Forrester Research Q1 Earnings Call Highlights

Key Points

• Forrester reported Q1 revenue of $85.5 million (down 5% YoY) and a 3% decline in contract value, but saw improving retention (wallet retention 89%, client retention 78%) and generated about $19 million in free cash flow (≈$25M ex one‑time HQ capex) despite an adjusted operating loss of $0.9 million.
• The company is accelerating its AI strategy with the upgraded Forrester AI model and Microsoft integrations (Teams and Copilot), driving adoption—usage was up 55% and prompt volume up 65%—and management expects private models to capture the majority of future AI revenue.
• Forrester is exiting strategy consulting, raised the low‑to‑midpoint of its 2026 revenue outlook to $350M–$360M, kept operating margin (6–6.5%) and EPS ($0.72–$0.82) guidance intact, and ended the quarter with over $145 million in cash and $35 million of debt.

Forrester Research NASDAQ: FORR reported first-quarter 2026 results that showed improving retention trends and strong free cash flow, even as revenue declined year over year and contract value (CV) remained down. Management also highlighted growing adoption of Forrester AI and continued progress on a strategy to embed its research and AI tools into customers’ workflows through integrations with Microsoft products.

Quarterly performance: retention improves as revenue declines

Chief Executive Officer and Chairman George Colony said the company saw “continuing momentum” in key indicators. Wallet retention improved to 89%, up two points from the prior quarter and up three points from the prior year. Client retention rose to 78%, up one point sequentially and up five points year over year. Colony also said multi-year deals increased to 72% of total CV, up from 71% in the fourth quarter of 2025.

CV declined 3% in the quarter, which Colony described as an improvement from the 6% decline in the prior quarter. Revenue totaled $85.5 million, down 5% from the prior year. Research revenue fell 2%, while consulting revenue declined 13%, which Colony tied to the company’s decision to exit the strategy consulting business in 2026.

Chief Financial Officer Chris Finn said the company generated approximately $19 million in free cash flow during the quarter. Excluding a one-time headquarters capital expenditure of $5.4 million, free cash flow was approximately $25 million. Operating cash flow was $25.6 million and capital expenditures were $6.2 million.

On an adjusted basis, operating expenses decreased 1%, “primarily driven by lower real estate costs,” and Finn said headcount was down 8%. However, he noted those savings were offset by one-time costs “largely associated with the now concluded litigation.” Adjusted operating income fell to negative $0.9 million, compared to $2.5 million a year earlier. Net income was negative $0.7 million, or negative $0.04 per share, versus net income of $2.0 million, or $0.11 per share, in the first quarter of 2025.

Consulting exit and events expectations

Finn said consulting revenue was $18.6 million, down 13% year over year. He attributed most of the decline to strategy consulting, which the company “stopped actively selling early in the quarter.” Finn said Forrester expects to continue delivering existing strategy consulting backlog over the coming quarters and exit the business by year-end.

Events revenue was “insignificant” in the quarter, Finn said, noting the company did not hold events during the period. Still, management cited events as a key driver behind its confidence in CV trends and its outlook for the year.

During the Q&A, Colony attributed management’s confidence in incremental improvements in CV to the events business, pointing to “really good, strong bookings” on the sponsorship side. He also said Forrester’s recent B2B Summit in Phoenix saw “incredibly strong” client engagement and a 10% year-over-year increase in attendees.

AI strategy: private models and “AI computing” drive client demand

Colony spent a significant portion of his remarks on AI trends and how the company is positioning itself. He said Forrester expects clients to face two primary challenges: building private AI models for customers and replacing internal systems such as CRM and financial platforms with new software based on what the company calls “AI computing,” particularly agentic AI.

Colony contrasted public models built by companies such as Anthropic, OpenAI, and Google with private models deployed by large enterprises. He said Forrester believes “approximately 70% of the revenue earned through AI in the future will come from private models, not public models,” citing data sensitivity, regulatory pressure, intellectual property protection, and customer trust as drivers of private model adoption.

Colony also said Forrester’s business tends to benefit when large enterprises undergo major shifts in how they connect with customers or rebuild internal systems, comparing the current AI wave to prior transitions such as mobile, social, and cloud computing.

Forrester AI rollout and Microsoft integrations

Colony said the company upgraded its AI model from the first generation “Izola” to a new generation called Forrester AI. He highlighted three updates: the model is “fully conversational,” it provides more transparency into how responses are generated by surfacing reasoning and underlying research, and it can respond in 197 languages.

In March, Forrester announced that Forrester AI is certified for Microsoft Teams and is available through the Microsoft Marketplace, allowing clients to access it within Teams. Colony also said that at the B2B Summit in Phoenix the company announced clients will be able to work in Microsoft Copilot and receive answers from Forrester AI, integrating those responses with Microsoft tools such as emails, presentations, and documents, enabled through the company’s Model Context Protocol server.

Colony said adoption continued to grow, with overall usage up 55% year over year and prompt volume up 65% in the first quarter, reaching an all-time high.

Chief Product Officer Carrie Johnson told analysts that the product roadmap includes two major priorities:

• Providing “more options in the way that they buy Forrester,” including building on Forrester AI Access and expanding access options and ways to work with senior analysts.
• Continuing major releases of Forrester AI and executing the “where you work strategy” by embedding Forrester AI into additional tools beyond Microsoft offerings.

Johnson added that the Microsoft Teams launch in March was “very well received,” and said Copilot has seen traction “double even that,” noting clients can discover the offering through channels like the Microsoft Marketplace.

Sales changes, AI Access traction, and 2026 guidance

Chief Sales Officer Christophe Favre said his early focus has been on North America and described changes including reorganizing around six industries, redefining territories so top sellers focus on high-potential accounts, and training the sales force to leverage AI to improve productivity and confidence. Favre told analysts these organizational changes have been implemented in North America, and he cited “pocket of growth” in high-tech and “the industry sectors.” He also said the pipeline showed consistency and acceleration driven by interest in Forrester AI and embedded offerings, with particular interest from financial services, agencies, and government customers.

On Forrester AI Access, Colony said the product has “hit our expectations,” supporting win-back efforts and expansion within existing accounts. Finn added that AI Access represented “just under 5%” of CV mix and that the company expects it to approach 10% as it moves through year-end and into 2027. Finn also said CV per client has remained consistent in the 160–162 range and that the company is not seeing cannibalization.

For guidance, Finn said Forrester increased the low to midpoint range of its 2026 revenue outlook while leaving other guidance unchanged. The company now expects 2026 revenue of $350 million to $360 million, down 9% to 12% versus 2025. Finn attributed the higher confidence to improving metrics and “stronger sponsorship bookings for the upcoming events.” The outlook assumes a mid-single-digit decline in research revenue, a low-20% decline in consulting, and a mid-to-high teens decline in events for the year.

Despite the quarter’s one-time expenses, Finn reiterated the company expects operating margins of 6% to 6.5% in 2026 and maintained EPS guidance of $0.72 to $0.82 for the year. He also said the company ended the quarter with more than $145 million in cash and $35 million of debt, and that it extended its credit facility maturity to March 2029. Forrester did not repurchase shares or pay down debt during the quarter.

About Forrester Research NASDAQ: FORR

Forrester Research, Inc is a leading global research and advisory firm that provides insights and guidance to business and technology leaders. Founded in 1983 and headquartered in Cambridge, Massachusetts, the company offers a wide range of services designed to help clients understand market dynamics, evaluate technology investments and develop customer-centric strategies. Forrester's core offerings include syndicated research reports, bespoke advisory services, consulting engagements and data-driven analytics.

Through its extensive research practice, Forrester produces in-depth analyses of emerging technologies, industry trends and best practices across sectors such as information technology, marketing, customer experience and digital business.

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