Innodata Inc. (INOD Quick QuoteINOD - Free Report) has plunged 15.7% over the past month, lagging sharply behind the Zacks Computer - Services industry, the broader Zacks Computer and Technology sector and the S&P 500. Shares trade near $57.58, well below the 52-week high of $93.85, even as fundamental performance continues to strengthen. The stock’s pullback comes at a time when earnings expectations are rising, revenue visibility is expanding, and Innodata is widening its footprint in the generative AI ecosystem.

INOD Stock’s 1-Month Performance

Image Source: Zacks Investment Research

Whether the recent slide should be viewed as a buying opportunity or a warning sign depends on how investors interpret Innodata’s rapid expansion, its dependence on large customers and its premium valuation.

INOD Stock’s Performance and Technical Indicators

Innodata’s pullback is clearer through its moving averages. The stock now sits below its 50-day average near 70, reflecting softer short-term sentiment, yet remains above the 200-day average near 51, indicating that the long-term uptrend is still intact. Trading volumes stayed elevated during the decline, suggesting repositioning rather than weakening fundamentals. This matches the company’s strong third-quarter 2025 results and expanding AI pipeline across Big Tech, federal contracts and pre-training data programs. The chart shows pressure in the near term, but the broader setup supports the view that the correction stems from profit-taking rather than a deterioration in Innodata’s growth story.

INOD’s Earnings Strength and Expanding Growth Visibility

Innodata posted another record quarter in the third-quarter 2025. Revenue reached $62.6 million, up 20% from a year earlier, while adjusted EBITDA rose to $16.2 million, a 23% sequential increase. Adjusted gross margin stood at 44%, and adjusted EBITDA margin reached 26% as the company continued to demonstrate strong operating leverage.

Management reiterated expectations for at least 45% year-over-year organic revenue growth in 2025. This outlook is supported by several developments described in the earnings call and accompanying materials. Innodata is deepening relationships with major technology players, strengthening ties with its largest customer and gaining traction with new hyperscalers. Verbal confirmations for additional work, including a potential $6.5 million annualized program, underscore continued strength in its Big Tech vertical. The company has also highlighted new engagements with five additional hyperscalers, several of which may contribute meaningfully in 2026 as global spending on training data and evaluation surges.

Earnings expectations have risen as well. The Zacks Consensus Estimate for 2025 earnings per share (EPS) increased from 78 cents to 89 cents over the past 30 days, while 2026 EPS moved to $1.20 from $1.18. Revenue projections also improved and now imply growth of 45.6% in 2025 and 24.1% in 2026. These upward revisions signal confidence in Innodata’s execution and visibility.

Image Source: Zacks Investment Research

Deepening Relationships With Big Tech

Innodata’s most significant engine of growth remains its expanding engagement with the world’s largest AI builders. The company plays a central role across the model development lifecycle, from pre-training and fine-tuning to evaluation and safety. During the third quarter, Innodata noted that six of its eight leading Big Tech customers are expected to grow meaningfully next year. These customers rely on highly specialized data engineering capabilities that Innodata has refined over decades, making the company a key beneficiary of accelerating AI investment cycles. Notably, the largest customer contributed approximately 56% of revenues, underscoring both the strength and concentration of these relationships.

Accelerating Momentum in Pre-Training Data

A major breakthrough during 2025 has been Innodata’s rapid expansion into pre-training data creation. With only a modest $1.3 million investment, the company developed a capability that is already generating substantial returns. Signed and expected contracts amount to roughly $68 million in potential revenue, most of which should materialize through 2026. This shift reflects a broader industry trend that places increasing emphasis on high-quality pre-training corpora as a competitive differentiator for large language models.

Expansion Into Federal AI Markets

The launch of Innodata Federal marks an important step into U.S. government AI programs. The unit already secured an initial engagement expected to result in around $25 million of revenues, with larger projects under discussion. The addition of General Richard Clarke to the board adds credibility and strategic insight into the defense sector, supporting a long runway for federal AI adoption.

Governments across multiple regions are seeking sovereign control over AI systems. Innodata is engaged in advanced discussions with several sovereign AI programs in Asia and the Middle East. These discussions represent government-backed, large-scale initiatives that could shape a new growth leg for the company in 2026 and beyond.

Strengthening Enterprise AI and Agentic AI Capabilities

Innodata is leveraging insights from hyperscalers to support enterprise customers in deploying generative AI across products and operations. The company is actively working on workflow automation, safety evaluation, analytics integration and multistep autonomous agents. These capabilities position Innodata to benefit not only from AI model builders but also from the much larger enterprise adoption cycle.

Headwinds of INOD Investors Should Consider

Customer concentration remains the most prominent risk. With more than half of third-quarter 2025 revenues coming from a single customer, any slowdown, delay or cancelation would have a noticeable impact on financial performance. While Innodata is expanding its roster of hyperscalers, the near-term exposure remains significant.

Valuation is another challenge. With the stock trading at roughly 48.83X forward 12-month earnings, Innodata carries a substantial premium to its industry average of 17.4X. This valuation reflects high expectations, and the market has little tolerance for execution missteps.

INOD’s P/E Ratio (Forward 12-Month) vs. Industry

Image Source: Zacks Investment Research

The at-will nature of many contracts introduces unpredictability. Innodata invests ahead of anticipated demand, including absorbing excess capacity costs as it prepares for large-scale opportunities. Management noted that these costs will likely continue until revenue ramps from recently initiated programs.

Finally, competition in AI data services is intensifying. Although Innodata believes only a few firms can scale to $50 million or $100 million project sizes, the rapid influx of AI service providers presents ongoing market pressure.

Where INOD Stands in the AI Data & Services Landscape

A clearer view of Innodata’s competitive landscape emerges when comparing it with Accenture (ACN Quick QuoteACN - Free Report) and Cognizant (CTSH Quick QuoteCTSH - Free Report) —two companies deeply involved in AI services, data operations and digital transformation. Accenture competes with Innodata in enterprise AI consulting, and Accenture increasingly appears in large-scale generative AI deployment projects that overlap with Innodata’s emerging enterprise AI practice. Cognizant often competes with Innodata in data engineering, AI lifecycle support and digital operations, and it continues expanding its AI delivery capabilities across hyperscaler ecosystems.

Is the Pullback an Opportunity?

The recent decline does not appear to reflect weakening fundamentals. Instead, it seems tied to short-term sentiment and valuation compression across AI-linked stocks. The company sits at the center of several structural AI trends, including hyperscaler spending, pre-training data, model safety, federal and sovereign AI development and enterprise AI adoption. Record results in the third quarter, rising estimates and a strong financial foundation point toward continued advancement. As of the third quarter of 2025, Innodata held $73.9 million in cash and short-term investments with no debt. This strong balance sheet gives the company financial flexibility to fund new initiatives, absorb temporary project fluctuations and support scaling efforts as demand increases.

While volatility may persist and concentration risks remain real, the long-term story appears intact. For investors who believe in the AI infrastructure theme and can withstand near-term fluctuations, Innodata’s pullback offers a compelling setup supported by a strengthening growth trajectory and a top-tier Zacks Rank. Currently, INOD sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.