-raises the risk of platform commoditization and price compression, which could slow ARPU growth, squeeze operating margins, or result in attrition of high-value enterprise accounts.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $22.818 for Sprout Social based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $32.0, and the most bearish reporting a price target of just $16.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $609.4 million, earnings will come to $79.8 million, and it would be trading on a PE ratio of 23.0x, assuming you use a discount rate of 8.5%.
Given the current share price of $15.23, the analyst price target of $22.82 is 33.3% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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