FTI Consulting (FCN) Q3 2026 earnings review
FTI Consulting raises its adjusted profit plan, but cuts staff
FTI Consulting, a global business advisory firm, grew sales in every division while cutting staff to match slower client work. Revenue rose 6% to $1.01 billion, and Economic Consulting returned to profit as antitrust demand recovered. Chief executive Steven H. Gunby said record success fees and a low tax rate helped results, lifting profit per share excluding one-offs by 48%, while a $46 million layoff charge pushed reported profit down.
| Revenue | $1,012.6M +5.9% from a year ago |
|---|---|
| Profit per share, excluding one-offs | $3.84 +48% from a year ago |
| Reported profit per share | $2.35 -10% from a year ago |
| Full-year adjusted profit outlook | Raised $0.35 middle of the range: $9.75 (+10%) |
⚖️ Verdict: ⚪ Neutral
The story is unchanged because temporary tailwinds and cost cuts balanced weak consultant workloads. Economic Consulting's return to profit and lower overhead bills eased last quarter's margin squeeze and funded $80 million in planned annual savings. The bad news: utilization — the share of hours consultants bill to clients — fell again in the two largest divisions, and by our math the raised outlook points to $1.96 per share in the fourth quarter, down 9% against last year's clean figure.
The question now is whether the $80 million cost-cutting plan will lift profit margins next year or merely offset falling client hours. One view is that higher hourly rates, antitrust recovery and leaner staffing will expand margins; the other is that soft restructuring and investigation volumes will keep consultants idle. Fourth-quarter utilization rates and the 2027 outlook will tell.
🐂 Bull Case
Economic Consulting Returned to Profit
Economic Consulting, which advises companies on antitrust and financial disputes, lost money a year ago after senior economists left its Compass Lexecon unit. Management promised the division would grow again in the second half of 2026. Third-quarter results met that goal against a weak comparison from last year.
- Segment revenue: $189.3 million, up 9.3% from a year ago
- Segment profit (Adjusted Segment EBITDA): $14.0 million, or 7.4% of sales, compared with a $4.6 million loss a year ago
- Consultant utilization (the share of work hours billed to clients): 61%, up from 55% a year ago
- Average hourly rate: $639, up 7.0% from $597 a year ago
The division grew because clients needed more help with "non-merger and acquisition (“M&A”)-related antitrust and M&A-related antitrust services", the company said, while lower overhead costs also lifted profit. The recovery is real, but last year's third quarter fell 22%, so the comparison was easy.
What to watch: fourth-quarter Economic Consulting revenue and profit against last year's $176.2 million and $1.0 million. Beating both numbers would complete management's second-half goal and show the new economists are bringing in steady work.
Higher Hourly Rates and Success Fees Lifted Margin
FTI Consulting has raised its hourly billing rates across its main divisions to make up for past inflation. Chief executive Steven H. Gunby noted that the quarter also benefited from "certain favorable non-recurring items, such as record success fees and a lower effective tax rate". Those items drove a sharp jump in quarterly profit excluding one-offs.
Direct cost of revenues — mainly consultant pay and benefits — fell by 1.4 percentage points of sales to 65.4%, by our math. Hourly rates rose 3.2% to $550 in Corporate Finance, 4.7% to $468 in Forensic and Litigation Consulting, and 7.0% to $639 in Economic Consulting. Meanwhile, the tax rate dropped from 25.9% to 17.8%, which helped lift profit per share excluding one-offs by 47.7% to $3.84.
Higher billing rates provide lasting support, but Gunby's own words show that one-time success fees and tax benefits did much of the heavy lifting this quarter. By our math, the raised full-year outlook leaves $1.96 per share for the fourth quarter, almost half the third-quarter level.
What to watch: fourth-quarter direct cost of revenues as a share of sales. A lower cost share without record success fees would show that staff cuts and higher hourly rates can hold margins up on their own.
Positives this quarter didn't test
Three standing growth drivers were not broken out in the third-quarter earnings release and await the conference call or quarterly filing.
- Artificial intelligence consulting demand: the release does not mention AI projects; commentary on the call will show whether AI work still grows across all five divisions.
- European and international senior hiring: regional sales and senior managing director hiring counts are absent from the release; the quarterly filing's geographic table will show whether Europe still leads growth.
- Corporate Finance transformation consulting: sub-practice sales are not in the release, though FTI said turnaround and transactions demand fell, implying transformation and success fees carried the division's 4.8% growth.
🐻 Bear Case
Consultants Worked Fewer Hours and Triggered Layoffs
Gunby said record sales were driven by the fact that "our clients are increasingly turning to us for the depth and breadth of our capabilities". In a consulting firm, client demand is best measured by utilization, the share of available hours that staff bill to clients. In FTI's two largest profit divisions, consultants had less billable work than a year ago.
- Corporate Finance utilization: 58%, down 5 percentage points from 63% a year ago
- Forensic and Litigation Consulting utilization: 54%, down 4 percentage points from 58% a year ago
- Third-quarter layoff and real estate charge: $46.0 million, plus about $7 million planned for the fourth quarter
- Net new billable staff in the third quarter: 166, down from 249 in last year's third quarter by our math
Idle staff forced the company to act. FTI booked $45.5 million in severance pay and $0.5 million in real estate costs under "a plan to align staffing with demand", taking nearly two-thirds of the charge in Corporate Finance and Forensic and Litigation Consulting. Growing through price hikes while laying off staff shows that work volumes are soft.
What to watch: utilization rates in Corporate Finance and Forensic and Litigation Consulting next quarter. Another year-over-year drop after the layoffs would mean client demand is shrinking faster than headcount.
Debt-Funded Buybacks Lifted Interest Costs
FTI Consulting has spent $605.3 million buying back its own stock over the first nine months of 2026, including $79.4 million in the third quarter at an average price of $151.55 per share. Because cash from operations over those nine months was only $32.7 million, the firm borrowed money to fund the purchases.
Total debt reached $852.0 million at the end of September, up from $510.0 million a year ago, while cash fell to $88.1 million. By our math, debt minus cash rose by $400 million over the past year to $763.9 million. That higher debt load pushed third-quarter interest expense up 74.6% from a year ago to $13.3 million, eating into reported net income.
What to watch: fourth-quarter debt repayments and share buybacks, since FTI collects most of its cash late in the year. Using fourth-quarter cash to buy more stock instead of paying down the credit line would lock in higher interest costs for 2027.
One-Off Adjustments Widen the Gap Between Profit Measures
At the start of 2026, FTI Consulting said its full-year reported profit per share and its profit per share excluding one-offs would be identical. Last quarter, management began excluding legal bills from its trade-secret lawsuit against former executive Jonathan Orszag and rival Econic Partners. This quarter, it added $53 million of full-year severance and real estate charges to the exclusions.
Those two items moved the full-year outlooks in opposite directions. FTI cut its reported profit forecast by $1.20 at the middle of the range to $7.80 per share, while raising its forecast excluding one-offs by $0.35 to $9.75. A $1.95 per share gap now separates the two measures, and regular staff cuts in a consulting business are a recurring cost of matching headcount to demand.
What to watch: whether the 2027 outlook, due next quarter, returns to having no gap between reported and adjusted profit per share. Keeping lawsuit and severance exclusions in 2027 would mean these costs have become permanent.
Risks this quarter didn't answer
Three standing concerns could not be checked from the third-quarter press release alone.
- Middle East and UK project delays: regional revenue figures are not in the release; the quarterly filing will show whether Middle East suspensions and UK case gaps eased.
- US routine merger-clearance market share: while Economic Consulting antitrust sales rose, the release does not split US and European share.
- Quarterly forgivable loans to new hires: nine-month loan outflows fell to $53.3 million from $251.6 million a year ago, but the standalone third-quarter figure awaits the filing.
👓 Other Themes
Staff Cuts Target $80 Million in Annual Savings
FTI Consulting announced a restructuring programme across all five divisions and corporate headquarters, booking $46.0 million of charges in the third quarter — mostly in Corporate Finance ($16.0 million) and Forensic and Litigation Consulting ($15.7 million) — and planning another $7 million in the fourth quarter. Management expects the $53 million combined programme to save about $80 million a year in salary, benefit and office lease costs.
Merger Reviews Accelerated While Restructuring Demand Softened
Corporate deal activity helped two divisions while hurting another. Rising merger reviews lifted demand for "second request" data services in Technology and antitrust work in Economic Consulting. At the same time, Corporate Finance faced "lower demand for turnaround & restructuring and transactions services", and Forensic and Litigation Consulting saw "lower demand for risk & investigations and data & analytics services", the company said.
💲 Other KPIs
Diluted shares fell 15.2% from 31.8 million a year ago and 7.1% from 29.0 million last quarter. Heavy stock buybacks over the past year shrank the share count, which cushioned the drop in reported profit per share and added roughly 18 percentage points to per-share growth excluding one-offs.
Cash generated from operations dipped 5.7% from $201.9 million a year ago as higher pay and operating expenses outweighed better client collections. For the first nine months of 2026, operating cash flow turned positive at $32.7 million, compared with a $207.6 million cash drain a year earlier, because the firm issued fewer forgivable loans to new hires.
FTI's two smaller divisions posted the fastest top-line growth this quarter. Strategic Communications sales rose 12.5% to $100.6 million on demand for public affairs and reputation advice, while Technology sales climbed 9.7% to $103.2 million on merger-review work. Both divisions expanded their segment profit margins excluding one-offs by more than 1 percentage point.
🔮 Guidance
Unchanged. Management kept the full-year sales plan at about 6.1% growth at the middle of the range for a third straight quarter, leaving a wide $160 million band with one quarter left. By our math, that middle figure leaves $1.031 billion for the fourth quarter, or 4.0% growth from a year ago, down from 5.9% in the third quarter.
Cut. FTI lowered the middle of its reported profit per share plan by $1.20, to a 5.3% drop from 2025. It is the second cut in two quarters: unchanged in the first quarter, then -$0.25, then -$1.20, driven by $1.55 per share of severance and real estate charges. By our math, the outlook leaves $1.58 per share for the fourth quarter, down 11.2% from $1.78 a year ago.
Raised. The middle of the range moved up $0.35 to $9.75, or 10.4% growth for the year, following a $0.15 raise last quarter. By our math, that leaves $1.96 per share for the fourth quarter, up 10.1% from last year's reported $1.78, but down 9.3% against last year's clean $2.16 before a one-time tax charge.
❓ Key Questions
Why keep a $160 million sales range for one quarter?
With nine months of the year already reported, keeping the $3.94 billion to $4.10 billion full-year sales range implies fourth-quarter sales could fall 4% or grow 12%. Investors need to know what client projects could swing fourth-quarter revenue by $160 million.
How much of the $80 million savings lands in 2027?
Management expects third- and fourth-quarter layoffs and office closures to save $80 million a year. Will those savings boost profit margins in 2027, or will the firm spend the money on new senior hires and forgivable loans?
How many campus graduates joined, and who left?
FTI planned to welcome more than 270 graduates in the third quarter, yet total billable headcount rose by only 166 people after the $45.5 million severance charge. Breaking out gross campus additions and layoff departures would clarify how much senior capacity left.
What were third-quarter forgivable loan issuances?
Nine-month net cash outflows for forgivable loans to new hires dropped to $53.3 million from $251.6 million a year ago, while nine-month loan amortization rose to $66.2 million. Disclosing the third-quarter issuance figure would show whether retention spending in Economic Consulting has peaked.