FTI Consulting (FCN) Q2 2026 earnings review
Top-Line Resilience Clouded by Margin Compression and Litigation
FTI Consulting delivered a mixed Q2. The top line is stable, with revenue accelerating 5.3% YoY to a record $993.5M, driven by a massive rebound in the Technology segment and steady performance in Corporate Finance. However, profitability continues to bleed. Net Income decelerated by 19% YoY, and Adjusted EBITDA margins compressed to 10.5% from 11.8%. The company is heavily investing in talent (billable headcount up 3.2% YoY), which is driving up compensation and SG&A expenses. Furthermore, a messy trade-secret lawsuit against a former employee forced management to cut full-year GAAP EPS guidance. FTI is actively buying back stock with debt to support the share price, but organic margin recovery remains the primary concern.
🐂 Bull Case
The Tech segment has completely reversed its prior year slump, posting 18.4% YoY revenue growth. M&A 'second request' demand is returning.
Management used balance sheet leverage to repurchase $390.9M in stock at an average price of $150.84, signaling extreme confidence in intrinsic value.
🐻 Bear Case
Adjusted EBITDA margins compressed across three of the five segments. High compensation, rising SG&A, and aggressive headcount expansion are outpacing revenue growth.
Despite management claiming it hit a 'low point' last quarter, Economic Consulting revenue still shrank 1.5% and margins are a dismal 4.7%.
⚖️ Verdict: ⚪
Neutral. The diversified model is working to protect the top line, but the cost of acquiring and retaining talent, combined with messy internal litigation, is depressing earnings quality.
Key Themes
Technology Segment Surges on M&A Recovery
Accelerating. The Technology segment completely reversed its trajectory, transforming from the company's biggest laggard in 2025 to its primary growth driver in Q2 2026. Revenue grew 18.4% YoY to $99.0M, heavily driven by macro improvements in M&A-related 'second request' e-discovery and data analytics services. Adjusted Segment EBITDA margin improved to 9.1% from 6.3%.
Corporate Finance Remains the Reliable Anchor
Stable. The Corporate Finance segment continues to carry the firm, increasing revenue by 8.5% YoY to $411.4M. The growth is fueled by higher realized bill rates and sustained demand for transformation and turnaround & restructuring services. Impressively, it maintained a highly profitable 20.9% Adjusted EBITDA margin despite a 7.8% surge in billable headcount.
The Cost of Talent is Crushing Margins
Decelerating. FTI's strategy of aggressively hiring senior professionals through the cycle is straining the P&L. Total direct costs grew 5.6% and SG&A grew 14.1% YoY—both outpacing the 5.3% revenue growth. This caused consolidated Adjusted EBITDA margins to drop from 11.8% to 10.5%. While management champions talent as its 'core growth engine,' the near-term negative operating leverage contradicts the bullish narrative of scale efficiencies.
Economic Consulting Turnaround is Sluggish
Stable (Laggard). Last quarter, management suggested the Economic Consulting business had reached its 'low point.' While margins improved sequentially from negative territory to 4.7%, revenue still contracted 1.5% YoY due to weak non-M&A antitrust demand. Given historic margins in this segment hovered around 15%, the rebuild process remains a significant drag on overall profitability.
Extraordinary Litigation Against Former Employees
A new, highly specific red flag emerged: FTI recorded $6.6M in 'Extraordinary Litigation-Related Expenses' this quarter, dragging EPS down by $0.17. Management allowed a third amended complaint against former employee Jonathan Orszag, adding competitor Econic Partners and alleging theft of trade secrets. This forced a cut to GAAP EPS guidance (estimating a $0.40 full-year hit). For a firm that prides itself on talent retention and culture, suing former prominent experts for conspiracy is a bad look that creates unpredictable legal liabilities.
Other KPIs
Accelerating. Up significantly from $55.7M in the same period last year. This 173% increase was driven by improved cash collections and a deliberate decrease in the massive forgivable loan issuances that hampered cash flow in 2025.
Accelerating. Total debt net of cash exploded sequentially from $556.7M in Q1 to $856.3M in Q2. Management is aggressively drawing on its debt facilities to fund massive share repurchases ($390.9M in Q2 alone). While FTI remains relatively under-levered compared to peers, the rapid increase in interest expense (up to $11.6M from $5.2M YoY) is directly biting into Net Income.
Guidance
Stable. The company reaffirmed its full-year top-line guidance. The midpoint ($4.02B) implies roughly 6.1% YoY growth over FY25's $3.79B, indicating management expects the current mid-single-digit cadence to hold steady through the second half of the year.
Decelerating. Management lowered the GAAP EPS range from the previous $8.90-$9.60. This cut is entirely driven by the newly classified 'Extraordinary Litigation-Related Expenses,' which are expected to create a $0.40 per share drag for the full year.
Accelerating. FTI introduced specific Adjusted EPS guidance to strip out the litigation costs. The midpoint ($9.40) implies healthy ~6.5% growth over the $8.83 delivered in FY25, though this relies on heavy add-backs.
Key Questions
Litigation Cost Runaway
You've categorized the Orszag litigation as 'extraordinary' and booked a $6.6M expense this quarter, guiding for a $0.40 full-year EPS hit. What is the risk that these costs escalate further in 2027 if the case goes to trial, and how are you ring-fencing the distraction for your current Economic Consulting team?
Economic Consulting Margin Trajectory
Economic Consulting margins improved sequentially to 4.7% but remain far below historical norms. With the heavy lifting of talent acquisition reportedly in the rear-view mirror, what is the specific timeframe to return this segment to double-digit EBITDA margins?
Debt-Funded Buybacks
You repurchased nearly $400M in stock this quarter, driving net debt to $856M and more than doubling interest expense YoY. Given the current interest rate environment, what is your upper limit for leverage to fund buybacks before the interest burden becomes too destructive to EPS?