Executive Summary

Q1 2025 delivered strong top-line growth and profitability: revenue $58.3M (+120% YoY) and adjusted EBITDA $12.7M (22% margin), with diluted EPS $0.22; management said results came in ahead of analyst revenue estimates and reaffirmed “40%+” FY2025 growth guidance .
Commercial momentum broadened: a second Master SOW was signed with the largest customer to access a materially larger budget category; multiple Big Tech expansions and new onboarding across enterprise tech, cloud software, e-commerce, and healthcare are underway .
Trust & Safety and agentic AI are emerging growth pillars: ~$4.5M potential ARR from expanded trust/safety engagements, an early-access evaluation platform (with continuous attack agent) targeting GA in late Q2, and a ~200-agent build program under discussion .
Near-term watch items: management flagged normal quarter-to-quarter volatility tied to customer concentration (Q1 ~5% above Q4 run-rate; Q2 could be ~5% below) and a ~$2M investment in Q2 ahead of revenue that will temporarily pressure margins; tax rate expected ~29% going forward .

What Went Well and What Went Wrong

What Went Well
- Broad-based pipeline traction: “being onboarded by potential major new customers” across multiple verticals; CEO emphasized “momentum… has never been stronger” .
- Largest customer expansion: signed a second Master SOW unlocking a separate, materially larger budget category; management expects this to support continued growth at the account .
- Trust & Safety and platform progress: expanded trust/safety engagements (~$4.5M potential ARR) and launched an enterprise-grade test/evaluation platform with early access and late Q2 target for GA .
What Went Wrong
- Sequential moderation and volatility risk: despite YoY strength, sequential revenue was roughly flat (Q4’24 $59.2M vs Q1’25 $58.3M), and management cautioned Q2 could be ~5% below largest-customer run-rate due to dynamic demand .
- Near-term margin headwind: ~$2M planned Q2 investment (ahead of revenue) to support new SOW and programs with largest customer will temporarily impact margins .
- Continued concentration: management is “embracing customer concentration” in the near term, which can elevate quarterly volatility until broader diversification further matures .

Financial Results

Consolidated results vs prior quarters

Metric	Q3 2024	Q4 2024	Q1 2025
Revenue ($M)	$52.2	$59.2	$58.3
Diluted EPS ($)	$0.51	$0.31	$0.22
Adjusted EBITDA ($M)	$13.9	$14.1	$12.7
Adjusted Gross Margin (%)	44%	48%	43%

Notes: Q1 2025 adjusted EBITDA margin ~22% (management) .

YoY and QoQ change (selected metrics)

Metric	Q1 2024	Q1 2025	YoY	Q4 2024 → Q1 2025 QoQ
Revenue ($M)	$26.5	$58.3	+120%	-1.5% (derived from cited values)
Diluted EPS ($)	$0.03	$0.22	+$0.19	-$0.09 (derived from cited values)
Adjusted EBITDA ($M)	$3.8	$12.7	+$8.9	-$1.4 (derived from cited values)

Segment revenue

Segment Revenue ($M)	Q3 2024	Q4 2024	Q1 2025
DDS	$44.7	$51.3	$50.8
Synodex	$1.9	$2.1	$2.0
Agility	$5.6	$5.8	$5.5
Total	$52.2	$59.2	$58.3

KPIs (Q1 2025)

KPI	Q1 2025
Cash & equivalents ($M)	$56.6
Cash from operations ($M)	$10.9
Capex ($M)	$2.35
Net income ($M)	$7.8

Non-GAAP note: Company provides reconciliations; Adjusted EBITDA excludes interest, taxes, D&A, stock comp, non-controlling interests, severance/one-time costs .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue growth (YoY)	FY 2025	“40% or more” (Q4 release)	“Reiterates 40% or more” (Q1)	Maintained
Adjusted EBITDA	FY 2025	Exceed 2024 Adjusted EBITDA (Q4 call)	“We believe we can make these investments and still guide to growing our Adjusted EBITDA in 2025 over 2024” (Q1)	Maintained
Effective tax rate	FY 2025	~28%–31.5% (Q4 call)	~29% going forward (Q1 call)	Narrowed
Near-term margin outlook	Q2 2025	N/A	~$2M investment ahead of revenue; temporary margin impact (Q1 call)	New item

Earnings Call Themes & Trends

Topic	Q-2 (Q3 2024)	Q-1 (Q4 2024)	Current (Q1 2025)	Trend
Big Tech/AI training data	“Record 136% YoY” and building roster incl. 5 of Magnificent Seven; raised FY24 growth guidance	Pretraining data: $3M project; largest-customer run-rate ~$135M; other Big Tech +159% seq.	Expanding expert domains & languages; onboarding multiple significant customers	Accelerating scope and customer breadth
Agentic AI	—	Discussed orchestrating agentic ecosystems for enterprises	~200 agents program under discussion; agentic AI as cornerstone tech	From concept to concrete programs
Trust & Safety	—	2 engagements ~$3.6M ARR; platform design with beta in Q2	Expanded T&S ~$4.5M ARR; multi-language eval; platform early access, continuous attack agent, GA late Q2	Rapid expansion and productization
Customer concentration	—	Largest-customer run-rate ~$135M	“Embrace customer concentration”; Q1 ~5% above run-rate, Q2 could be ~5% below	Managing volatility while diversifying
Macro/capex context	—	M7 capex escalation across MSFT/GOOGL/META/AMZN	Company believes short-term cycles/trade policies have limited impact; positioned to benefit from M7 AI capex	Supportive backdrop

Management Commentary

“We’re being onboarded by potential major new customers, expanding existing relationships, and building a pipeline that’s deeper and more advanced than at any point in our history.” – CEO, Jack Abuhoff .
“The momentum in our business has never been stronger… to build Innodata into one of the leading AI solutions companies of our era.” – CEO .
“Our Q1 2025 revenue was $58.3 million… adjusted EBITDA… 22% of revenue… We’re pleased with our financial results… ahead of analyst revenue estimates.” – CEO .
“We intend to embrace customer concentration as a natural part of our evolution… [with] quarter-to-quarter volatility.” – CEO .
“In Q2, we plan to invest approximately $2 million to support a new Statement of Work… ahead of the associated revenue… expected to temporarily impact margins.” – Interim CFO .
“We have won expanded [trust and safety] engagements… potential value of approximately $4.5 million of… annual recurring revenue… [and] introduced our generative AI test and evaluation platform… early access… GA targeted for late Q2.” – CEO .

Q&A Highlights

Largest customer SOW: New SOW opens an additional budget category believed to be “significantly higher” than prior scope; separate from the noted ~5% sequential run-rate dynamics .
Win-rate/land-and-expand: Strategy is to enter with small requirements, build trust, and expand; management believes a very large percentage of pilots that proceed convert .
Concentration and volatility: Management is intentionally embracing customer concentration while broadening the base; Q1 ~5% above Q4 run-rate, Q2 could be ~5% below, reflecting dynamic demand .
Investment/tax outlook: ~$2M Q2 investment ahead of revenue will temporarily impact margins; effective tax rate expected ~29% going forward absent changes .
Trust & Safety as recurring revenue: Expanding multi-language evaluations and platform-led continuous monitoring seen as recurring enterprise opportunities .

Estimates Context

Results vs S&P Global consensus

Metric	Q3 2024	Q4 2024	Q1 2025
Revenue – Actual ($M)	$52.2	$59.2	$58.3
Revenue – Consensus Mean ($M)	$36.1*	$53.0*	$57.6*
Diluted EPS – Actual ($)	$0.51	$0.31	$0.22
Primary EPS Consensus Mean ($)	$0.128*	$0.214*	$0.167*
# of EPS Estimates	3*	4*	4*
# of Revenue Estimates	3*	4*	4*

Notes: All consensus values marked with * are Values retrieved from S&P Global. Management also stated Q1 revenue was ahead of analyst revenue estimates .

Q3 2024: Revenue and EPS both beat consensus materially.
Q4 2024: Revenue and EPS both beat consensus.
Q1 2025: Revenue and EPS both beat consensus (modestly).

Key Takeaways for Investors

Q1 2025 was a clean beat on revenue and EPS versus consensus, with robust YoY growth and sustained profitability; sequential moderation reflects normal program timing and concentration, not weakening demand .
The second Master SOW at the largest customer (distinct, larger budget) plus expanding Big Tech and enterprise onboarding are set-ups for continued growth beyond the near-term Q2 investment headwind .
Trust & Safety and agentic AI are catalyzing higher-quality, potentially recurring revenue streams; the early-access evaluation platform (continuous attack agent) targeting GA in late Q2 is a tangible product lever .
Guidance discipline remains conservative (“40%+” FY25), with a plan to update as new wins land—similar to FY24 cadence; investors should watch for guidance revisions and large-program announcements .
Concentration strategy is intentional; expect quarterly volatility but improving diversification through multiple Big Tech and enterprise accounts as programs mature .
Near-term trading setup: potential Q2 margin pressure from ~$2M investment could create transitory noise; medium-term thesis hinges on execution in Trust & Safety/platform, agentic AI deployments, and continued land-and-expand across Big Tech .

INNODATA INC (INOD)·Q1 2025 Earnings Summary