Certara (CERT) Q1 2026: Software Bookings Surge 20% as AI Platform and Portfolio Realignment Take Hold
Certara’s Q1 marked a pivotal shift, with software bookings up 20% and a strategic exit from medical writing sharpening its focus on core drug development technology. The company is accelerating investments in an AI-enabled platform, reorganizing around two growth vectors, and forming high-impact partnerships with NVIDIA and Alta Sciences. With improved software visibility and a more predictable business mix, Certara is positioning itself for scalable, durable growth as the industry’s reliance on model-informed drug development intensifies.
Summary
- Software Momentum Accelerates: Bookings rebound across all customer tiers, fueled by new product releases and pricing discipline.
- Portfolio Streamlining Sharpens Focus: Medical writing divestiture and reorg concentrate resources on core MIDD and data-driven solutions.
- AI Platform Investment Sets Up Long-Term Differentiation: Dedicated AI team and NVIDIA partnership lay groundwork for next-gen growth.
Business Overview
Certara provides model-informed drug development (MIDD) software and expert services used by biopharma companies and regulators to accelerate and de-risk drug R&D. The business is now organized into two primary segments: MID3, which combines technology and services for model-based discovery and development, and ACE, which focuses on accelerating clinical evidence generation through data and workflow solutions. Revenue is split between ratable software subscriptions and project-based services, with a growing emphasis on cloud and AI-enabled offerings.
Performance Analysis
Q1 2026 results underscored a clear divergence between software and services, with software revenue up 7% and bookings up 20% year-over-year, while services revenue declined 4% and bookings fell 14%. The software net retention rate climbed to 106, reflecting successful upsell activity and broad-based demand across large pharma and emerging biotech, especially for SimCYP, Phoenix Cloud, and Camaxon. Ratable and subscription revenue held steady at 57% of software sales, supporting revenue predictability.
Services performance was mixed, impacted by operational realignment and lingering execution challenges, particularly in regulatory services. The recent divestiture of the medical writing business is expected to reduce lumpiness in services and improve revenue quality going forward. Adjusted EBITDA margin remained solid at 30%, though operating expenses rose due to acquisition-related items and increased R&D spend, reflecting deliberate investment in the AI platform and product innovation. The balance sheet remains healthy, with $149.5 million in cash and continued share buybacks signaling capital discipline.
- Software Bookings Outperformance: All customer tiers exceeded plan, driven by product innovation and revamped sales incentives.
- Services Drag Counterbalanced by Backlog Conversion: Despite bookings softness, backlog conversion supported revenue, with improvement expected in H2 as new commercial structures take hold.
- Cost Structure Reflects Transformation: Operating expense growth tied to both strategic R&D and non-recurring acquisition costs; margin discipline remains a focus.
The shift to a 50-50 software-services mix and increased software visibility are expected to drive more consistent financial performance in coming quarters.
Executive Commentary
"We are building an AI integrated platform that sits on top of and complements our existing portfolio. This next-generation platform will give researchers the ability to interrogate Certara's full body of knowledge across products, data sets, and scientific expertise to get accurate, trusted answers to increasingly complex questions."
John Resnick, Chief Executive Officer
"We now expect 2026 reported full-year revenue to be in the range of $395 to $405 million, including the $18 million...related to the divested business. This outlook reflects full-year growth of 0 to 4%, excluding the divested business in both periods, and is consistent with our prior growth expectations."
John Gallagher, Chief Financial Officer
Strategic Positioning
1. AI Platform and Data Leverage
Certara is investing aggressively in a unified AI platform that will connect its proprietary data, scientific expertise, and validated software tools. This initiative is designed to enable researchers to query and synthesize insights across the entire drug development lifecycle, leveraging decades of regulatory and scientific knowledge. The appointment of a Chief AI Officer and the NVIDIA partnership signal a commitment to scalable, differentiated AI-enabled solutions that are deeply embedded in customer workflows.
2. Portfolio Realignment and Divestiture
The company’s exit from regulatory and medical writing services sharpens its focus on areas with the highest competitive advantage and recurring revenue potential. This move also increases the alignment between software and expert services, especially within the MID3 segment, improving predictability and operational leverage. Management expects this realignment to unlock 150 basis points of incremental growth in 2027 and beyond.
3. Segment Reorganization: MID3 and ACE
Certara’s new structure integrates technology and services in MID3 for a “flywheel” effect, while ACE targets the growing need for accelerated clinical evidence generation. This realignment is designed to drive accountability, shorten feedback loops, and spur innovation by aligning product development and commercial execution more tightly with customer needs.
4. Partnership-Driven Ecosystem Expansion
Strategic collaborations with NVIDIA and Alta Sciences are intended to extend Certara’s reach and accelerate product development. The NVIDIA partnership will enhance computational speed and democratize access to advanced simulation tools, while the Alta Sciences alliance advances integrated early drug development solutions, targeting biotech innovators and pharma clients.
5. Operational Rigor and Commercial Discipline
Focused SWAT teams, pricing optimization, and revamped incentives are being deployed to drive execution, improve cost efficiency, and encourage cross-functional collaboration. The company is also leveraging AI to refine targeting and sales effectiveness, with a view to restoring double-digit growth rates over the medium term.
Key Considerations
This quarter marks a deliberate pivot toward scalable growth and operational discipline, with Certara taking bold steps to align its business model with secular industry trends and customer demand for AI-driven, model-informed solutions.
Key Considerations:
- AI Platform as a Differentiator: Certara’s deep regulatory and scientific legacy positions its AI initiative as a credible, high-barrier offering in a crowded field.
- Revenue Quality Improves with Divestiture: Exiting medical writing reduces volatility and strengthens the link between technology and services.
- Segment Realignment Targets Consistency: MID3 and ACE structures are designed to reduce quarter-to-quarter swings and enhance customer-centricity.
- Capital Allocation Remains Balanced: Share buybacks and tuck-in M&A are both on the table, with a disciplined approach to R&D spend and return expectations.
- Execution Risks from Change Management: Management acknowledges short-term churn as new organizational and go-to-market structures are implemented.
Risks
Certara faces transitional execution risk as it reorganizes and integrates new leadership, with potential for near-term volatility in services and commercial operations. The competitive threat from large pharma building internal AI solutions is mitigated by Certara’s regulatory data moat, but remains a long-term watchpoint. Broader biotech funding cycles and customer consolidation could also affect growth, especially in Tier 2 and 3 segments.
Forward Outlook
For Q2 2026, Certara guided to:
- Revenue includes approximately $5 million from the divested businesses, with mix shifting toward software.
- Adjusted EBITDA margin expected to be modestly below the 30%–32% full-year range, improving in H2.
For full-year 2026, management maintained guidance:
- Revenue of $395–$405 million (0%–4% growth, excluding divested businesses)
- Adjusted EPS of $0.35–$0.41 per share
Management emphasized H2 acceleration in both software and services, driven by higher backlog, improved sales alignment, and new product traction. Visibility is strongest in software, with Tier 2 and 3 customers expected to benefit from an improved funding climate. R&D investments are expected to yield revenue benefits beginning in 2027.
- H2 revenue growth expected above high end of range
- Margin improvement tied to operational discipline and divestiture impact
Takeaways
Certara’s Q1 2026 set a new foundation for durable growth, with decisive moves to streamline the portfolio, invest in AI, and enhance operational rigor.
- Software Outperformance and Platform Vision: Bookings strength and AI investment position Certara to capture secular demand for model-informed and data-driven drug development solutions.
- Business Model Realignment for Consistency: Divestiture and segment reorg are expected to reduce volatility and drive more predictable, higher-quality growth as the year progresses.
- AI Platform, Partnerships, and Execution Discipline: The combination of a credible AI roadmap, ecosystem expansion, and sharpened commercial focus sets up Certara for a potential inflection in growth and margin trajectory in 2027 and beyond.
Conclusion
Certara’s Q1 2026 was a quarter of strategic repositioning, as management acted to align its business model with industry tailwinds in AI and data-driven drug development. With improved software momentum, a more focused portfolio, and deliberate capital allocation, Certara is building the foundation for sustained, scalable growth—though execution will remain a key watchpoint as transformation efforts continue.
Industry Read-Through
Certara’s results and commentary highlight a sector-wide acceleration in AI-enabled drug development, with regulatory agencies and large pharma increasing their reliance on model-based approaches and real-time clinical trial data. The company’s ability to leverage proprietary data and regulatory trust positions it as a partner, not a competitor, to large pharma’s internal AI initiatives. Divestiture of non-core services and focus on platform integration signal a broader trend toward specialization and data-driven differentiation in the life sciences tools and services industry. Partnerships with cloud and AI leaders like NVIDIA are likely to become table stakes for technology-driven drug development vendors.