Innodata Inc. (INOD): A Bull Case Theory

We came across a bullish thesis on Innodata Inc. on Capital Curiosity’s Substack by Taylor Nichols. In this article, we will summarize the bulls’ thesis on INOD. Innodata Inc.'s share was trading at $82.98 as of October 15th. INOD’s trailing and forward P/E were 67.76 and 74.63  respectively according to Yahoo Finance.

Innodata (NASDAQ: INOD) is a 35-year-old data engineering company that has unexpectedly positioned itself at the heart of the generative AI boom, delivering a 380% share price gain over the past year. Unlike speculative AI startups, Innodata generates 86.5% of its revenue from its Digital Data Solutions segment, providing mission-critical services such as data collection, annotation, structuring, and AI model testing for major tech companies including Google, Microsoft, Meta, and Amazon. Its credentialed workforce of 3,000–5,000 experts across healthcare, law, finance, and sciences enables high-quality outputs that cheaper, crowdsourced competitors cannot match, giving the company a premium pricing advantage and long-term sticky contracts.

Innodata benefits from early technical foresight, having implemented Human-in-the-Loop workflows since 2016 and internal LLMs for PDF extraction in 2019. Its global scale across 20+ delivery centers, 85+ languages, and proprietary platforms for annotation and document intelligence create a structural moat that positions it well for the expanding AI training data market, projected to grow from $1.64B in 2023 to $14.42B by 2033.

Q2 2025 results highlight 79% YoY revenue growth, 18% EBITDA margins, net income of $7.2M, and a strong cash position of $59.8M, though one client accounts for 58–59% of revenue, underscoring a significant concentration risk. Management is actively diversifying its client base, adding new engagements and expanding its AI service offerings into agentic AI, robotics, and simulation data.

Despite near-term execution risks, high valuation, potential dilution, and ongoing legal exposure, Innodata’s combination of profitability, proprietary capabilities, and mission-critical role in AI infrastructure makes it a compelling small-cap play with optional upside, including potential M&A interest, if it continues executing on diversification and capturing a meaningful share of the growing AI data market.

Previously we covered a bullish thesis on Euronet Worldwide, Inc. (EEFT) by P14 Capital in May 2025, which highlighted its evolution from an ATM operator to a global fintech provider with resilient remittance flows, EFT margin expansion, and high-margin growth from the Ren software platform. The stock has depreciated approximately 17.81% since our coverage. The thesis still stands. Taylor Nichols shares a similar perspective but emphasizes Innodata’s AI infrastructure, data annotation services, and proprietary platforms.

Innodata Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 16 hedge fund portfolios held INOD at the end of the second quarter which was 18 in the previous quarter. While we acknowledge the potential of INOD as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.