Innodata Raises 2026 Revenue Growth Forecast to 42% After 53% Third-Quarter Increase
Key Facts
On November 5, Innodata raised its forecast for 2026 revenue growth to 42% or more year over year, from 40% or more, after posting record third-quarter revenue. In its earnings release, the company said the increase takes into account the wind-down of a program for one of its major clients, with new programs expected to offset it in the first quarter. Revenue was $95.6 million in the three months ended September 30, up 53% from the year-earlier period. Revenue also exceeded analysts’ average estimate by about $12.3 million, or 15%. Zacks reported the news on November 12, a week after the company announced its results and updated its guidance.
Growth extended to net income, which was $10.3 million in the third quarter, up 24% year over year, while diluted earnings per share reached $0.29. For the first nine months of 2026, revenue rose to $277.9 million from $179.3 million in the same period of 2025, an increase of about 55%. The company attributed the increase mainly to higher volumes of AI data engineering services delivered under programs for existing clients. Revenue was $92.1 million in the second quarter, up 58% year over year. Adjusted gross margin in that quarter was 49%.
On the client side, Innodata said a client that accounted for less than 5% of revenue a year earlier became its largest client in the third quarter, giving it two clients of similar size. It added that it signed an additional fourth-quarter program with that client worth about $18 million. But nine-month data show that revenue remains concentrated: the largest client accounted for about 41% of the total, while another client accounted for about 32%. That compares with a 58% share for the largest client in the same period of 2025. The figures underscore the importance of expanding the base of programs and clients to revenue growth, alongside the company’s reliance on a limited number of large accounts.
The company announced five new programs with a large cloud computing company, after that account generated about $3.1 million in revenue over the previous twelve months. Innodata said it expects revenue from this client to exceed $20 million in 2027, based on those programs. Separately, the company launched a motion-capture lab in September to train humanoid robots and world models. It estimated that one successful trial from these efforts could generate about $7 million in revenue in 2027. The projected revenue remains contingent on the trial’s success, according to the company’s wording.
In government contracts, Innodata disclosed an oral award of a federal contract worth $5 million annually for five years. It said it expects the contract to be signed by the end of the fourth quarter. For near-term execution, the company expects new programs in the first quarter to offset the program being wound down for a major client. At the same time, the latest annual forecast increase follows a start to the year with the company projecting growth of about 35% or more, with the possibility of an increase if programs expanded. Innodata ended 2025 with revenue of $251.7 million, up 48% year over year.
The revenue acceleration was accompanied by a decline in adjusted gross margin in the third quarter to 40%, compared with 44% in the year-earlier period. The company attributed the decline mainly to higher direct operating costs. This followed an adjusted margin of 49% in the second quarter, according to the company’s results. As Innodata most recently raised its annual revenue growth forecast to 42% or more, the rollout of new programs and the absorption of their costs will be among the factors the market tracks in coming quarters. The near-term dates set by the company include the end of the fourth quarter for signing the federal contract and the first quarter for beginning to offset the program being wound down.