Innodata Stock Soars 66% in a Month: Still Worth Buying or Risk?

The rally in artificial intelligence (“AI”) stocks has produced some dramatic winners in 2025, and Innodata Inc. INOD has quickly emerged as one of the most eye-catching names. Best known for its expertise in “smart data” that powers generative and agentic AI models, Innodata has surged 66.5% over the past month, vastly outperforming its peers and the broader market. Such a sharp move raises an obvious question: with the stock now trading close to its 52-week high, is there still room to buy, or does caution make more sense at these levels?

To answer this, investors need to look beyond the momentum and evaluate the company’s recent financial results, its expanding position in the AI ecosystem and the structural risks that could challenge the sustainability of its rally.

Share Price Momentum and Technical Strength

Innodata’s stock has sprinted past market benchmarks, beating the 2.9% gain in the Zacks Computer - Services industry, the 6.2% growth of the Zacks Computer and Technology sector, and the 3.6% rise in the S&P 500 during the same period. At $65.89, shares sit just 7.2% below their 52-week high of $71.00 and stand more than 400% above their 52-week low of $13.02.

INOD Stock’s 1-Month Performance

The breakout is reinforced by technicals. The stock trades comfortably above its 50-day simple moving average of $46.42 and its 200-day SMA of $42.88, signaling strong institutional support. However, the steep pace of gains suggests that short-term pullbacks cannot be ruled out.

INOD’s Solid Q2 Results Drive Sentiment

The recent rally was fueled by an exceptional second-quarter performance. Revenues climbed 79% year over year to $58.4 million, EPS of 20 cents crushed the consensus mark by 81.8% and adjusted EBITDA surged to $13.2 million, or 23% of sales, compared with 9% a year ago. Net income swung to $7.2 million, reversing a small loss.

On the back of this momentum, management raised full-year organic revenue growth guidance to at least 45%, up from 40%. This “beat-and-raise” quarter reinforced investor confidence in the company’s ability to scale within the booming AI sector.

Innodata’s Expanding Ties With Big Tech

A crucial growth engine for Innodata lies in its relationships with major technology players. The company’s largest client contributed $33.9 million in the second quarter, representing more than half of total revenues. Another tech customer is expected to deliver $10 million in the second half of 2025, a massive jump from just $200,000 in the previous year.

These trends highlight Innodata’s deepening role as a trusted partner in generative AI. Management also views Agentic AI—autonomous systems and robotics requiring complex datasets—as the next major growth frontier. CEO Jack Abuhoff has described this as a potential “ChatGPT moment for robotics,” underscoring the longer-term opportunity.

Balance Sheet Strength Supports Investments

Innodata’s financial flexibility underpins its ability to capitalize on these opportunities. The company ended the second quarter with $59.8 million in cash and an undrawn $30 million credit facility. It invested about $1.4 million in the quarter toward new products, go-to-market initiatives, and talent expansion, while still projecting stronger adjusted EBITDA for 2025 compared with 2024. This balance between reinvestment and profitability positions the company for sustainable growth.

Innodata’s EPS Estimates and Profitability Pressures

The 2025 EPS estimates have ticked up to 83 cents from 80 cents over the past two months. However, the figure still represents a 6.7% year-over-year decline. Yet, earnings are expected to grow 38% in 2026.

By contrast, revenues are projected to rise nearly 43% in 2025 and 24% in 2026. This divergence signals that heavy investment in expansion—while necessary for long-term positioning—may weigh on near-term profitability, leaving earnings leverage muted.

INOD Stock’s Premium Valuation Versus Industry Peers

Innodata trades at a forward 12-month P/E ratio of 62.79x, compared to just 16.54x for the industry average. While growth potential warrants a premium, the multiple looks stretched—especially since 2025 EPS is projected to decline 6.7% even as revenues climb 42.8%.

INOD’s P/E Ratio (Forward 12-Month) vs. Industry

Innodata’s Challenges and Risks

Despite strong growth, Innodata’s reliance on project-based contracts and a concentrated customer base creates volatility. With one client alone representing more than half of the revenue in the second quarter, any budget cuts or vendor shifts could materially impact results.

The generative AI data services market is crowded. C3.ai AI continues to push enterprise AI platforms that overlap with Innodata’s offerings, while Palantir Technologies PLTR leverages deep government and commercial ties to capture large-scale AI budgets. BigBear.ai BBAI, though smaller, is quickly scaling in defense and logistics AI. Together, C3.ai, Palantir and BigBear.ai present formidable competition.

These three rivals—C3.ai, Palantir and BigBear.ai —also benefit from brand strength and broader service portfolios, which may pressure Innodata on both pricing and growth. The challenge for Innodata is to differentiate through data quality and execution in a market where scale often wins.

Meanwhile, aggressive spending on innovation and capacity could weigh on margins if revenue conversion lags, reducing near-term profitability. Also, Innodata’s global delivery model exposes it to risks tied to conflicts such as Russia-Ukraine and India-Pakistan, as well as U.S. monetary policy shifts that affect technology budgets.

What to do With the INOD Stock?

Innodata’s remarkable 66.5% surge in just one month underscores investor enthusiasm for its role in powering generative and agentic AI. The company’s strong second-quarter results, rising customer engagements and healthy balance sheet provide a compelling growth story. However, risks tied to customer concentration, competitive pressures, and stretched valuation temper the outlook.

With a Zacks Rank #3 (Hold), Innodata appears best suited for investors to hold rather than chase at current levels. The long-term AI opportunity remains significant, but near-term caution is warranted given the premium valuation and reliance on a handful of key customers. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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