In the fast-evolving landscape of artificial intelligence and data-driven technologies, two names have recently stood out for investors: Innodata Inc. (INOD Quick QuoteINOD - Free Report) and Pagaya Technologies Ltd. (PGY Quick QuotePGY - Free Report) . Though serving distinct markets, both companies leverage AI and proprietary data pipelines to deliver mission-critical solutions—Innodata as a provider of intelligent data engineering services, and Pagaya as an AI infrastructure platform for consumer credit and financial institutions.

The commonality between these companies lies in their deep integration of AI across workflows and the growing scale of their enterprise relationships. Both have delivered standout second-quarter 2025 results, raised full-year guidance, and are investing in capabilities that aim to dominate their niches. With market interest surging in AI-adjacent stocks and fintech reinvention, this faceoff is timely for investors.

Let’s dive deep and closely compare the fundamentals of the two stocks to determine which one is a better investment now.

The Case for Innodata Stock

Innodata is carving out a niche as a small-cap enabler of the AI boom, providing the “picks and shovels” of the industry—data preparation, annotation, and model evaluation that power the development of advanced AI models. Its recent results underscore the momentum. In the second quarter of 2025, revenue jumped 79% year over year to $58.4 million, while adjusted EBITDA surged 375% to $13.2 million. Profitability improved sharply, with gross margins expanding to 43% from 33% a year ago, and the company posted $7.2 million in net income versus breakeven previously.

The surge reflects deepening relationships with major technology clients, particularly in supplying training and evaluation data for large language models and agentic AI. CEO Jack Abuhoff highlighted a striking shift with one big tech partner: revenue that was just $200,000 over the prior year is now expected to generate $10 million in the second half of 2025. Such contracts point to a significant broadening of Innodata’s enterprise footprint.

Strategically, the company is investing in long-cycle platforms to support LLM testing, enterprise deployments, and advisory services. While these moves set the stage for scalability, they may compress margins in the near term. At the same time, Innodata is directing resources into emerging fields like autonomous agents and robotics. Management views simulation data for robotics as a potentially larger market than today’s model fine-tuning, and has committed $1.4 million in new hiring to strengthen delivery and product development.

The key challenge remains concentration risk. Heavy reliance on a handful of large clients leaves Innodata vulnerable should spending shift or projects be insourced. However, with a healthy pipeline, $59.8 million in cash, and an unused credit facility, the company has the financial strength to continue pursuing growth aggressively. Its positioning in frontier AI services and willingness to expand into next-generation applications like agentic AI and robotics suggest that Innodata is not merely capturing today’s generative AI trend but is preparing for multiple future waves of innovation.

The Case for Pagaya Stock

Pagaya presents a somewhat different AI-driven story – one rooted in fintech. Pagaya operates a platform that uses artificial intelligence and vast datasets to underwrite and orchestrate consumer credit for partners (like banks, fintech lenders, auto finance providers, etc.), while connecting those loans with institutional investors. In effect, Pagaya’s network bridges Wall Street and Main Street through AI, as the company puts it. After a challenging period in 2022–2023, Pagaya has hit an inflection point in 2025 with improving fundamentals and profitability.

In the second quarter of 2025, Pagaya delivered record results: $326 million in revenues (up 30% year over year) and $17 million in GAAP net income. This was the second consecutive quarter of positive earnings for Pagaya, a notable turnaround from heavy losses in 2024. Adjusted EBITDA came in at $86 million for the quarter, up 72% year over year, reflecting strong operating leverage as the business scales. The company’s AI-driven lending volume was $2.6 billion for the quarter, a 14% increase, with particular strength in the newer Auto loan and Point-of-Sale financing verticals. Off the back of these results, Pagaya raised its full-year 2025 outlook – now expecting $1.25–$1.325 billion in revenues (more than 20% growth for the year) and $55–$75 million in GAAP net income. In other words, Pagaya is growing steadily and is solidly profitable on an adjusted basis, with an improving bottom line.

Pagaya’s strength lies in its diversified, scalable model. Unlike Innodata’s reliance on a few clients, Pagaya leverages a broad ecosystem of 145 institutional funding partners and numerous bank and fintech originators. This diversity enables multiple revenue streams—such as fee income from managing portfolios and gains on loan sales—while reducing exposure to any single lender or product. Its capital-light approach further mitigates risk, as loans are swiftly sold through securitizations or forward-flow agreements, leaving little credit risk on its balance sheet. This structure provides stability and scalability for growth.

Product innovation is also a tailwind. Initiatives like its Direct Marketing Engine and FastPass in auto lending have expanded partner funnels and streamlined application journeys. New AAA-rated ABS deals in both auto and POS verticals not only validate Pagaya’s asset quality but expand capacity—over $1B in effective POS lending capital alone.

Challenges for Pagaya include its exposure to the consumer credit cycle and a complex regulatory environment. However, its highly automated model—with 100% of loans underwritten without manual intervention—positions it well to scale profitably while navigating macro headwinds.

Share Price Performance of INOD and PGY Stocks

Innodata stock is trading around $37.74 per share (as of Aug. 21), showing a slight decline of about 1.4% on the latest trading day. Its 52-week price is between $13.02 and $71.00, indicating that it is trading below its recent highs but well above its low for the year.

Pagaya stock is trading around $29.77 per share (as of Aug. 21), down about 1.7% on the latest trading day. Its 52-week price is between $8.20 and $41.48, suggesting it has also pulled back from recent highs but is still significantly above its yearly low.

Year to date, PGY stock has skyrocketed by approximately 220.5%, significantly outperforming INOD’s performance, which declined 4.5% during the same time frame. The PGY stock has been seen as resilient with a capital-efficient business model supported by a diversified revenue stream.

Over the past three months, PGY stock has gained 89.4%, significantly outperforming the INDO stock’s 3.5% rise, as shown below.

3-Month Share Price Performance

Image Source: Zacks Investment Research

Valuation of INOD & PGY Stocks

At a $1.2 billion market cap, Innodata’s forward 12-month price/sales (P/S) ratio is 4.29– a rich multiple compared to traditional IT services firms, reflecting its higher growth but also implying high expectations. As a smaller company, Innodata must execute flawlessly to justify its valuation; it is aggressively investing in new capabilities that may pressure near-term margins.

With a market cap near $2.3 billion, Pagaya stock forward 12-month P/S ratio is 1.58, much lower than INOD’s. Even Pagaya’s valuation is cheaper than many pure-tech AI plays and below the broader software industry average.

INOD Vs PGY Valuation

Image Source: Zacks Investment Research

INOD & PGY Estimate Revision Trend

For INOD, the Zacks Consensus Estimate for 2025 earnings per share (EPS) has increased over the past 30 days to 71 cents, as you can see below, depicting analysts’ optimism. However, the estimated figure indicates a 20.2% decline from the year-ago reported EPS of 89 cents. The Zacks Consensus Estimate for 2025 revenues implies year-over-year growth of 42.8%.

For INOD Stock

Image Source: Zacks Investment Research

For Pagaya stock, the Zacks Consensus Estimate for 2025 EPS of $2.51 has increased over the past 60 days, as you can see below. The estimated figure indicates an improvement of 202.4% from the year-ago level. The Zacks Consensus Estimate for 2025 revenues implies a year-over-year growth of 28.4%.

For PGY Stock

Image Source: Zacks Investment Research

Conclusion: Which AI-Powered Data Play Has the Edge?

Both Innodata and Pagaya are riding powerful tailwinds from the AI revolution, but they offer investors very different profiles. Choosing depends on whether you prefer a fintech AI leader with strong profitability or an AI infrastructure and data services player with rapid growth potential but somewhat more risk. Both stocks represent compelling AI-powered data investment opportunities for 2025, but PGY appears to have a stronger current financial and market momentum profile while INOD offers a promising niche play in AI data engineering.

For INOD, valuation remains elevated with the stock trading at a premium multiple amid high expectations. It currently holds a Zacks Rank #3 (Hold), reflecting the market’s wait-and-see approach after a significant rally.

Conversely, broader diversification and proven ability to generate profits give PGY a more stable foundation, and its valuation (and analyst sentiment) leaves room for further appreciation as earnings grow. Considering all factors – growth, risks, and valuation – Pagaya seems to offer more upside potential in 2025 and stands out as the better buy now. The stock currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.