Innodata Inc. reported fourth‑quarter and full‑year 2025 results that surpassed analyst expectations, with revenue rising to $72.4 million in Q4 and $251.7 million for the year, a 48% increase over the $170.5 million earned in 2024. Diluted earnings per share reached $0.25, beating the consensus estimate of $0.21 by $0.04, or 19%. The company’s adjusted gross margin expanded to 42% in Q4, above the 40% target and higher than the 40% margin reported in the prior year, reflecting effective cost control and a favorable mix of high‑margin data‑service contracts.
The revenue growth was driven primarily by the Digital Data Solutions (DDS) segment, which generated $220.8 million in 2025, up 22% from $173.5 million in 2024. The Agility segment added $23.5 million, while the Synodex segment contributed $7.3 million. Strong demand for large‑language‑model training data and new AI‑agent evaluation tools underpinned the DDS expansion, while the Agility segment’s focus on real‑time data pipelines helped capture additional market share. The company’s customer base diversified, reducing concentration risk even as the largest customer still accounted for 56% of Q3 revenue.
Margin expansion in Q4 was largely due to a shift toward higher‑margin DDS contracts and improved operational leverage as revenue scaled. The company maintained disciplined cost growth, keeping cost of goods sold in line with revenue growth, which allowed the adjusted gross margin to rise. The 42% margin also reflects successful pricing power in the AI data services market, where demand for high‑quality training data continues to outpace supply. The company’s cash reserves grew to $82.2 million, up from $46.9 million at the end of 2024, providing a strong balance‑sheet foundation for future investments.
Management guided for full‑year 2026 revenue growth of approximately 35% or more, a deceleration from the 48% growth seen in 2025. The guidance signals confidence in sustained demand for AI data services while acknowledging that scaling the business will moderate the growth rate. The company also projected early‑2026 adjusted gross margins in the 35–40% range, anticipating normalization toward 40%+ as new programs mature. These outlooks suggest a focus on maintaining profitability while investing in product innovation and customer expansion.
Investors reacted to the guidance by tempering enthusiasm, as the projected 2026 growth rate is lower than the 2025 pace. The market’s focus on the deceleration, rather than the earnings beat, highlights the importance of growth trajectory in valuation considerations. Despite the positive earnings and margin performance, the guidance signals a more cautious outlook that may influence investor sentiment.
Management emphasized the company’s momentum and strategic priorities. CEO Jack Abuhoff noted that 2025 was a “defining year” for Innodata, citing the $72.4 million Q4 revenue and $251.7 million full‑year revenue as evidence of “extraordinary momentum.” CFO Marissa Espineli highlighted a 22% year‑over‑year revenue increase in Q4 and a 42% adjusted gross margin, underscoring disciplined cost management and a strong mix of high‑margin contracts.
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