[Second Quarter 2025 Financial Highlights & Business Outlook](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Highlights%20%26%20Business%20Outlook) Innodata reported outstanding Q2 2025 results, beating analyst expectations with **79%** year-over-year revenue growth to **$58.4 million** and a significant increase in Adjusted EBITDA to **$13.2 million** Q2 2025 Key Financial Metrics (YoY Comparison) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Revenue | $58.4 million | $32.6 million | +79% | | Adjusted EBITDA | $13.2 million | $2.8 million | +$10.4 million | | Net Income | $7.2 million | ($0.014) million | Significant Improvement | | Diluted EPS | $0.20 | $0.00 | +$0.20 | | Cash & Equivalents (as of) | $59.8 million | - | - | - Raised full-year 2025 organic revenue growth guidance to **45% or more**, up from **40%**, due to strong demand, momentum, and a robust deal pipeline with significant dollar values[2](index=2&type=chunk) - The company's performance and positioning in the AI sector were recognized by its inclusion in Wedbush's "The AI Revolution Theme; 30 Names to Play in the 4th Industrial Revolution" industry note[4](index=4&type=chunk) [Consolidated Financial Statements (Unaudited)](index=5&type=section&id=Consolidated%20Financial%20Statements%20%28Unaudited%29) This section presents the unaudited condensed consolidated statements of operations, balance sheets, and cash flows for the three and six-month periods ended June 30, 2025, and 2024, detailing the company's financial performance and position [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For Q2 2025, revenue surged **79%** YoY to **$58.4 million**, transforming a prior-year net loss of **$14 thousand** into a net income of **$7.2 million** Consolidated Statements of Operations (in thousands, except per-share amounts) | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :---: | :---: | :---: | :---: | | | **2025** | **2024** | **2025** | **2024** | | **Revenues** | **$58,393** | **$32,553** | **$116,737** | **$59,057** | | Income before income taxes | $9,488 | $276 | $17,887 | $1,690 | | **Net income (loss) attributable to Innodata** | **$7,219** | **($14)** | **$15,006** | **$975** | | **Basic EPS** | **$0.23** | **($0.00)** | **$0.47** | **$0.03** | | **Diluted EPS** | **$0.20** | **($0.00)** | **$0.43** | **$0.03** | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, the company's financial position strengthened significantly compared to December 31, 2024, with cash and cash equivalents increasing by **$12.9 million** to **$59.8 million** Key Balance Sheet Items (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Cash and cash equivalents** | **$59,792** | **$46,897** | | Total current assets | $100,689 | $81,000 | | **Total assets** | **$132,623** | **$113,449** | | Total current liabilities | $35,122 | $39,506 | | **Total liabilities** | **$45,981** | **$50,060** | | **Stockholders' equity** | **$86,642** | **$63,389** | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the first six months of 2025, net cash from operating activities was **$15.1 million**, a more than twofold increase from **$6.3 million** in the same period of 2024, driven by higher consolidated net income Cash Flow Summary - Six Months Ended June 30 (in thousands) | | 2025 | 2024 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | **$15,102** | **$6,313** | | Net cash used in investing activities | ($4,058) | ($4,067) | | Net cash provided by financing activities | $1,239 | $392 | | **Net increase in cash and cash equivalents** | **$12,895** | **$2,703** | | Cash and cash equivalents, end of period | $59,792 | $16,509 | [Segment Performance](index=8&type=section&id=Segment%20Performance) The Digital Data Solutions (DDS) segment was the primary engine of growth, with its Q2 revenue nearly doubling year-over-year to **$50.6 million** and its Adjusted EBITDA increasing almost tenfold to **$12.2 million** Consolidated Revenue by Segment (in thousands) | Segment | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | DDS | $50,576 | $25,410 | +99.0% | | Synodex | $2,065 | $1,986 | +4.0% | | Agility | $5,752 | $5,157 | +11.5% | | **Total** | **$58,393** | **$32,553** | **+79.4%** | Adjusted EBITDA by Segment - Q2 (in thousands) | Segment | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | DDS | $12,215 | $1,275 | | Synodex | $461 | $522 | | Agility | $558 | $990 | [Reconciliation of GAAP to Non-GAAP Financial Measures](index=4&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Financial%20Measures) This section provides the bridge from GAAP to non-GAAP metrics, including Adjusted Gross Profit and Adjusted EBITDA, which management believes offer greater transparency into core operating performance - The company provides non-GAAP financial measures to assist investors in period-to-period comparisons and to reflect the ongoing performance of the business, consistent with how management evaluates performance[14](index=14&type=chunk)[15](index=15&type=chunk) [Adjusted Gross Profit Reconciliation](index=8&type=section&id=Adjusted%20Gross%20Profit%20Reconciliation) Consolidated Adjusted Gross Profit for Q2 2025 was **$25.0 million**, yielding an Adjusted Gross Margin of **43%**, a significant improvement from **33%** in Q2 2024, driven by the DDS segment Consolidated Gross Profit Reconciliation - Q2 (in thousands) | | 2025 | 2024 | | :--- | :--- | :--- | | Gross Profit (GAAP) | $23,023 | $9,351 | | Depreciation and amortization | $1,583 | $1,394 | | Stock-based compensation | $441 | $73 | | **Adjusted Gross Profit (Non-GAAP)** | **$25,047** | **$10,818** | | **Gross Margin (GAAP)** | **39%** | **29%** | | **Adjusted Gross Margin (Non-GAAP)** | **43%** | **33%** | [Adjusted EBITDA Reconciliation](index=9&type=section&id=Adjusted%20EBITDA%20Reconciliation) Consolidated Adjusted EBITDA for Q2 2025 was **$13.2 million**, a nearly fivefold increase from **$2.8 million** in Q2 2024, with reconciliation from Net Income including adjustments for taxes, interest, depreciation & amortization, and stock-based compensation Consolidated Adjusted EBITDA Reconciliation - Q2 (in thousands) | | 2025 | 2024 | | :--- | :--- | :--- | | Net income (loss) attributable to Innodata | $7,219 | ($14) | | Provision for income taxes | $2,269 | $285 | | Interest (income) expense, net | ($577) | $101 | | Depreciation and amortization | $1,602 | $1,418 | | Stock-based compensation | $2,721 | $992 | | **Adjusted EBITDA - Consolidated** | **$13,234** | **$2,787** | [About Innodata & Forward-Looking Statements](index=3&type=section&id=About%20Innodata%20%26%20Forward-Looking%20Statements) This section provides a corporate overview of Innodata as a global data engineering company focused on AI innovation, along with standard legal disclaimers regarding forward-looking statements - Innodata defines itself as a global data engineering company on a mission to help leading technology companies and enterprises drive Generative AI innovation[8](index=8&type=chunk) - The report contains forward-looking statements concerning operations, performance, and market position, which are subject to numerous risks and uncertainties, meaning actual results could differ materially from expectations[10](index=10&type=chunk)[11](index=11&type=chunk)[12](index=12&type=chunk)

Core Insights - Innodata (INOD) is set to report its second-quarter 2025 results on July 31, with expected revenues of $56.36 million, reflecting a 73.13% increase year-over-year [1][9] - The consensus estimate for earnings remains at 11 cents per share, with the company having consistently beaten earnings estimates in the past four quarters, averaging a surprise of 156.77% [1][3] Performance Factors - The anticipated strong performance in Q2 is attributed to robust demand for generative AI solutions, expanded customer engagements, and strategic investments [3] - A second master statement of work (SOW) with the largest customer is expected to significantly boost revenue from generative AI services [3][9] - Innodata plans to invest $2 billion in AI technology to support its largest customer, enhancing capabilities to meet evolving customer needs [4] Industry Context - The company is benefiting from industry tailwinds driven by AI-related capital expenditures among major tech firms, positioning itself as a key player in the growing AI services market [5] - Innodata's strong balance sheet, with $56.6 million in cash at the end of Q1 2025, provides the flexibility to execute its expansion strategy [5] Stock Performance - INOD shares have increased by 25.1% year-to-date, outperforming the Zacks Computer and Technology sector's 10.9% and the Computer - Services industry's 1.2% [6] - Compared to competitors like Cognizant, Infosys, and ExlService, which have seen declines of 2%, 21.7%, and 4.9% respectively, Innodata has shown stronger performance [7] Future Prospects - The company expects revenues to grow by 40% year-over-year in 2025, reaching $238.6 million, driven by an expanding clientele [14] - Innodata has secured contracts with eight major tech companies for Large Language Models (LLMs) data engineering, positioning it for strong growth [12] Product Development - The launch of the Generative AI Test & Evaluation Platform is significant, designed to help enterprises assess the safety and reliability of LLMs [13] - This platform includes features for hallucination detection and adversarial prompt testing, enhancing the trustworthiness of AI solutions [13]

Core Insights - Innodata (INOD) is heavily focused on Generative AI services, with its Digital Data Solutions segment contributing 87% of total revenues in Q1 2025 [1][9] - The company is experiencing significant growth, with a Zacks Consensus Estimate for Q2 2025 revenues at $56.36 million, reflecting a 70.8% year-over-year increase [1] - Major tech companies, referred to as the Magnificent 7, are ramping up AI infrastructure investments, with Microsoft planning to invest $80 billion, Meta between $64 and $72 billion, and Amazon targeting $54 billion [2] Company Developments - Innodata supports five of the seven hyperscalers and secured $8 million in new Big Tech deals in Q1 2025, indicating a growing reliance on its services for GenAI model evaluation and training [3][9] - The launch of a GenAI Test and Evaluation Platform focused on Large Language Model (LLM) validation positions Innodata to deepen its integration with Big Tech's GenAI investments [4][9] - The company faces increasing competition from TaskUs and Palantir Technologies, both expanding their GenAI capabilities and targeting similar industries [5][6] Financial Performance - Innodata's stock has appreciated by 20.8% year-to-date, outperforming the broader Zacks Computer & Technology sector, which grew by 9.5% [7] - The company's shares are trading at a premium, with a forward 12-month Price/Sales ratio of 5.55X compared to the industry's 1.75X [10] - The Zacks Consensus Estimate for Innodata's 2025 earnings is 69 cents per share, marking a decline of 22.47% from fiscal 2024's earnings [13]

Core Insights - Innodata (INOD) shares closed at $50.10, approximately 29.4% below the 52-week high of $71 reached on February 21, 2025, with a year-to-date appreciation of 26.8%, outperforming the Zacks Computer and Technology sector's return of 8.6% and the Zacks Computer – Services industry's return of 0.9% [1][2] Financial Performance - INOD expects 2025 revenues to rise 40% year over year to $238.6 million, driven by growing enterprise demand and contracts with eight Big Tech firms for LLM data work, including five of the "Magnificent 7" [9][14] - The Zacks Consensus Estimate for second-quarter 2025 earnings is pegged at 11 cents per share, unchanged over the past 60 days, while the consensus mark for 2025 earnings is 69 cents per share, suggesting a 22.47% year-over-year decline [16][18] Competitive Positioning - Innodata has outperformed competitors such as Cognizant, Infosys, and ExlService year to date, with their shares dropping 1.8%, 15.8%, and 4.3%, respectively [2] - The company is expanding its Generative AI capabilities and has secured approximately $8 million in new engagements from four Big Tech customers, indicating strong growth potential [11][13] Investment and Growth Strategy - Innodata plans to invest $2 billion in AI technology in the second quarter of 2025 to support its largest customer, benefiting from significant investment promises made by major tech firms [3][10] - The company is building capabilities to collect and create Gen AI training data, targeting the growing Generative AI IT services market expected to be worth $200 billion by 2029 [12] Valuation Metrics - Innodata shares are trading at a premium, with a forward 12-month Price/Sales ratio of 5.84X compared to the Zacks Computer Services industry's 1.76X, indicating a premium valuation relative to closest peers [19]

Core Insights - Innodata Inc. (NASDAQ: INOD) is characterized as a battleground stock due to numerous conflicting narratives surrounding it [1] - The company has a long history of managing large volumes of complex data and has leveraged this expertise since around 2019 to provide high-value data services [1] Company Overview - Innodata has been involved in handling complex data for many years, indicating a strong foundation in data management [1] - The shift to providing high-value data services began approximately in 2019, suggesting a strategic pivot in its business model [1]

Core Insights - Innodata (INOD) is experiencing growth due to rising demand for generative AI, with its Digital Data Solutions (DDS) segment generating $50.8 million in Q1 2025, representing over 87% of total revenues [1][9] - The company is launching a Generative AI Test & Evaluation Platform to help enterprises assess the safety and reliability of large language models (LLMs), with MasterClass as its first customer [3] - Innodata is positioned to benefit from significant investments in generative AI from major tech companies, securing $8 million in new deals from four Big Tech clients [4][9] Digital Data Solutions (DDS) Segment - DDS provides full-stack GenAI services, including training data creation and LLM evaluation, supporting industries like enterprise tech and healthcare [2] - The segment has become a core driver of Innodata's AI service portfolio, showcasing domain-specific capabilities [2] Competitive Landscape - Innodata faces competition from TaskUs and Palantir Technologies, both advancing their own generative AI solutions [5][6] - TaskUs is focusing on model evaluation and data labeling, while Palantir is enhancing its domain-specific LLM platforms [5][6] Financial Performance - Innodata's stock has increased by 29% year to date, outperforming the broader Zacks Computer & Technology sector, which grew by 8% [7] - The company is trading at a premium with a forward Price/Sales ratio of 5.98X compared to the industry average of 1.84X [10] Earnings Estimates - The Zacks Consensus Estimate for Innodata's 2025 earnings is 69 cents per share, reflecting a decline of 22.47% from fiscal 2024's earnings [13]

Financial Performance & Growth - Innodata reported Q1 2025 revenue of $58.3 million, a 120% year-over-year increase[44] - The company's adjusted gross margin was 43% in Q1 2025[44] - Adjusted EBITDA as a percentage of revenue rose from 14% in Q1 2024 to 22% in Q1 2025[53] - Innodata has a strong cash position, with $56.6 million in cash on the balance sheet[44] - The company anticipates FY25 revenue growth of 40% or more, projecting revenue of $238.6 million compared to $170.5 million in 2024[55, 56] Market Positioning & Strategy - Innodata is positioned as a "picks and shovels" beneficiary of the AI and GenAI race, with contracts with five of the "Magnificent Seven" technology companies[12] - The company estimates a total addressable market (TAM) opportunity for generative AI IT services of $200 billion by 2029[14] - Innodata's revenue is primarily driven by services, accounting for approximately 91% of the total, while SaaS contributes about 9%[44] AI & Data Engineering Focus - Innodata is focused on providing end-to-end AI lifecycle solutions, including generative AI and traditional AI services[11, 12] - The company has developed a proprietary Goldengate foundational AI platform[19, 25] - Innodata supports both AI builders and AI adopters with scaled data solutions, including data curation, transformation, and annotation for LLMs[21]

Core Insights - Innodata (INOD) and C3.ai (AI) are prominent AI-focused companies that provide essential services for enterprise digital transformation, with Innodata specializing in AI data engineering and model training, while C3.ai offers an AI-powered software platform for data integration and analytics [1][2] Industry Overview - The global generative AI spending is projected to reach $644 billion by 2025, reflecting a growth of 76.4% from 2024, with services expected to grow by 162.6% to $27.76 billion and software anticipated to increase by 93.9% to $37.12 billion [2] - Overall global spending on AI is expected to exceed $632 billion by 2028, with a compound annual growth rate (CAGR) of 29% from 2024 to 2028 [2] Innodata Highlights - Innodata is poised to benefit from significant investments from major tech companies, including Microsoft's $80 billion and Meta Platforms' $64-$72 billion [4] - The company anticipates a 40% year-over-year revenue increase in 2025, reaching $238.6 million, driven by expanding client relationships [5] - Innodata is targeting the generative AI IT services market, projected to be worth $200 billion by 2029, and is enhancing its capabilities in creating training data for large language models (LLMs) [6] - The launch of Innodata's Generative AI Test & Evaluation Platform aims to assist enterprises in evaluating the safety and reliability of LLMs [7] C3.ai Highlights - C3.ai operates over 130 enterprise AI applications, with a 100% increase in Generative AI revenues in fiscal 2025 and 66 deployments across 16 industries [8][10] - The company has established a strong partner network, with 73% of agreements in fiscal 2025 made in collaboration with major cloud providers, leading to a 419% year-over-year increase in partner-driven bookings [9] - C3.ai secured a $450 million contract with the U.S. Air Force, enhancing its presence in the federal sector [11] - The company reported a 48% year-over-year increase in non-oil and gas revenue, reflecting successful expansion into 19 different industries [12] Stock Performance - Year-to-date, Innodata shares have increased by 29.6%, while C3.ai shares have decreased by 28.6% [13] - Both companies are currently considered overvalued, with C3.ai trading at a forward Price/Sales ratio of 6.81X compared to Innodata's 6.03X [16][19] Earnings Estimates - The consensus estimate for C3.ai's fiscal 2026 loss is 37 cents per share, improved from a previous estimate of 46 cents [21] - Innodata's earnings estimate for 2025 is 69 cents per share, reflecting a 22.47% decrease year-over-year [22] Investment Recommendation - Despite Innodata's growth potential, C3.ai's strong partner base, innovative platform, and diversified business model make it a more attractive investment option, with a Zacks Rank of 2 (Buy) compared to Innodata's 3 (Hold) [23]

Core Insights - Innodata's Digital Data Solutions (DDS) segment is driving growth as enterprises seek comprehensive support for Generative AI, positioning itself as a platform provider for safe and scalable deployments [1] Financial Performance - In Q1 2025, DDS segment revenues increased by 158% year over year to $50.8 million, bolstered by new client acquisitions and expanded relationships with major technology firms [2] - The company secured $8 million in new contracts from four significant technology customers, with smaller accounts evolving into multi-million-dollar opportunities [2] - The forecast for Q2 EPS is $0.11, a decrease from $0.22 in the previous quarter [10] Product Development - Innodata launched its Generative AI Test & Evaluation Platform to help enterprises evaluate the safety and reliability of large language models (LLMs), featuring capabilities like hallucination detection and adversarial prompt testing [3] - The platform is currently in early access with MasterClass as the first customer and is expected to generate revenue in the second half of 2025 [4] Competitive Landscape - Innodata's DDS segment faces competition from emerging AI service providers such as BigBear.ai and Grid Dynamics, both enhancing their Generative AI capabilities [5] - BigBear.ai focuses on decision intelligence and model validation but lacks Innodata's specialized multimodal hallucination detection [6] - Grid Dynamics aids Fortune 100 clients with custom LLM development but does not offer a ready-to-deploy platform for model safety testing [7] Stock Performance and Valuation - Innodata's shares have risen by 17.2% year to date, outperforming the broader Zacks Computer & Technology sector, which returned 1.5% [8] - The stock is trading at a forward 12-month Price/Sales ratio of 5.49X, significantly higher than the Computer Services industry's 1.81X [11] - The Zacks Consensus Estimate for fiscal 2025 earnings is 69 cents per share, reflecting a 22.47% decline from fiscal 2024 earnings [15]

Core Viewpoint - Innodata (INOD) shares are trading at a premium with a forward 12-month Price/Sales (P/S) ratio of 4.65X, significantly higher than the Zacks Computer Services industry average of 1.79X [1][8]. Financial Performance - Innodata shares have declined 0.8% year to date (YTD), underperforming the industry and the Zacks Computer & Technology sector, which returned 1.4% and 1.1% respectively [6][8]. - The Zacks Consensus Estimate for second-quarter 2025 earnings is 11 cents per share, down 39% over the past 60 days, compared to break-even earnings in the year-ago quarter [12]. - The consensus mark for 2025 earnings is 69 cents per share, reflecting a 6.8% decrease over the past 60 days, indicating a 22.47% year-over-year decline [12]. Investment and Growth Strategy - The company plans to invest $2 billion in AI technology to support its largest customer in the second quarter of 2025 [10]. - Innodata's Generative AI Test & Evaluation Platform, powered by NVIDIA technology, aims to enhance AI trustworthiness and accelerate model development [13]. - The company expects 2025 revenues to increase by 40% year over year to $238.6 million, driven by an expanding clientele [16]. Market Position and Client Acquisition - Innodata is expanding relationships with key customers, including securing approximately $8 million in new engagements from four Big Tech customers [14]. - The company is onboarding major clients in enterprise tech, cloud software, digital commerce, and healthcare technology, which are expected to provide significant growth potential [15]. - Innodata serves the generative AI IT services market, projected to be worth $200 billion by 2029, indicating substantial growth prospects [17].