Simulations Plus Inc. (SLP) shares climbed more than 18% on Tuesday after delivering a quarter that beat lowered expectations and offered hints that the worst might be over for the biosimulation software market.
The company reported fourth-quarter fiscal 2025 sales of $17.5 million, down 6% year-over-year but slightly above the consensus estimate of $17.09 million. More importantly, Simulations Plus posted adjusted earnings of 10 cents per share, soundly beating expectations for a five-cent loss, though still down from 18 cents a year ago.
The revenue breakdown showed software sales fell 9% to $9 million while services revenue dropped 3% to $8.4 million. Gross profit came in at $9.8 million with a 56% margin, and adjusted EBITDA hit $3.5 million, representing 20% of total revenue compared to $4.1 million or 22% in the prior year.
Looking Ahead with Cautious Optimism
Simulations Plus reaffirmed its fiscal 2026 adjusted earnings guidance of $1.03 to $1.10 per share, in line with preliminary expectations and well above the consensus loss of $3.22. The company expects 2026 revenue between $79 million and $82 million versus analyst estimates of $78.8 million, with an adjusted EBITDA margin of 26% to 30%.
What's more interesting than the numbers is the tone. Management noted that demand appears to be stabilizing as biotech funding improves and concerns about tariffs and drug pricing ease for large pharma clients. This has translated into increased proposal activity ahead of customer budget cycles, which is exactly what you want to see if you're betting on a recovery.
Not Declaring Victory Yet
The company isn't ready to call it a full rebound, though. Management remains cautious and wants clearer evidence of sustained recovery before making that declaration. The 2026 guidance assumes a stable demand and pricing environment, not a roaring comeback.
William Blair analysts remain bullish despite the uncertainty around timing. They highlight that Simulations Plus is well-positioned to capitalize when the biosimulation demand inflection finally arrives. The company is actively investing in AI solutions across its product portfolio and working to unify its product ecosystem to better support clients' end-to-end model-informed drug development needs.
The analysts believe the company can return to consistent double-digit organic revenue growth and meaningful margin expansion over time, maintaining their Outperform rating.
Price Action: SLP stock traded up 18.38% to $20.26 at publication on Tuesday.
