16 hours ago
Certara (CERT) Q2 Revenue Jumps 12%
Key Points
GAAP revenue beat expectations at $104.6 million in Q2 2025, Revenue reached $104.6 million, representing a 12% increase compared to Q2 2024, while Non-GAAP EPS of $0.07 missed the $0.10 estimate.
Software segment revenue jumped 22%, far outpacing the 5% reported growth in services.
GAAP net loss narrowed substantially, but the company remains unprofitable on a GAAP basis.
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Certara (NASDAQ:CERT), a leader in biosimulation software and Model-Informed Drug Development solutions, released its Q2 FY2025 earnings on August 6, 2025. The most notable news was a slight revenue beat, with reported GAAP revenue of $104.6 million, exceeding analyst expectations, but non-GAAP earnings per share (EPS) missed consensus by $0.03. The company delivered double-digit top-line growth, driven primarily by its software segment, but the bottom line continues to face pressure. GAAP net losses narrowed sharply year over year. Overall, the quarter was marked by continued software momentum but mixed progress on translating growth into profit.
Metric Q2 2025 Q2 2025 Estimate Q2 2024 Y/Y Change
Revenue (GAAP) $104.6 million $104.05 million $93.3 million 12%
EPS (Non-GAAP) $0.07 $0.10 $0.07 0%
Adjusted EBITDA $31.9 million $26.3 million 21%
Net Income (GAAP) $(2.0) million $(12.6) million 84.1%
Software Revenue $46.7 million $38.2 million 22.3%
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Inside Certara's Business and Focus Areas
Certara operates at the intersection of life sciences and software technology. Its main products are biosimulation platforms, which help pharmaceutical companies simulate how drugs interact within the body using computer models. This approach helps reduce the time, cost, and risk of drug development.
The company is well known for its expertise in Model-Informed Drug Development (MIDD), using advanced software, artificial intelligence, and regulatory science tools to help drugs reach the market faster and with higher rates of approval. Recent focus areas include expanding AI and machine learning across its software suite, integrating new technologies through acquisitions, and supporting clients as regulatory agencies encourage the use of biosimulation in preclinical and clinical drug research.
Quarterly Trends: Software Strength and Margin Expansion
The quarter's headline was the continued rapid growth in software, which delivered a 22% year-over-year increase in revenue. This segment includes products like Simcyp and both software tools used in simulating drug action and regulatory reporting, as well as new offerings powered by artificial intelligence. Revenue from software reached $46.7 million, driven by both organic sales and the integration of Chemaxon, an acquired software company that added $5.3 million in revenue and $5.4 million in bookings.
On the services side, growth was slower, with GAAP revenue up only 5%. Biosimulation services remain the primary growth lever in the services business, though increased services bookings of 15% suggest some future revenue potential. Regulatory science and compliance services also maintained demand, especially as the US Food and Drug Administration (FDA) moves toward new drug evaluation standards that rely more on computer modeling and less on animal testing. The recently launched Non-Animal Navigator solution, which combines simulation software and regulatory expertise for monoclonal antibody drug development, received strong early interest, with significant inbound inquiries and over 400 webinar attendees in the weeks following the announcement. However, its financial impact is not expected to be immediate.
Certara's bookings—a forward-looking metric measuring new customer contracts—grew 13%. The software bookings component rose 11% year-over-year. The increase in software bookings was primarily due to strength in Certara's core biosimulation software and the contribution from Chemaxon. Growth in bookings for the services segment was even stronger at 15%, suggesting recovery momentum in this area even as the segment's revenue growth lags.
Cost of revenue (GAAP) increased 2.3% compared to Q2 2024, much less than total revenue growth. Operating expenses declined by $8.2 million, reflecting sharp drops in items like transaction costs. Adjusted EBITDA—a measure of core profitability—jumped 21% year over year, with adjusted EBITDA margin rising to about 30% for the year. Still, adjusted net income and non-GAAP EPS were flat versus a year earlier, signaling ongoing pressure from high non-cash costs like stock-based compensation.
Strategy: Innovation, Acquisitions, and Regulatory Momentum
Certara continues to invest heavily in research and development, particularly around artificial intelligence and new biosimulation models. The launch of the platform and the company's AI-powered software tools stand out as key differentiators in the market, with Research and development expense (GAAP) was $8.972 million, compared to $9.067 million for Q2 2024. These investments aim to make its software easier to use and more effective for drug developers as the regulatory landscape shifts toward model-based approaches.
The company is integrating recent acquisitions, notably Chemaxon, to expand its software range and customer reach. Since 2013, Certara has acquired 21 businesses, giving it access to cutting-edge technology and expertise while achieving greater global scale. Certara's software and services have been used by more than 2,400 biopharmaceutical companies and academic institutions across 70 countries, including 38 of the top 40 pharmaceutical companies by research and development spending.
On the regulatory front, Certara's work spans 23 drug regulatory agencies globally, and its tools have contributed to the majority of new drug approvals by the FDA over the last decade. The FDA's recent move to phase out animal testing for some types of drugs has created new opportunities for Certara's biosimulation products and services. The Non-Animal Navigator solution—combining software models and scientific consulting—was launched to help drug developers adapt to these new guidelines and reduce their reliance on animal models in the preclinical stage.
The treasury share buyback program continues, with 3.2 million treasury shares held as of June 30, 2025, up from 950,000 at the end of December 2024.
Looking Ahead: Management Guidance and Key Watchpoints
For the full fiscal 2025 year, Certara reiterated its full-year 2025 guidance on August 6, targeting revenue of $415–$425 million for FY2025, adjusted EBITDA margins of 30–32% for the full year, and adjusted diluted EPS of $0.42–$0.46 for FY2025. These figures suggest expected top-line growth in the high single digits and stable profit margins, based on Certara's full-year 2025 guidance for revenue of $415 million to $425 million and adjusted EBITDA margin of 30% to 32%. Management noted steady demand for biosimulation and increasing customer interest in model-informed solutions, but Certara reiterated its guidance for the full fiscal year.
Investors should watch for signs of improvement in the services segment, and ongoing regulatory changes—particularly the FDA's support for biosimulation and alternatives to animal testing—could create new business opportunities, but financial materiality will likely take time to emerge. Persistent GAAP net losses, high stock-based compensation, and the challenge of translating robust revenue gains into net profit remain critical issues for Certara as it continues to invest in its transformation strategy, as evidenced by a GAAP net loss of $2.0 million and equity-based compensation expense of $8.2 million.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
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