[Part I – Financial Information](index=2&type=section&id=Part%20I%20%E2%80%93%20Financial%20Information) [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The company's financial position strengthened significantly as of June 30, 2025, with total assets increasing to **$132.6 million** from **$113.4 million** at year-end 2024, driven by a rise in cash and accounts receivable Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $59,792 | $46,897 | +$12,895 | | Accounts receivable, net | $34,124 | $28,013 | +$6,111 | | Total current assets | $100,689 | $81,000 | +$19,689 | | Total assets | $132,623 | $113,449 | +$19,174 | | Total current liabilities | $35,122 | $39,506 | -$4,384 | | Total liabilities | $45,981 | $50,060 | -$4,079 | | Total Stockholders' equity | $86,642 | $63,389 | +$23,253 | Consolidated Statements of Operations Highlights (in thousands, except per share amounts) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $58,393 | $32,553 | $116,737 | $59,057 | | Net Income (loss) | $7,219 | $(14) | $15,006 | $975 | | Diluted EPS | $0.20 | $(0.00) | $0.43 | $0.03 | Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30, in thousands) | Cash Flow Activity | 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 | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Key accounting policies remain consistent with the 2024 annual report, with valuation allowances released for deferred tax assets in Canadian and German subsidiaries due to improved profitability outlooks, and a single customer in the DDS segment accounting for a significant portion of revenue - In Q1 and Q2 2025, the company released valuation allowances on deferred tax assets for its Canadian and German subsidiaries, respectively, due to expectations of future profitability[56](index=56&type=chunk)[57](index=57&type=chunk) - The DOJ and SEC have concluded their investigations related to the securities class action and do not intend to recommend enforcement actions against the company[65](index=65&type=chunk) Segment Revenue (in thousands) | Segment | Q2 2025 Revenue | Q2 2024 Revenue | YTD 2025 Revenue | YTD 2024 Revenue | | :--- | :--- | :--- | :--- | :--- | | DDS | $50,576 | $25,410 | $101,406 | $45,116 | | Synodex | $2,065 | $1,986 | $4,079 | $3,857 | | Agility | $5,752 | $5,157 | $11,252 | $10,084 | - A single customer in the DDS segment accounted for **58%** of total revenue in Q2 2025 and **59%** in H1 2025, also representing **60%** of accounts receivable as of June 30, 2025[92](index=92&type=chunk)[93](index=93&type=chunk)[94](index=94&type=chunk) - The company has a secured revolving line of credit for up to **$30.0 million**, with an available borrowing base of approximately **$25.2 million** as of June 30, 2025, and the facility was not used during the first six months of 2025[105](index=105&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=34&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the significant **97%** year-over-year revenue growth for the first six months of 2025 primarily to increased volume from a single large customer in the Digital Data Solutions (DDS) segment, which focuses on AI data services, driving gross margin up to **40%** from **32%** in the prior year period and strengthening liquidity [Business Overview](index=36&type=section&id=Business%20Overview) Innodata is a data engineering company focused on providing high-quality data for AI applications, with core offerings in AI Data Preparation, AI Model Deployment and Integration, and AI-Enabled Industry Platforms, operating through its DDS, Synodex, and Agility segments - The company's mission is to provide high-quality data engineering for AI, honed over 35+ years[114](index=114&type=chunk)[116](index=116&type=chunk) - Core offerings include AI Data Preparation, AI Model Deployment and Integration, and AI-Enabled Industry Platforms[119](index=119&type=chunk) - The company's three reporting segments are Digital Data Solutions (DDS), Synodex, and Agility[130](index=130&type=chunk) [Results of Operations](index=41&type=section&id=Results%20of%20Operations) For Q2 2025, revenue increased **79%** YoY to **$58.4 million**, driven by a **99%** increase in the DDS segment from a large existing customer, leading to gross profit growth to **$23.0 million** from **$9.3 million** and gross margin expansion from **29%** to **39%**, with six-month net income reaching **$15.0 million** and Non-GAAP Adjusted EBITDA surging to **$25.9 million** Revenue by Segment - Three Months Ended June 30 (in millions) | Segment | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | DDS | $50.5 | $25.4 | +99% | | Synodex | $2.1 | $2.0 | +5% | | Agility | $5.8 | $5.2 | +12% | | **Total** | **$58.4** | **$32.6** | **+79%** | - The primary driver for the DDS segment's revenue growth was higher volume from an existing customer, which accounted for **58%** of total company revenue in Q2 2025[147](index=147&type=chunk)[150](index=150&type=chunk) Gross Profit & Margin - Three Months Ended June 30 (in millions) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Gross Profit | $23.0 | $9.3 | | Gross Margin | 39% | 29% | Adjusted EBITDA Reconciliation - Six Months Ended June 30 (in thousands) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net income | $15,006 | $975 | | Adjustments (Taxes, Interest, D&A, etc.) | $10,943 | $5,594 | | **Adjusted EBITDA** | **$25,949** | **$6,569** | [Liquidity and Capital Resources](index=56&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity position improved significantly, with cash and cash equivalents reaching **$59.8 million** at June 30, 2025, up from **$46.9 million** at year-end 2024, and working capital increasing to **$65.6 million**, supported by **$15.1 million** in net cash from operating activities for the first six months of 2025 Key Liquidity Metrics (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $59,792 | $46,897 | | Working capital | $65,567 | $41,494 | - Net cash provided by operating activities was **$15.1 million** for the first six months of 2025, compared to **$6.3 million** for the same period in 2024[222](index=222&type=chunk)[223](index=223&type=chunk) - Anticipated capital expenditures for the next 12 months are approximately **$11.0 million**, primarily for software and technology upgrades[225](index=225&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=60&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is not applicable as the company is a smaller reporting company - Disclosure is not required for smaller reporting companies[231](index=231&type=chunk) [Controls and Procedures](index=60&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and interim CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of June 30, 2025, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective[233](index=233&type=chunk) - No material changes were made to internal control over financial reporting during the six months ended June 30, 2025[234](index=234&type=chunk) [Part II – Other Information](index=61&type=section&id=Part%20II%20%E2%80%93%20Other%20Information) [Legal Proceedings](index=61&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in a putative securities class action filed in February 2024, alleging false statements about its AI technology, but the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) have both closed their related investigations without recommending enforcement actions - A putative class action lawsuit was filed against the company in February 2024 regarding alleged false and misleading statements about its AI technology, and the company filed a motion to dismiss, which is pending[64](index=64&type=chunk) - On June 12, 2025, the DOJ notified the company it has closed its investigation, and the SEC has also notified the company that it has concluded its investigation and does not intend to recommend an enforcement action[65](index=65&type=chunk) [Risk Factors](index=61&type=section&id=Item%201A.%20Risk%20Factors) There are no new risk factors presented in this report, with the company referring to the Risk Factors section in its Annual Report on Form 10-K for the year ended December 31, 2024 - The report refers to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024[237](index=237&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=61&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no sales of unregistered equity securities or repurchases of its equity securities during the second quarter of 2025 - There were no sales of unregistered equity securities or repurchases of equity securities during the three months ended June 30, 2025[238](index=238&type=chunk) [Other Information](index=61&type=section&id=Item%205.%20Other%20Information) During the quarter ended June 30, 2025, no directors or officers of the company adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No directors or officers adopted or terminated a Rule 10b5-1 trading plan during the quarter[241](index=241&type=chunk) [Exhibits](index=62&type=section&id=Item%206.%20Exhibits) The report lists the exhibits filed, including CEO and CFO certifications pursuant to the Sarbanes-Oxley Act and XBRL data files - Exhibits filed include Sarbanes-Oxley Act certifications (31.1, 31.2, 32.1, 32.2) and XBRL financial data (101, 104)[243](index=243&type=chunk)

[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 Viewpoint - BigBear.ai and Innodata represent two distinct investment opportunities in the growing artificial intelligence market, with BigBear.ai focusing on AI modules for edge networks and Innodata specializing in data preparation for AI applications [1][2]. Company Overview - BigBear.ai's stock increased over 390% in the past year, driven by business stabilization and biometric security service rollout [2]. - Innodata's stock rose approximately 140% due to heightened demand for its AI-oriented services [2]. - BigBear.ai's main AI modules include Observe, Orient, and Dominate, which process data and predict outcomes [4]. - Innodata has transitioned from a small analytics provider to a significant player in AI data preparation since launching task-specific microservices in 2018 [6][7]. Financial Performance - BigBear.ai's revenue grew from $146 million in 2021 to $158 million in 2024, falling short of its initial projections [5]. - Innodata's revenue surged at a CAGR of 20% from 2018 to 2024, driven by demand from major tech companies [7]. - Projected revenue growth for BigBear.ai is expected to be 6.1% in 2025 and 12.1% in 2026, while Innodata's growth is projected at 41.5% in 2025, but will decelerate to 5.1% by 2027 [11]. Profitability and Valuation - BigBear.ai is not yet profitable but is expected to narrow its net losses through 2026 [12]. - Innodata became profitable in 2024, with expected net income growth at a CAGR of 16% through 2027 [12]. - BigBear.ai has a market cap of $2.1 billion, trading at 12 times this year's sales, while Innodata, valued at $1.6 billion, trades at less than 7 times this year's sales [13]. Investment Outlook - BigBear.ai's growth is anticipated to be driven by government contracts, including projects for the Department of Homeland Security and U.S. military [9]. - Innodata's growth is expected to be fueled by the expanding generative AI market, leading to increased spending from large tech customers [10]. - Despite BigBear.ai's potential in the government sector, Innodata is viewed as a better investment due to stronger growth, profitability, and lower valuation [15].

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]