Revisiting Innodata (INOD)

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Over the weekend i reviewed INOD Q1 results and conference call from end of last week.

This is a company that had been on the board 6 months back, but most exited due to customer concentration with 1 hyperscaler customer.

In Q1 they shared that they have a 2nd tech customer that could generate > $50m, they have expanding revenue with their largest customer and had 453% revenue growth across the other big tech players that they work with.

In terms of my thesis on AI, they are one of the only listed players that are exposed to the large language model providers that are where most of the revenue growth has occurred in the last 2 quarters (Anthropic - unlisted, OpenAI - unlisted, Google Gemeni).

Aside from the numbers, where revenue increased 20% QoQ from $72m to $90m and guidance raised from 35% growth in cal 2026 to 40% in 2026, their business model of working with the 20 AI innovation labs and frontier models to support them with pre-training, mid training, post-training, safety and evaluations seems like it is in the right place at exactly the right time.

Also, they mentioned that their evaluation & observability platform for agents just moved from beta to immediately securing at $1m revenue contract, which has potential for further growth in the coming quarters.

Their biggest competition in terms of observability of agents appears to be DDOG, but this seemed to be a blow-out quarter and a key quarter for validating their business model and didn’t get any air time on the board.

Hope bringing this onto the board is helpful.

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Hello @DaveDownUnder, I posted about Innodata last January, so a bit less than 6 months ago. I must admit that my investment thesis did not have staying power and I exited the position at a modest profit not too long after first taking a position.

It’s not that the thesis was broken. I still thought it had legs, I just thought that there were better opportunities so I redeployed my funds elsewhere.

Thanks for bringing the company back to the board. I think they hold a fairly unique position in the rapidly growing AI space, the company holds promise. But I was finally discouraged by the very few truly significant customers they actually held under contract and the human resource requirements demanded by their mission. They have a very large staff of multi-lingual specialists across a broad array of subjects. Those people are expensive. They are destined to increase headcount in order to serve more clientele should they secure the contracts. Operational costs will be difficult to control and will serve as a damper on profitability - at least that’s the way I see it. But I could be wrong. Management is obviously closer to the business than I ever will be, and they are very bullish.

I’ll keep an eye on it.

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