Forrester Research (FORR) Q2 2026 earnings review
Metrics Stabilize, But Core Revenue Continues to Slide
Forrester's Q2 paints a picture of a company buying time. Management points to stabilizing retention metrics and an expanding AI portfolio as proof of an impending turnaround. However, the actual financials tell a sobering story: total revenue declines accelerated to 10.3%, and the core Research segment took a sudden step backward. While a massive $12.3 million tax benefit artificially inflated GAAP net income, adjusted operating profit fell 24%. The decision to restart stock buybacks shows confidence in their cash flow, but until the new Forrester AI and Microsoft Copilot integrations translate into Contract Value growth, the company remains firmly in a contraction phase.
🐂 Bull Case
Contract Value (CV) decline held steady at -3% YoY, a massive improvement from the -7% drops seen a year ago. Wallet retention held strong at 89%, proving that despite macro headwinds, existing clients are keeping their spend.
The company is aggressively rolling out its 'where you work' strategy. Following the successful launch of Forrester AI, the integration into Microsoft Teams and Copilot positions the company to deeply embed its research directly into enterprise daily workflows.
🐻 Bear Case
The top-line turnaround has yet to materialize. The Research segment, Forrester's most critical engine, saw revenue declines accelerate from -2% in Q1 to -8% in Q2. If the core product shrinks, top-line recovery is impossible.
GAAP Net Income spiked 290% YoY to $15.3M, but this was entirely manufactured by a one-time $12.3M tax benefit. Pre-tax income actually fell 59%, and adjusted operating margins compressed from 12.2% to 10.4%.
⚖️ Verdict: 🔴
Bearish-leaning Neutral. The stabilization of Contract Value and strong cash flow generation provide a floor for the stock, but accelerating revenue declines in the core Research segment prove the AI pivot has not yet offset legacy business erosion.
Key Themes
Innovation: 'Where You Work' Strategy Takes Shape
Forrester's strategic shift toward embedding proprietary AI directly into client environments is accelerating. The company announced upcoming rollouts of additional products and capabilities tied to its Microsoft Teams and Copilot integrations. By moving research out of a separate portal and into daily enterprise workflows, Forrester aims to increase stickiness, defend against public LLMs, and drive CV growth in the second half of the year.
Retention Metrics Defend the Baseline
A key reason management remains confident in their turnaround is the underlying client behavior. Wallet retention remained stable sequentially at 89% (up from 85% a year ago), and overall client retention sat at 77% (up from 74% a year ago). These metrics confirm that the 'retention life cycle' initiatives launched over the past year are successfully plugging the leaks in the subscriber base.
Capital Return Re-Ignition
Management announced the restart of the stock buyback program with plans to accelerate repurchases. Generating $25.0M in operating cash flow over the first six months (up from $23.1M last year), the company has the liquidity to support this. This signals management's belief that the stock is undervalued relative to the cash-generation potential of the new AI-centric business model.
The 'Stabilization' Narrative Contradicts Research Revenue Reality
CEO George Colony highlighted 'ongoing stabilization of our metrics.' While true for Contract Value, this claim directly contradicts the performance of the core Research segment. Research revenue declines had been improving steadily (-6% in 25Q3, -4% in 25Q4, -2% in 26Q1), but suddenly reversed course and accelerated to an 8% YoY decline in 26Q2. This break in the recovery trend is a major red flag.
Illusory GAAP Profitability Masking Margin Squeeze
Headline GAAP net income looked spectacular, surging to $15.3 million from $3.9 million a year ago. However, this was a pure accounting illusion driven by a massive $12.3 million income tax benefit. Looking at actual operational performance, pre-tax income fell 59% (to $2.9M from $7.1M), and Adjusted Operating Income dropped 24% (to $10.4M from $13.7M). Operating leverage remains deeply negative.
Consulting and Events Continue to Bleed (Macro Impact)
The non-subscription segments remain a heavy drag. Consulting revenue fell 15% YoY ($20.0M vs $23.5M), heavily impacted by the deliberate exit from strategy consulting and ongoing macro hesitancy. Events revenue dropped 17% YoY ($8.5M vs $10.2M), indicating that corporate discretionary spending and sponsorship budgets remain tightly constrained in the current economic environment.
Other KPIs
Stable. The YoY decline held steady at -3%, identical to Q1 and a marked improvement from the -7% decline seen in the prior year period. Stopping the CV bleed is step one; the next hurdle is converting this stabilization into actual booked growth.
Accelerating. Up 8% YoY from $23.1 million in 2025H1. Despite top-line pressures and significant restructuring changes over the last year, Forrester maintains excellent working capital discipline. This strong cash generation acts as the primary funding mechanism for their renewed buyback program.
Decelerating. Dropped from 12.2% in the same quarter last year. A $11.4 million drop in quarterly revenue was only partially offset by a $7.9 million reduction in adjusted operating expenses. Cost cuts are trailing revenue declines.
Guidance
Stable. The company maintained its prior full-year guidance, which implies an 11.8% to 9.3% YoY decline. Given that H1 revenue is tracking at roughly -8% YoY, this suggests management expects the second half to remain heavily challenged, with no immediate top-line hockey-stick recovery from AI product launches.
Stable. Maintained from previous guidance. This target reflects a compressed profitability profile for the year as the company absorbs the revenue loss from its consulting exit while simultaneously funding its Forrester AI development.
Stable. Management reiterated this range, based on an assumed 29% adjusted effective tax rate. The massive GAAP tax benefit in Q2 will strictly impact unadjusted metrics, leaving the core earnings power target unchanged.
Key Questions
Research Revenue Deceleration
Research revenue declines had been improving sequentially over the last three quarters but suddenly accelerated to -8% this quarter. What specific dynamics caused this reversal, and what gives you confidence this won't drag down CV in the second half?
Pacing of Stock Buybacks
You noted plans to 'accelerate' stock repurchases. Given the $18.2M spent on property and equipment year-to-date and the expected drag on H2 revenue, how much free cash flow has been modeled to aggressively execute these buybacks without drawing on the credit facility?
Copilot and Teams Monetization
As Forrester AI integrates deeply into Microsoft Teams and Copilot, how are you pricing this 'where you work' capability? Is this an add-on monetization lever, or strictly a retention tool to defend current seat value?