INOD · Innodata
Conviction · Low · more likely to lag the S&P 500 over the next three months
Wrong if: a daily close above $45.42
Note written ·
Price against the kill line
21.9% clear of its kill line on the 13 November 2026 close.
How to read this
This note expects the shares to lag the market, so its kill line sits above the price: a close above the red mark would prove the view wrong. Prices run from low on the left to high on the right. The dot is where the stock closed on 13 November 2026, left of the mark while it is below the line; a dot right of the mark has closed through it.
The scale is stretched near the line, so close calls are easy to see. More than 8% from the line, the stock reads well clear, with a hollow dot to show the figure is off the drawn scale.
The kill line is the research note's own test. The portfolio sells on business facts, not on a price. How the portfolio decides
Three months against the kill line
Daily closes, to . Red: the kill line, a daily close above $45.42, on record since 11 November 2026. The shares are down 44.9% since the close; the S&P 500 is down 2.1% over the same sessions. Figures in the note can cover a different window.
Kill line
A daily close above $45.42, the level where the shares would be regaining ground lost after the 5 November report and leading the S&P 500. A fourth-quarter report with 2026 growth well above the 42% guidance floor and adjusted gross margin back near 49% would also show the shares leading.
Research onlyNot in the portfolio.
Key figures from the filings · Technology
Quarter to 30 September 2026, filed 5 November 2026; valuation at the 13 November 2026 close
- Revenue, latest quarter ($M)
- 95.6
- Revenue, change on a year (%)
- +52.9
- Gross margin (%)
- 38.3
- Operating margin (%)
- 10.4
- Price to earnings (×)
- 25.2
All filed numbers
What Innodata reports to the SEC in its quarterly and annual filings. Each group states its period and filing date once; a figure dated otherwise says so. Built from the filings known on .
| Quarter to | Revenue ($M) | On a year (%) | Gross margin (%) | Operating margin (%) |
|---|---|---|---|---|
| first filed | 95.6 | +52.9 | — | 10.4 |
| first filed | 92.1 | +57.8 | — | 19.1 |
| first filed | 90.1 | +54.4 | — | 19.2 |
| first filed | 72.4 | +22.3 | 38.3 | 15.1 |
| first filed | 62.5 | +19.8 | 40.8 | 18.8 |
| first filed | 58.4 | +79.4 | 39.4 | 15.3 |
| Pre-tax income ($M) | 10.0 |
| Net income ($M) four quarters: 48.5 | 10.3 |
| Diluted shares, change on a year (%) against the quarter to 30 September 2025 | +1.0 |
| Operating cash flow ($M) | Not available |
| Capital spending ($M) | 10.5 |
| Free cash flow ($M) | Not available |
| Cash and short-term investments ($M) | 164 |
| Debt ($M) | Not available |
| Net cash, cash less debt ($M) | Not available |
| Deferred revenue ($M) +12.3% on a year | 7.9 |
| Backlog, orders not yet delivered ($M) | Not reported |
| Receivables ($M) | 44.4 |
| Inventory ($M) | Not reported |
| Shareholders' equity ($M) | 177 |
| Market value ($M) | 1,220 |
| Enterprise value, market value plus net debt ($M) | Not available |
| Enterprise value to sales (×) | Not available |
| Enterprise value to operating income (×) | Not available |
| Price to earnings (×) | 25.2 |
| Price to book value (×) | 6.9 |
| Free-cash-flow yield (%) | Not available |
Short interest (FINRA, settled 15 October 2026, published 26 October 2026): 13.1% of shares outstanding sold short, 3.6 days of average trading to cover, −3.1% since the previous report.
| Window | Bought | Sold |
|---|---|---|
| 90 daysfrom | $0 | $1.1M |
| 12 monthsfrom | $0 | $160.9M |
The thesis
Innodata is more likely to lag the S&P 500 over the next three months. Revenue growth is intact, but a large customer program has ended and gross margin has dropped, and the fourth-quarter report with the 2027 outlook (expected around 26 February 2027) settles whether replacement programs close the gap.
Third-quarter 2026 revenue was $95.6 million, up 53% from $62.6 million a year earlier. Net income was $10.3 million, or $0.29 per diluted share. The company raised 2026 revenue growth guidance to about 42% or more from about 40% or more (company results release, 5 November 2026). Cash was $164.0 million at 30 September 2026, about $153.7 million net of customer prepayments for pass-through costs.
The shares closed at $36.29 on 12 November 2026, 71.0% below the 52-week intraday high of $125.14 set on 4 June 2026, and down 43.2% over three months. That price already reflects the program wind-down and the margin drop, not the 53% growth rate. Management expects new programs to replace the lost work in the first quarter of 2027.
Maxim Group cut its estimates in a note dated 6 November 2026, per MarketBeat. Fourth-quarter 2026 earnings per share fell to $0.05 from $0.24, and 2027 earnings per share fell to $0.92 from $1.41. The third-quarter figure was $0.29, so Maxim expects a steep step down in the quarter now under way.
Bullish and bearish views on Innodata Inc.
The bull case on Innodata Inc. (INOD), in brief: growth record still intact. The bear case: a large program ended in mid-October.
Bull case
- Growth record still intact. Third-quarter revenue rose 53% from a year earlier, and the company lifted its 2026 growth guidance to at least 42% on 5 November 2026. Management has described its guidance method as conservative.
- New hyperscaler programs for 2027. Management expects more than $20 million of 2027 revenue from five new programs with a large hyperscaler, and said a further program worth about $18 million was signed in the fourth quarter (Capital.com, 5 November 2026).
- Customer base is widening. A customer under 5% of revenue a year earlier became the largest in the third quarter, the company added five new customers, and it described a verbal win worth about $5 million a year for five years that it expects to sign by the end of the fourth quarter.
- Balance sheet. Cash of $164.0 million at 30 September 2026 gives room to fund the transition between programs without relying on share sales.
Bear case
- A large program ended in mid-October. Tickeron reported on 6 November 2026 that a historically large customer's program ended mid-October and put the fourth-quarter revenue shortfall at about $12 million, its own estimate (Tickeron). The company has said only that new programs should replace it in the first quarter of 2027.
- Margins fell sharply. Tickeron put third-quarter adjusted gross margin at 40% against 49% in the second quarter, and adjusted EBITDA margin (earnings before interest, tax, depreciation and amortization) at about 19% against 27.5%.
- Analysts are cutting estimates. Maxim Group lowered fourth-quarter 2026 earnings per share to $0.05 from $0.24 and 2027 earnings per share to $0.92 from $1.41, per MarketBeat on 11 November 2026.
- Two customers dominate. In the second quarter the largest customer supplied 37% and the second-largest 34% of revenue (company release, 6 August 2026). One pause hits the growth rate directly.
- Insider sales and share issuance. Director Louise Forlenza sold 10,000 shares at $55.01 on 4 September 2026 and 10,000 shares at $53.54 on 14 September 2026 (SEC Form 4 filings), both after exercising options at about $1.40. A $300 million at-the-market stock program filed on 6 August 2026 (Form 424B5) allows share sales between reports.
- Legal overhang. Law firm Levi & Korsinsky announced an investigation of the company on 28 October 2026.
Price setup
The shares closed at $36.29 on 12 November 2026. The 50-day average of the adjusted closes is $55.45 and the 200-day average is $60.47, so the shares trade far under both.
Recent closes show a narrow range after the report: $38.62 on 5 November 2026, $37.03 on 6 November 2026, $36.96 on 9 November 2026, $35.05 on 10 November 2026 and $38.17 on 11 November 2026. The 52-week closing low is $34.45, set on 30 March 2026. The close of $35.05 on 10 November 2026 came within about a dollar of that low.
Two things would change the read: a close back above the mid-$40s, which the kill line captures, and the replacement programs showing up in company disclosures ahead of the February report.
Catalysts ahead
- ~31 December 2026 (est.): Expected signing of a verbal contract win worth about $5 million a year for five years. Management said it expects to sign by the end of the fourth quarter; signing would add to the replacement for the program that ended in mid-October.
- ~26 February 2027 (est.): Fourth-quarter 2026 report with the 2027 outlook. Shows whether replacement programs arrived on schedule, whether adjusted gross margin recovered from 40%, and what 2027 growth guidance is.
What would change the view
A daily close above $45.42, the level where the shares would be regaining ground lost after the 5 November report and leading the S&P 500. A fourth-quarter report with 2026 growth well above the 42% guidance floor and adjusted gross margin back near 49% would also show the shares leading.
What it trades with
Innodata trades on its own customer news more than on a sector. Its two largest customers supplied about 71% of second-quarter revenue. MarketBeat lists a beta of 3.11, which means the shares have moved about three times as far as the market in either direction.
On 1 October 2026 the shares rose with the information-technology services group after Accenture's results, so sentiment toward that group moves them at the margin. Third-party reports link the largest customer to Meta; neither company has confirmed that.
The evidence, claim by claim (8)
- Third-quarter 2026 revenue was $95.6 million, up 53% from $62.6 million a year earlier; net income was $10.3 million, or $0.29 per diluted share. Innodata Q3 2026 results release (SEC Form 8-K exhibit) · as of
- 2026 revenue growth guidance was raised to about 42% or more from about 40% or more. Innodata Q3 2026 results release (SEC Form 8-K exhibit) · as of
- Cash was $164.0 million at 30 September 2026, about $153.7 million net of customer prepayments for pass-through costs. Innodata Q3 2026 results release (SEC Form 8-K exhibit) · as of
- Management expects more than $20 million of 2027 revenue from five new programs with a large hyperscaler; a customer under 5% of revenue a year earlier became the largest in the third quarter. Innodata Q3 2026 results release; Capital.com · as of
- A program with a large customer ended in mid-October, with an estimated $12 million fourth-quarter revenue shortfall; adjusted gross margin was 40% against 49% in the prior quarter. Tickeron, 6 November 2026 · as of
- Maxim Group cut fourth-quarter 2026 earnings per share to $0.05 from $0.24 and 2027 earnings per share to $0.92 from $1.41. MarketBeat report on Maxim Group note dated 6 November 2026 · as of
- Second-quarter 2026 revenue was $92.142 million, up 58%; the largest customer supplied 37% and the second-largest 34% of revenue. Innodata Q2 2026 results release · as of
- Director Louise Forlenza sold 10,000 shares at $53.54 on 14 September 2026 and 10,000 shares at $55.01 on 4 September 2026 after option exercises. SEC Form 4 filings · as of
Sources
- INNODATA INC - Form 8-K - FY2026 · sec.gov
- Innodata Q3 net income rises 24% to $10.3 million; Q3 revenue jumps 53% to $95.6 million · capital.com
- Tickeron ·
- Equities Analysts Issue Forecasts for Innodata Q4 Earnings · marketbeat.com ·
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