Innodata jumps over 30% on strong financials and Big Tech client news

Quotes on Innodata, a provider of IT services and enterprise software, surged more than 35% in premarket trading today, Friday, November 8. For the third quarter, the company comfortably doubled its top line year over year, while net income came in 43 times the amount in the previous-year period. Innodata also announced that it had secured new Big Tech clients and raised its 2024 revenue guidance, now expecting around 90% year-over-year growth.

Details 

In premarket trading today, as of this writing, Innodata stock jumped as high as 37% to $33.40 per share. Yesterday, Thursday, November 7, it ended the day up 1.08% at $24.34 per share, marking its highest-ever closing price. Since the beginning of 2023, Innodata has nearly tripled in market value.

Yesterday, Innodata released third-quarter financial results: revenue surged a record 135.5% year over year to $52.2 million, while net income skyrocketed to $17.4 million, 43 times the $0.40 million posted a year ago. Adjusted EBITDA jumped 337% to $13.9 million.

For the full-year 2024, the company guides for revenue to grow 88–92% compared to 2023, when the top line stood at $86.8 million (up 10% year over year). Innodata added that it currently has $26.4 million in cash, about $10 million higher than the previous quarter. Its strong balance sheet, the company believes, enables it to invest in growth.

Analyst insights 

Innodata develops generative AI and large language models (LLMs) for training other companies’ AI. According to its earnings, its client list now includes five members of the Magnificent Seven, like Google, Amazon, and Microsoft. In the third quarter, Innodata also won a “prominent social media company” as a client. Without disclosing the name, it revealed that this company had become its eighth Big Tech client.

For a long time, Innodata had been considered a slow-growth company, the Motley Fool noted. However, following a pivot to AI in 2019, its revenue grew at a CAGR of 12% in the period until 2023. “Increasing investments by the world’s largest tech companies in generative AI and LLMs will continue to be a growth catalyst for Innodata,” CEO Jack Abuhoff was quoted as saying in the third-quarter earnings report. 

According to MarketWatch, all three analysts covering Innodata recommend buying it (two “buy” ratings and one “overweight”). Their average target price is $34 per share, indicating nearly 40% upside versus the last closing price.