Forrester (FORR) Q2 Revenue Falls 8%

Forrester Research (FORR 6.02%), a company specializing in technology research, advisory, and consulting, released its second quarter 2025 earnings on July 31, 2025. The firm reported GAAP revenue of $111.7 million, which was above the analyst consensus of $109.97 million. Adjusted (non-GAAP) earnings per share (EPS) landed at $0.51, just above expectations of $0.50 (non-GAAP). While results beat Wall Street forecasts (non-GAAP), the quarter showed declines in recurring contract value, client count, and profit margins compared to the year-ago period. Overall, the period featured a mix of outperformance on cost controls and ongoing challenges in core subscription growth.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Company Overview and Core Business

Forrester Research (FORR 6.02%) offers research, consulting, and events focused on helping businesses improve technology, marketing, customer experience, and digital strategies. Its core model is built on subscription-based research products, alongside advisory consulting and hosted events. The most notable offering, Forrester Decisions, is a subscription research product that enables organizations to get expert guidance on digital transformation, customer experience, and emerging technology topics.

The company's main goals are growing recurring contract value, expanding client engagement, and differentiating through expertise in areas like artificial intelligence (AI) research. Management emphasizes “customer obsession”—a focus on helping clients place their own customers at the center of their operations—as a critical driver for both client retention and business growth. Forrester’s strategy relies on increasing contract renewals and expanding its presence in enterprise accounts, while also investing in talent, proprietary research, and digital tools like its AI-powered Q&A platform, Izola.

Quarter in Detail: Earnings Drivers and Key Developments

Revenue (GAAP) surpassed estimates, but fell from the same period last year. The company’s adjusted EPS was higher than Wall Street forecasts. However, both operating margin and net income trended lower, reflecting pressure on profitability as demand remained tepid, and events revenue (GAAP) tumbled 23.3%.

Contract value—a key measure of the annualized recurring revenue tied to multi-period contracts—decreased 7% compared to the prior year, landing at $288.7 million. This continued erosion in contract value reflects customer hesitancy and longer sales cycles, which management attributes in part to “ongoing market uncertainty.” Notably, client retention rates improved slightly to 74%, but wallet retention, which measures the renewal and upsell performance among clients, slipped to 85%. Company leadership cited that churn remained most pronounced among smaller, single-license clients, with many not well-matched to the evolving portfolio. Headcount reductions, down 11% year over year, further signal ongoing cost controls and a streamlined workforce aimed at preserving operating flexibility.

The company’s investments in artificial intelligence continued this period, with product enhancements focused on its Izola tool. Izola, Forrester's proprietary large language model, enables clients to ask natural language questions and receive AI-generated insights powered by Forrester’s research. Management claims “leading AI research company” status among industry peers, hoping such innovation will differentiate the offering in a competitive environment. In parallel, Forrester continued to enhance Forrester Decisions by rolling out “Expanded Access”—a feature that broadens content reach and adds interactive data capabilities to the research platform. These efforts align with stated priorities to boost client engagement and adoption, although it remains unclear to what degree these enhancements are translating into new bookings or improved renewals at this stage.

Other financial details from the period included an increase in cash and equivalents to $134.95 million as of June 30, 2025, up from $104.67 million as of December 31, 2024, and no change in debt outstanding at $35 million as of June 30, 2025. Cash flow from operations (GAAP) rebounded sharply for the first half of 2025, improving from a net outflow to a net inflow of $23.1 million. This reflects ongoing cost management, but the company offset some of the revenue shortfall with reduced selling, general, and administrative costs, but the impact of restructuring costs and workforce reductions continued to shape cost structure.

Looking Ahead: Guidance and What to Watch

Management’s full-year guidance calls for GAAP revenue between $400.0 million and $410.0 million, representing a decline of 5.2% to 7.5% from previous year levels (GAAP). The outlook for adjusted EPS is $1.20 to $1.35, This is in line with earlier projections. GAAP operating margin is projected in the negative 17.4% to negative 18.4% range, reflecting an expected $83.9 million non-cash goodwill impairment (GAAP). Adjusted (non-GAAP) operating margin is expected between 8.0% and 9.0%. No changes to guidance were announced this quarter.

Looking ahead, investors will likely focus on trends in contract value, client and wallet retention, and the effectiveness of AI platform investments, particularly Izola. Improving salesforce productivity and rebuilding headcount are also themes to monitor given ongoing cost adjustments and pipeline growth. Management highlighted longer sales cycles and greater scrutiny in customer purchasing as persistent challenges but continued to point to progress in operational efficiency and pipeline building. Forrester Research does not currently pay a dividend.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.