Korn Ferry (NYSE:KFY) Beats Revenue Estimates in Q2 FY2026, Provides Cautious Outlook

Korn Ferry (NYSE:KFY) reported financial results for its second quarter of fiscal year 2026 that exceeded analyst expectations on the top line, while adjusted earnings per share came in essentially in line with forecasts. The global organizational consulting firm’s performance, described by leadership as "outstanding," has been met with a modestly positive initial reaction in pre-market trading.

Earnings Snapshot vs. Estimates

The company’s reported results for the quarter ended October 31, 2024, showed continued growth, marking its fourth consecutive quarter of accelerated expansion. The key figures compared to Wall Street expectations are:

• Fee Revenue: $721.7 million reported versus an estimate of approximately $713.0 million.
• Adjusted Diluted EPS: $1.33 reported, nearly matching the consensus estimate of $1.33.

The revenue beat, driven by strong performance in Executive Search and Professional Search & Interim services, suggests robust client demand for Korn Ferry’s talent and organizational consulting services. The in-line EPS result indicates that while revenue growth was healthy, the company managed its cost structure in line with expectations to deliver projected profitability.

Market Reaction and Price Action

Following the earnings release, Korn Ferry shares saw a positive move in pre-market activity, rising approximately 1.7%. This immediate reaction suggests investors viewed the results, particularly the revenue outperformance, favorably. The stock’s performance over recent weeks has been relatively stable, with minimal movement over the past month. The pre-market gain indicates the report may have provided a catalyst for the stock, which had been trading in a narrow range.

Key Highlights from the Quarter

CEO Gary Burnison attributed the strong quarter to accelerated growth led by the firm's largest "Marquee and Diamond" accounts. The results breakdown by solution highlights where the momentum originated:

• Executive Search was a standout segment, with fee revenue jumping 10% year-over-year to $226.0 million, driven by increases in both the number of engagements billed and the average fee per engagement.
• Professional Search & Interim revenue surged 17% to $141.1 million, largely due to the acquisition of Trilogy International.
• Consulting revenue grew 4% to $172.8 million, primarily fueled by a 10% increase in average bill rates.
• The Digital segment saw a slight 2% decline in fee revenue to $91.0 million, while Recruitment Process Outsourcing (RPO) grew 4% to $90.8 million.

Profitability metrics remained solid. Consolidated adjusted EBITDA was $124.8 million, with a margin of 17.3%, essentially flat compared to the prior year. The company also reported a strong backlog, with estimated remaining fees under existing contracts totaling $1.84 billion, up 20% from the year-ago period.

Forward Outlook vs. Analyst Expectations

Management provided guidance for the third quarter of fiscal 2026, which appears cautious relative to existing analyst projections for the period.

• The company expects Q3 fee revenue between $680 million and $694 million. The midpoint of this range ($687 million) is below the current analyst sales estimate of approximately $693.8 million.
• Guidance for adjusted diluted EPS is set between $1.19 and $1.25. The midpoint ($1.22) is meaningfully lower than the analyst EPS estimate of $1.25 for the quarter.

This conservative outlook for the coming quarter may temper some of the initial enthusiasm from the Q2 beat and could be a focal point for investors and analysts on the accompanying conference call. The full-year analyst estimates for fiscal 2026 project revenue of about $2.85 billion and EPS of $5.30.

For a detailed look at Korn Ferry’s historical earnings, future estimates, and analyst projections, you can review the data here.

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