CS Disco (LAW) Q2 FY26 earnings call: guidance and Q&A

What is the customer adoption cycle and pricing model for the new Unified Litigation Solution, and does it require existing Ediscovery implementation?

The company is currently in a learning phase with a small, hand-selected group of customers piloting the solution on live matters. There is no firm pricing or monetization plan yet, as the focus is on understanding how capabilities resonate and how customer business models should shape commercial engagement. It's an ambitious multi-year bet, and revenue from this solution should not be built into models for 2026.

“This is an ambitious multiyear bet and you should definitely hear today's announcement as the first step of a large vision, not the complete answer ready today. As we get further into the pilot and subsequent calls, we'll have much more to share on packaging and timing and certainly update you. But I would have built revenue from the solution into your models yet.”

asked by Scott Berg · answered by Eric Friedrichsen

What drives the confidence in the implied Q4 guidance, which assumes an acceleration in subscription revenues?

Confidence stems from three main factors: strong execution against the strategy of securing more large matters from the largest customers, better-than-expected adoption and performance of the DISCO platform (both pricing and volume), and positive traction with Auto Review, indicating improving AI readiness among customers and the impact of new, easier-to-use capabilities.

“The first thing is execution. Year-to-date, our execution against the strategy around more large matters from our largest customers. we're seeing the success in that. We are expecting that to continue. The second piece is DISCO platform. We talk about how we're excited with the trends we've seen, the adoption we've seen at DISCO platform on not just it's exceeded our expectations, but it's exceeded our expectations from a pricing of volume. And so all the elements that we're expecting, we're seeing deposits come due there. And then on the third piece, is Auto Review. We talked about that as well. We're seeing positive traction there. It seems like AI readiness for our customers is improving, and we're also building new capabilities that make it easier for them do an Auto Review, and we're going to continue to make those investments as well.”

asked by Scott Berg · answered by Unknown Executive

Given the trend of platform openness in software, will Disco need to open its platform as it expands and customers adopt it more?

The executive emphasized the need for deep, comprehensive access to information for litigation, which is fundamentally more complex and adversarial than transactional legal work. Unlike general AI tools that rely on outside connections or limited data, Disco has deep access to both facts and the full legal corpus. This control over data and the ability to build and train on it is a significant differentiator for litigation teams.

“The reality here is we've got access to all of the data, and we've got control over how to use that data, which is a big, big differentiator for us.”

asked by Unknown Analyst · answered by Eric Friedrichsen

Can you describe the expansion motion into corporate legal departments, leveraging law firms as a channel, compared to traditional analog customers?

There's significant upside within the existing customer base, particularly with large law firms where Disco currently holds only 15-20% wallet share. An integrated go-to-market approach enables law firms to market DISCO internally and to their corporate clients. Law firms are increasingly seeking Disco's help to differentiate themselves and demonstrate value to corporate clients through AI, indicating a growing willingness to co-market.

“And so honestly, we made great traction, but I think incredibly -- there's an incredible upside that we haven't even really seen flourish yet. We're making progress, but there's much, much more upside really through enabling these law firms to sell on our behalf.”

asked by Unknown Analyst · answered by Unknown Executive

How much of the DISCO platform's strong traction comes from new logo wins versus expansion with existing customers?

The strong performance of the DISCO platform is a combination of both new customers and existing customers. It has improved consideration for new customers and new large matters within the existing customer base. The platform's competitive and understandable pricing has also led to better close rates and helped preserve margins by reducing the need for excessive discounting.

“So one of them was to improve our consideration. And that's both for new customers, but also for new large matters within our existing customer base. There were many times in the past where customers wouldn't even consider us because they found -- our pricing seems so much more expensive than our competitors. Even if it wasn't, it's just that our model was one that they couldn't understand very well. So we're seeing improved consideration. And then another goal was more -- better close rates because customers are electing to go with Disco because they understand that our pricing is competitive. And then the third thing is preserving our margins.”

asked by Mark Schappel · answered by Eric Friedrichsen

Can you provide an update on sales productivity, particularly whether new sales reps are reaching productivity faster due to easier demonstration of AI capabilities?

Sales efficiency has improved over the past several quarters due to an integrated go-to-market approach enabling law firms to sell on Disco's behalf. Other drivers include increased focus on larger, strategic matters (which have longer lifetimes), the 'with you in every case' services approach, ideal matter profile targeting, and innovation in AI capabilities (Cecilia, Advanced Research, Auto Review). The new DISCO platform pricing has also significantly boosted sales productivity.

“But another thing that allows us to get more efficient is large matters. We've spoken about this in the past. But what's great about selling larger and strategic matters, not only is it more revenue, but they stay on our platform a lot longer, which creates a lot of downstream opportunity for us. And we've had a lot better success with selling large matters because of a few different dynamics.”

asked by Mark Schappel · answered by Eric Friedrichsen