Innodata Before Q4 Earnings: Should You Buy, Sell or Hold the Stock?

Innodata Inc. INOD is slated to release fourth-quarter 2025 results on Feb. 26, after the closing bell.

Innodata delivered a record third-quarter 2025, reflecting strong demand for generative AI data engineering services. Its adjusted earnings per share (EPS) of 24 cents topped the Zacks Consensus Estimate by 71.4%. In the year-ago quarter, it reported an adjusted EPS of 51 cents. Revenues of $62.6 million also topped the consensus mark by 4.6% and grew 19.8% year over year. Adjusted EBITDA increased to $16.2 million from $13.9 million a year ago, demonstrating operating leverage. The company reiterated guidance for 45% or more year-over-year organic revenue growth in 2025. 

INOD’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 55.9%, as shown in the chart below.

How Are Estimates Placed for Innodata Stock?

The Zacks Consensus Estimate for the fourth-quarter EPS has remained unchanged at 21 cents over the past 30 days. The estimated figure indicates a 32.3% decline from the year-ago reported EPS of 31 cents. The consensus mark for revenues is pegged at $69.5 million, suggesting 17.4% year-over-year growth.

For 2026, Innodata is expected to register a 25.9% increase from a year ago in revenues. Its EPS is expected to witness 27.8% growth from the year ago. Below is what to expect in the fourth quarter of 2025 and 2026 for INOD stock.

Key Factors Likely to Influence Innodata’s Q4 2025 Results

Topline Drivers: Big Tech & Federal Push

Fourth-quarter revenues are likely to have been supported by continued expansion with large technology customers building and refining foundation models. Management has highlighted meaningful deal momentum, including signed and anticipated contracts tied to high-quality pre-training data that could collectively represent approximately $68 million of potential revenue across multiple customers. While much of this opportunity is expected to scale through 2026, ramping activity in late 2025 may have contributed incrementally in the December quarter.

The launch of Innodata Federal and engagement with a new high-profile customer, with an initial project anticipated to generate roughly $25 million of revenue mostly in 2026, may also have driven early mobilization revenues in the fourth quarter. In addition, growing traction in enterprise AI, sovereign AI discussions and agentic AI evaluation work is likely to have provided diversified sources of demand as enterprises increasingly integrate generative AI into workflows.

However, the project-based nature of the Digital Data Solutions segment and customer concentration remain structural risks. Any year-end budget timing shifts or program ramp variability could have introduced quarterly volatility. Ongoing geopolitical uncertainties and macro factors cited in company risk disclosures may also have influenced client spending decisions.

Factors Influencing Margins and Bottom Line

On the profitability front, scale benefits from expanding big tech engagements and higher-value pre-training and evaluation services are likely to have supported gross margin dynamics. Management has emphasized positioning the company at the center of the AI buildout, with continued transformative growth expected.

At the same time, Innodata has been investing in new capabilities, including federal expansion, sovereign AI initiatives and advanced model safety offerings. These investments, alongside capability-building expenses and hiring to support anticipated growth, could have pressured selling and administrative costs in the near term. The company has also acknowledged risks tied to customer project variability and potential market downturns, which may affect operating leverage in any single quarter.

What the Zacks Model Unveils for INOD Stock

Our proven model does not conclusively predict an earnings beat for INOD for the quarter to be reported. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) for this to happen. This is not the case here, as you will see below.

Earnings ESP: INOD has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #3. 

You can see the complete list of today’s Zacks #1 Rank stocks here.

Price Performance & Valuation of INOD Stock

INOD stock has gained 18.5% over the past six months, underperforming the Zacks Engineering - R and D Services industry but performing better than the industry peers. Over the same period, INOD has meaningfully outpaced Cognizant Technology Solutions CTSH, which declined 9.9%, Infosys INFY, which fell 15.5%, and ExlService EXLS, which tumbled 31.4%.

While Cognizant Technology Solutions and Infosys have grappled with slower discretionary spending trends, and ExlService has faced sharper investor pullback, INOD has demonstrated relatively stronger price resilience. Compared with Cognizant Technology Solutions, Infosys and ExlService, INOD’s performance highlights a divergence in investor sentiment within the engineering and digital services space.

Price Performance

In terms of the forward 12-month price/earnings (P/E), INOD stock is currently trading at a premium to its industry.

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

Why INOD Stock Is a Hold for Now?

Innodata heads into its fourth-quarter 2025 earnings release with solid operating momentum but limited near-term catalysts to justify aggressive positioning. The company delivered a record third quarter, continued to win big-tech and federal AI data engineering work and reiterated strong organic growth expectations. However, fourth-quarter EPS is projected to decline year over year, estimate revisions have remained unchanged, and the Earnings ESP stands at 0.00%, offering no clear signal of another beat. While revenue growth remains healthy and 2026 prospects look constructive, the stock trades at a premium forward P/E and has already rallied meaningfully in recent months. Balanced growth visibility and valuation risk support a hold stance for now.

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

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