Innodata — Third Quarter 2026 Earnings Summary

Financial Performance:

• Revenue reached $95.6 million for the quarter ended September 30, 2026, representing a 53% year-over-year increase compared to $62.55 million in the prior year period.
• Adjusted Gross Profit was $38.3 million, resulting in an Adjusted Gross Margin of 40%, down from 44% in the same period last year.
• Adjusted EBITDA totaled $17.7 million (18.5% of revenue), an increase of $1.5 million from $16.2 million in the prior year period.
• Net income was $10.3 million ($0.30 basic, $0.29 diluted per share), up from $8.3 million ($0.26 basic, $0.24 diluted per share) in the prior year period.
• Cash and cash equivalents increased to $164.0 million as of September 30, 2026, from $82.2 million as of December 31, 2025; net of customer prepayments related to pass-through costs, cash was approximately $153.7 million.
• Accounts receivable decreased to $44.4 million from $46.5 million at the end of 2025.
• Deferred revenue increased to $7.9 million from $7.5 million at the end of 2025.
• Total liabilities increased to $93.1 million from $61.5 million at the end of 2025, driven by increases in accrued expenses and long-term obligations.

Guidance and Future Outlook:

• Full-year 2026 revenue growth guidance was raised to approximately 42% or more year-over-year, up from the previous guidance of 40% or more.
• Management forecasts more than $20 million of revenue from a large hyperscaler customer in 2027, following five new program wins in Q3.
• Management anticipates one successful pilot with a leading frontier or robotics lab could yield approximately $7 million in revenue in 2027.
• A Federal contract valued at $5 million per year for five years is expected to be signed by the end of the fourth quarter.
• Management expects a program wind-down at one large customer to be replaced by new programs in Q1 2027.

Business Segments and Product Lines:

• A single customer that previously represented less than 5% of revenue became the largest customer in Q3, resulting in two customers of comparable scale.
• An additional program was signed with the largest customer in Q4 valued at approximately $18 million.
• Five new logos were added in Q3, including model builders and an enterprise data platform.
• Innodata launched a motion capture lab in September for humanoid robot and world model training.
• New relationships were added with a global technology hardware company and a major financial services firm in the enterprise AI sector.
• The Federal practice secured a verbal win for a contract through prime partners in its first year of operation.

Market and Competitive Landscape:

• Management identifies a "profound market opportunity" in physical AI, noting capital is flowing into robotics and embodied intelligence faster than into any category since the LLM boom.
• The company positions itself at the center of the transition to agents, reinforcement learning, and embodied intelligence, focusing on the data challenges and trust and safety work required.
• Robot foundation models are noted to improve with data similarly to Large Language Models (LLMs).

Risks and Challenges:

• Forward-looking statements highlight risks including geopolitical conflicts, potential contract terminations, and the possibility that projected volumes may not materialize.
• Risks include reliance on project-based work, the at-will nature of contracts, and the ability to replace completed, canceled, or reduced projects.
• Revenue concentration among a limited number of customers and dependency on third-party providers and partners are cited as risks.
• Potential risks include inability to achieve growth targets, difficulties in integrating acquisitions, and market downturns.
• Cybersecurity risks, including security breaches, cyber-attacks, and data breaches, are noted as potential threats.

Management Commentary and Tone:

• CEO Rahul Singhal described Q3 as another record revenue quarter, marking the 13th consecutive quarter of year-over-year growth.
• Singhal noted this is his first earnings report as CEO and expressed pleasure with the results, stating revenue exceeded consensus by approximately $12.3 million (15%) and diluted EPS beat consensus by approximately 70%.
• Management emphasized the breadth of wins, citing the diversification of the customer base and the scale of new agreements.
• The tone was confident regarding the company's position in the AI transition, specifically regarding data challenges for agents and embodied intelligence.

Other Key Points:

• Innodata reported 13 consecutive quarters of year-over-year revenue growth.
• The company operates as a global data engineering firm with a 36+ year legacy.
• The press release includes a conference call scheduled for November 5, 2026, at 5:00 PM Eastern Time, with dial-in numbers and a webcast available.
• Non-GAAP financial measures including Adjusted Gross Profit, Adjusted Gross Margin, and Adjusted EBITDA are provided with reconciliations to GAAP measures.
• The company's stock trades on Nasdaq under the ticker INOD.