Innodata — Q2 2026 Earnings Summary

Financial Performance

• Revenue reached $92.1 million for the quarter ended June 30, 2026, representing 58% year-over-year growth compared to $58.4 million in the prior year period.
• Adjusted Gross Profit was $45.4 million, resulting in an Adjusted Gross Margin of 49%, up from 43% in the same period last year.
• Adjusted EBITDA totaled $25.4 million (27.5% of revenue), an increase of $12.1 million from $13.2 million in the prior year period.
• Net income was $14.4 million, or $0.43 per basic share and $0.41 per diluted share, compared to $7.2 million, or $0.23 per basic share and $0.20 per diluted share, in the prior year period.
• Cash, cash equivalents, and short-term investments totaled $250.4 million as of June 30, 2026, an increase of $168.2 million from $82.2 million as of December 31, 2025; net of customer prepayments for pass-through costs, cash was approximately $134 million.
• Accounts payable increased to $53.0 million from $9.6 million at the end of 2025, while advances from customers rose to $66.9 million from $1.8 million.
• Total assets grew to $356.7 million from $168.6 million at the end of 2025.

Guidance and Future Outlook

• The company reiterated full-year 2026 revenue growth guidance of 40% or more year-over-year.
• Management indicated that large potential programs from new and anticipated customers, viewed as likely wins, are not yet factored into the 40% guidance and will be included in future updates once scope and timing are finalized.
• Management expressed confidence that 2026 will be a tremendous year and highlighted opportunities for 2027 and beyond.

Business Segments and Product Lines

• The largest customer's contribution to revenue decreased to 37% in Q2 from 56% in Q1, while a Big Tech customer scaled from 17% to 34% of revenue.
• The company secured a new customer identified as one of the fastest-scaling frontier labs.
• Growth is increasingly driven by research efforts, including an early position in agentic reinforcement learning.
• New programs include personalization of long-horizon agents for the largest customer and reinforcement-learning environments for computer-use agentic tasks.
• Innodata released two public benchmarks to identify failure modes missed by standard leaderboards and launched the first stage of its AI Cyber Training Suite, comprising twelve datasets and evaluation systems for training AI coding agents.
• The company shifted data-collection practices from individual pilots to scoping enterprise-scale, multi-modal programs following successful egocentric data-collection pilots with leading robotics companies.
• Revenue growth was driven by a mix of off-the-shelf datasets (where the company retains intellectual property) and high-value pre-training programs.

Market and Competitive Landscape

• Innodata is establishing an early position in agentic reinforcement learning, described as a critical frontier in AI development.
• The company is leveraging its research capabilities to differentiate itself and expand partnerships across the full model training lifecycle, from pre-training and post-training to model evaluation and benchmarking.
• The company is targeting the federal government and enterprise markets with capabilities developed for frontier labs to drive high-quality recurring revenue.

Risks and Challenges

• Forward-looking statements highlight risks including geopolitical conflicts, potential contract terminations, and the possibility that projected volumes or pipeline opportunities may not materialize.
• Risks include reliance on project-based work, the at-will nature of contracts, and the ability of customers to reduce, delay, or cancel projects.
• The company faces risks related to revenue concentration among a limited number of customers, dependency on third-party providers, and the inability to replace completed or canceled projects.
• Potential risks include integration difficulties from acquisitions, impairment of goodwill, market downturns, and changes in trade or monetary policy.
• Cybersecurity risks include potential security breaches, cyber-attacks, and privacy breaches resulting in unauthorized data disclosure.

Management Commentary and Tone

• CEO Jack Abuhoff described Q2 as a record quarter with an across-the-board beat, noting it was the 12th consecutive quarter of year-over-year growth.
• Abuhoff stated that quarterly revenue exceeded the company's annual revenue from three years ago and highlighted operating leverage with Adjusted EBITDA growing 92%.
• Abuhoff characterized the business model as working as designed, delivering growth, margin expansion, and cash generation while investing in innovation that converts to revenue within quarters.
• Incoming CEO Rahul Singhal expressed honor at the confidence placed in him and intends to build on the company's momentum, team, and research-driven growth engine.
• Abuhoff emphasized that the leadership transition is planned from a position of strength and that he will remain deeply engaged as Executive Chairman to partner with Singhal.

Other Key Points

• A planned leadership transition was announced effective September 30, 2026: Rahul Singhal will become President and CEO and join the Board, while Jack Abuhoff will transition to Executive Chairman.
• Jayant Chauhan joined as Chief Financial Officer, with Mariz Espineli stepping into the role of Chief Accounting Officer; Chauhan will focus on capital allocation, capital markets, customer partnerships, M&A, and investor communications.
• The company reported 12 consecutive quarters of year-over-year revenue growth.
• Adjusted Gross Margin of 49% stands nine points above the company's publicly stated 40% target.
• The earnings conference call and webcast replay details were provided for investor participation.