Shares of Innodata (INOD +81.05%) soared 101.3% higher on Friday morning, peaking near 11 a.m. ET. The data engineering expert backed down a bit from that extreme level, but was still up by 86% as of this writing at 2:20 p.m. ET. Innodata shareholders can thank a fantastic earnings report for this massive jump.
NASDAQ: INOD
Key Data Points
A classic blowout quarter
Let's start with the numbers. First-quarter sales rose 54% year over year to $90.1 million. Earnings nearly doubled over the same period, jumping from $0.22 to $0.42 per diluted share.
The Street consensus had called for earnings near $0.23 per share on revenue in the neighborhood of $72.1 million. Look up "blowout" in the dictionary, and you might just see Innodata's report instead of a standard definition.
AI is the engine behind the growth
Of course, Innodata's sudden growth spurt is powered by artificial intelligence (AI). What huge jump isn't AI-based nowadays?
The company sells data engineering services to other companies. It provides the data sets and data quality evaluation tools needed to build effective AI platforms. The company is signing many data engineering deals right now, including a massive contract with an unnamed AI hyperscaler.
Who is Innodata's new hyperscaler customer? Image source: Getty Images.
"We believe these engagements could potentially generate $51 million of revenue this year," CEO Jack Abuhoff said on the earnings call. "Twelve months ago, our revenue from this customer was zero. But this year, we expect it to become our second-largest customer."
That's the kind of mega-customer attention that turns heads on Wall Street. Yesterday, Innodata was a modestly priced growth stock with unclear long-term prospects. Today, investors see an emerging AI superstar, and the stock trades at 77 times trailing earnings. Whether that premium valuation holds will depend on Innodata's ability to convert these new AI contracts into sustained revenue growth.
