FORRESTER RESEARCH, INC. Q3 FY2026 earnings call

• Contract Value (CV) declined 3.5% year-over-year, with retention at 89% and client retention returning to Q1 levels (78%).
• Launched 'Team Solutions' for collaborative transformation and 'AI Access Plus,' which expands AI research access with quarterly analyst inquiry sessions.
• Forrester AI engagement surged: prompts up 142% YoY and users up 65% YoY.
• Expanded 'Where You Work' strategy to include Anthropic Claude via a limited early adopter program, alongside existing Microsoft Teams/Copilot integrations.
• Released 'Forrester AI Disruption Model' analyzing 205 technology markets, predicting disruption to labor-intensive knowledge work but reshaping rather than replacing enterprise software.
• Advised clients against 'AI doomsday' narratives propagated by frontier model providers, emphasizing disciplined risk management and legal liability for model creators.
• Operating expenses decreased 6% due to lower compensation costs and reduced real estate footprint; headcount down 10% following restructuring.
• Accelerated stock buyback program, repurchasing ~$10 million in shares.

Total revenue decreased 9% year-over-year to $86.1 million (from $94.3 million). Research revenue was $70.1 million, down 3% year-over-year, representing approximately 81.4% of total revenue. Consulting revenue was $14.7 million, down 31% year-over-year, driven by the exit from strategy consulting and weakness in content marketing. Events revenue was $1.2 million; year-over-year comparison is not meaningful due to prior year Q4 events.

• Full-year 2026 Revenue: Expected to be $350-$360 million, representing a 9%-12% decline versus 2025.
• Full-year 2026 EPS: Raised low-end guidance to $0.77, resulting in a new range of $0.77-$0.82 per share (original range was $0.72-$0.82).
• Full-year 2026 CV Outlook: Centered around flat performance, with a spread from a 2% decline to 2% growth, reflecting uncertainty in U.S. federal government funding timing.
• Component Trends: Research expected mid-single-digit decline; Consulting expected low-20s decline; Events expected mid-to-high teens decline.

• U.S. Federal Government Funding Uncertainty: Delayed deal closures and timing issues have impacted near-term contract value outlook.
• Consulting Business Decline: Significant revenue drop due to the strategic exit from strategy consulting and weakness in content marketing.
• Market Competition and Narrative Risk: Frontier AI labs may propagate regulatory or 'doomsday' narratives to protect competitive edges during IPOs, potentially influencing client perception.
• Execution Risk on New Products: Success of AI Access Plus and Team Solutions depends on effective upsell and adoption rates within the existing client base.

Q: Analyst asked about confidence in returning to positive CV growth and trends in renewals/new business given the mixed sales environment.

A: CFO cited three factors for cautious CV guidance (-2% to +2%): delayed U.S. federal deals due to funding timing, complex enterprise deals taking longer to close, and variability from launching two new products in a quarter where 40% of bookings occur. However, management expressed confidence in sustained CV growth entering 2027, citing stabilization, improved retention (+4 pts YoY), and go-to-market improvements driving the cut in CV decline from -6% in 2025.

Q: Analyst questioned AI's impact on core research/advisory business and the margin profile of new AI offerings compared to traditional products.

A: CEO stated AI is a massive opportunity, enabling faster delivery of insights and creating demand for advisory as clients redeploy systems around generative AI. CFO noted that self-service AI Access has materially higher margins than traditional high-tier products like Forrester Decisions. While AI Access Plus includes some analyst support increasing costs slightly, it still offers significantly higher margins than legacy products, supporting overall margin expansion.

Q: Analyst asked about sales staff declines, future hiring plans, and whether new price points would lead to more product breadth.

A: CSO explained sales headcount focus is on productivity and performance management amid mixed environments (strength in NA High Tech/APAC vs. challenges in US Federal). CPO highlighted that current portfolio (Team Solutions, AI Access Plus) fills major client-requested gaps. CEO added that the market has shifted toward serving small AI startups, prompting a change in vendor targeting strategy to include smaller tech vendors under $50M.

Q: Analyst inquired about the quality and composition of the contract value pipeline.

A: CSO reported pipeline consistency with recent quarters but emphasized a shift in focus from total volume to quality, late-stage conversion, and deal velocity. He noted a new sales leadership system aims to increase rigor in converting opportunities and driving retention, supported by leading indicators like increased wallet share (+3 pts) and retention.