Forrester Research (FORR) Q1 2026 earnings review
Retention Surges as Top Line Slowly bleeds
Forrester's Q1 results reveal a company effectively shrinking to a highly loyal core base. While overall revenue and Contract Value (CV) continued to contract (-5% and -3% YoY respectively), the pace of decline is decelerating. More importantly, client quality has drastically improved: Wallet retention spiked to 89% and client retention hit 78%. However, the transition remains painful—Adjusted EPS reversed to a loss of $0.04, and the Consulting segment continues to hemorrhage. Management's confidence in their AI product rollout enabled them to raise the low end of their FY26 revenue guidance, but profitability metrics must quickly follow suit to validate the turnaround.
🐂 Bull Case
The strategic culling of single-seat and low-margin clients in 2025 has yielded a highly sticky base. Wallet retention jumped from 86% a year ago to 89%, and Client retention improved from 73% to 78%.
Forrester AI's new capabilities embed proprietary research directly into client workflows (emails, presentations). This creates a massive switching cost and builds a defensive moat against generic public LLMs.
🐻 Bear Case
For the first time in recent quarters, Adjusted EPS reversed into negative territory (-$0.04), driven by lower top-line leverage and heavy turnaround investments.
Consulting revenue plummeted 13.3% YoY. Following the late-2025 exit from strategy consulting, the remaining advisory business continues to show severe weakness, creating a drag on the broader recovery.
⚖️ Verdict: ⚪
Neutral. The accelerating improvement in retention rates is the exact leading indicator needed to call a bottom, but with EPS flipping negative and Contract Value dropping sequentially from Q4, the company is not out of the woods yet.
Key Themes
Retention Quality Over Quantity
Management's 2025 strategy of walking away from poor-fit clients is bearing fruit. Total client count dropped from 1,822 in 25Q1 to 1,760 in 26Q1, but the remaining clients are spending significantly more. Wallet retention accelerating to 89% (from 86% YoY) is a massive leading indicator for future Contract Value growth.
Profitability Under Severe Pressure
Despite strong retention, Adjusted Operating Income reversed from a $2.5M profit in 25Q1 to a $0.9M loss in 26Q1. The narrative from late 2025 was that cost realignments and layoffs (8% of workforce cut in Q4) would protect margins. Instead, profitability continues to decelerate, creating a contradiction between management's positive AI narrative and actual bottom-line results.
Research Declines Nearing a Bottom
The core Research segment—which now makes up 78% of total revenue—is showing an accelerating path toward stabilization. Revenue fell just 2.2% YoY in Q1, a stark improvement from the 11% drop witnessed in the same quarter last year. If this trajectory holds, Research will return to positive growth by H2 2026.
Consulting Fails to Find Footing
The Consulting segment is decelerating rapidly, dropping 13.3% YoY to $18.6M. The company exited strategy consulting in Q4 2025 due to massive bookings declines and U.S. federal budget cuts, but the remaining advisory portfolio is still bleeding. Management warned of adverse economic and trade policy conditions, suggesting further macro headwinds for high-ticket discretionary consulting.
Contract Value Dips Sequentially
While the YoY decline in Contract Value (CV) improved to -3%, the absolute CV number dropped sequentially from $292.4M in 25Q4 to $285.3M in 26Q1. Q1 is historically a challenging quarter, but returning to CV growth is management's stated primary objective, making this step backward a focal point for investors.
Other KPIs
Down 3% compared to the prior year. This is a deceleration in the rate of decline (which was -7% a year ago), but it represents a sequential drop of $7.1 million from Q4 2025. This underscores that while retention of existing logos is up, gross new bookings are struggling to outpace churn.
Stable. Remained virtually flat compared to the $26.7 million generated in Q1 2025. Despite posting a net loss, Forrester's deferred revenue model continues to pump out strong free cash flow, ensuring the balance sheet remains highly resilient during the ongoing restructuring.
Guidance
Management raised the low end of the guidance (previously $345.0M). This implies a YoY decline of 11.8% to 9.3%. Because Q1 revenue fell only 5%, this guidance suggests that management expects revenue declines to actually accelerate in the back half of the year, likely due to the lagging effect of poor 2025 bookings flowing through.
Stable. Maintained from prior guidance. Since Q1 came in at a loss of $0.04, the company must average roughly $0.26 per quarter for the rest of the year to hit the midpoint. This implies massive margin expansion is expected in Q2-Q4.
Stable. Maintained from previous guidance. This highlights a steep anticipated recovery, as Q1 adjusted operating margin was roughly -1.0%.
Key Questions
EPS Guidance Feasibility
With Q1 Adjusted EPS flipping to negative $0.04 and Adjusted Operating Income turning negative, what specific cost levers or seasonal revenue influxes give you confidence in hitting the $0.72-$0.82 full-year EPS target?
Contract Value Sequential Decline
Wallet retention surged to a highly impressive 89%, yet absolute Contract Value fell sequentially by $7 million from Q4 to Q1. Is this entirely a function of shedding single-seat licenses, or are enterprise clients downsizing their multi-year commits upon renewal?
Consulting Segment Stabilization
Consulting revenue fell 13% this quarter. How much of this is the lingering tail of exiting the strategy consulting business versus fundamental weakness in the core advisory market?