CS Disco (NYSE:LAW) reported Q4 2025 revenue of $41.171 million, surpassing the consensus estimate of $39.984 million, and posted an adjusted earnings‑per‑share loss of $0.04 versus the analyst expectation of a $0.05 loss, a 20 % improvement over the prior‑quarter loss of $0.07. The beat was driven by a 14 % year‑over‑year increase in software revenue, which rose to $35.1 million, and by a reduction in one‑time legal charges that helped offset higher operating costs.
Adjusted EBITDA margin for the quarter was negative 5 %, an improvement from the negative 12 % margin reported in Q4 2024. The swing of 7 percentage points reflects a 77 % gross margin—up from 75 % the previous year—combined with cost efficiencies and a shift toward higher‑margin software revenue.
Software revenue accounted for $35.1 million of the total, up 14 % YoY, while services revenue was $6.0 million, down 3 % YoY. The software growth was largely driven by strong demand for the company’s Cecilia AI and Auto Review products, which saw year‑over‑year increases of 600 % and 30 % respectively.
Management guided for Q1 2026 revenue of $39.0 million to $41.5 million, with software revenue expected to be $33.75 million to $35.25 million and adjusted EBITDA projected between negative $6.0 million and negative $4.0 million. For fiscal 2026, the company forecast total revenue of $167 million to $177 million, software revenue of $145.5 million to $152.5 million, and adjusted EBITDA of negative $8.5 million to negative $4.5 million, indicating continued investment in growth while narrowing losses.
On the same day, CS Disco unveiled an all‑inclusive litigation platform that consolidates its e‑discovery, Cecilia AI, deposition management and timelines capabilities into a single, transparent pricing model. The platform is designed for large, multi‑terabyte matters and aims to streamline the entire litigation lifecycle for law firms and corporate legal departments, positioning the company to increase customer stickiness and enable premium pricing.
The market reacted sharply, with the company’s shares falling as much as 11 % in pre‑market trading. Investors focused on the continued negative adjusted EBITDA and the forward guidance, which still projects losses, despite the earnings beat and revenue growth.
CEO Eric Friedrichsen said, “DISCO continues to show what’s possible as an innovator in legal technology as our AI solutions were significant growth drivers in the fourth quarter and a key part of strong full‑year results for 2025.” He added, “We are continuing that disruptive trend in 2026 with the launch of the industry’s first scaled agentic AI solution for eDiscovery and a new AI‑inclusive platform that combines all of our Cecilia AI platform capabilities into a single, powerful offering for the largest and most complex matters in modern litigation.”
The results underscore CS Disco’s progress toward profitability: revenue grew 11 % YoY, software revenue accelerated 14 % YoY, and gross margin improved to 77 %. However, the company remains unprofitable on an adjusted EBITDA basis, and the market’s negative reaction highlights investor concern about the timeline to profitability. The launch of the new platform and the continued adoption of AI solutions represent tailwinds that could accelerate future growth, while the persistent losses and guidance for continued negative EBITDA signal headwinds that investors are monitoring closely.
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