Forrester Research, Inc. (FORR) Earnings

Management highlights

### Overall Financial Performance - Q2 2026 performance met management expectations, with consensus beats on total revenue, operating margin, and EPS. Continued market uncertainty drove declines in legacy consulting and events businesses, alongside the planned exit of strategy consulting. - Core metrics stabilized: 3% CV decline matching Q1 2026, flat wallet retention, 1% dip in client retention, and net growth in total client count. ### AI Research and Product Development - Forrester produced hundreds of new AI-focused research assets in Q2, including role-specific reports on AI's impact on CIOs, CMOs, and Chief Information Security Officers, and an industry analysis of AI adoption at U.S. marketing agencies. Management emphasized the firm's independent, research-based, iconoclastic analysis to support clients making large AI investment decisions. - The Forrester AI product was integrated with Microsoft Copilot in Q2, following prior integration with Microsoft Teams, making Forrester research accessible directly in clients' daily workflows. Forrester plans future integrations with Gemini, Claude, Slack, and other platforms. - Forrester AI adoption grew strongly in Q2: total users increased 33% quarter-over-quarter and 69% year-over-year; total user prompts grew 58% quarter-over-quarter and 105% year-over-year. Forrester AI surpassed indexed search to become the most used interaction method for Forrester Decisions clients. By the end of Q2, hundreds of client accounts had activated Forrester AI access via Teams and Copilot. ### Events - B2B Summit North America 2026 saw a 9% year-over-year increase in attendance to 1,400 attendees, with 59 sponsors and 110 sessions. The event focused on the "go-to-market singularity" shift driven by AI, which is eroding traditional B2B marketing practices and shifting power to buyers. Management estimated the summit influenced approximately $3.5 million in contract value bookings. - Press for Experience CX forums were held in New York, San Francisco, and Amsterdam in Q2, with New York and Amsterdam events selling out. The forums launched an updated Total Experience (TX) Score that added employee experience to the existing customer and brand experience framework, ranking 375 global brands across 10 vertical markets. ### Sales and Operational Restructuring - The exit of the strategy consulting business is on track to be completed by the end of 2026, allowing the sales organization to refocus fully on expanding core CV offerings. - Headcount decreased 7% year-over-year from earlier restructuring, with a small recent increase in quota-carrying sales headcount to support CV growth. The North American sales organization was reorganized around 6 vertical industries, and a new balanced scorecard accountability framework was implemented to improve pipeline health and sales productivity. - The stock buyback program was restarted in late Q2 2026, with $1 million in shares repurchased during the quarter. Over $76 million of authorized repurchase capacity remains available, and management plans to accelerate repurchases in the second half of 2026. ### Balance Sheet - The company maintains a strong balance sheet with over $130 million in cash and $35 million in total debt at the end of Q2. Free cash flow (excluding net spending on the Cambridge headquarters build-out) was $20.7 million in the first half of 2026. Remaining construction spending of approximately $11 million will be more than offset by $14.5 million in expected landlord reimbursements in the second half of 2026.

Guidance

Management maintains full-year 2026 guidance unchanged, with no upward or downward revisions from prior outlooks: - Full-year 2026 total revenue is guided to a range of $350 million to $360 million, representing a 9% to 12% decline from 2025. This assumes a mid-single-digit decline for research revenue, a low-20s decline for consulting revenue, and a mid-to-high teens decline for events revenue. - Full-year operating margin is guided to a range of 6% to 6.5%. - Full-year interest expense is expected to be $2.3 million, with a full-year effective tax rate of 29%. - Full-year diluted EPS is guided to a range of $0.72 to $0.82. - Management reaffirmed its target to achieve positive CV growth by the end of 2026, and expects CV decline momentum to improve in the second half of the year driven by Forrester AI adoption, product innovation, and retention improvement initiatives.

Segment performance

Total company revenue for Q2 2026 was $100.2 million, a 10% decrease from $111.7 million in Q2 2025. 1. Research: Total research revenue decreased 8% year-over-year, with research product revenue down 7% and reprint revenue down 12%. Research accounted for approximately 71.5% of total Q2 2026 revenue. Core CV (Contract Value) revenue declined 3% year-over-year, matching Q1 2026 performance and meeting management expectations. Client count increased by 10 clients to 1,770, while overall client retention was 77% (down 1 point quarter-over-quarter, up 3 points year-over-year) and retained revenue retention was 89% (flat quarter-over-quarter, up 4 points year-over-year). The AI access product has generated $10 million in cumulative bookings since its launch 9 months prior. 2. Consulting: Total consulting revenue was $20 million, a 15% year-over-year decline. The majority of this decline stems from the exit of the strategy consulting business, which Forrester stopped actively selling earlier in 2026. Within consulting, content marketing revenue was down 13% year-over-year, while advisory revenue grew 21% year-over-year. Consulting accounts for approximately 20% of total Q2 2026 revenue. 3. Events: Total events revenue was $8.5 million, a 17% year-over-year decline. The decline reflects a strategic shift to shorter, more intimate event formats, which impacted sponsorship and ticket revenue. Events account for approximately 8.5% of total Q2 2026 revenue.

Risks & headwinds

• Ongoing macroeconomic market uncertainty continues to pressure demand for legacy consulting and events services • The North American federal government segment has been a recent area of performance challenge, with recovery dependent on expected renewed client activity in Q3 2026 • Upsell performance remained slightly below expectations in Q2 2026, and has not improved from prior period levels • Agentic AI adoption by large enterprises introduces new operational and risk management complexities that clients require guidance to navigate, creating uncertainty around enterprise technology deployment timelines • Forward-looking statements are inherently subject to risks and uncertainties that could cause actual results to differ materially from guidance, as detailed in Forrester's SEC filings

Analyst Q&A

• Q: What visibility supports management's expectation that Forrester will achieve positive CV growth by the end of 2026? How is the sales force expansion progressing?

  A: Management notes that retention metrics have improved meaningfully in 2026, with continued focus on retention and product innovation driving further expected improvements in the second half. CV bookings grew year-over-year in Q2, with double-digit growth in tech research and positive net CV growth in EMEA and APAC. While North American government has been a weak segment, management expects a Q3 turning point driven by a strong pipeline of AI access and executive portfolio opportunities, as federal agencies resume normal activity after a period of budget uncertainty. Sales headcount saw a small increase in Q2, and management will prioritize improving existing sales force productivity before deciding on additional growth hiring after Q3.

• Q: What sales process changes are driving pipeline growth, and which verticals are seeing improving performance?

  A: Two key changes are driving impact: first, reorganization of the North American sales force around six vertical industries to better align with client demand, and second, implementation of a balanced scorecard framework to increase accountability for pipeline health and quality. The go-to-market strategy also leverages new embedded AI products that meet customer demand for access to Forrester expertise directly within their daily work tools. Technology showed clear uptick in Q2, with growth expected to continue into Q3, and industrial and manufacturing also show improving trends as B2B firms in these sectors seek support for AI and go-to-market transformation.

• Q: Is Forrester ahead of competitors in embedding research into customer workflows?

  A: Forrester is the first research firm in its peer set to integrate with Microsoft Teams and launch an AI agent for Microsoft Copilot, putting it ahead of competitors in embedded workflow access. Management confirms this positioning aligns with customer expectations, and the firm will continue leading in embedded product development moving forward.