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    LAW
    Earnings call· Jun 2026(Q2 FY26)

    CS Disco Q2 FY26 earnings call LAW

    Aug 5, 2026 Source

    Executive summary

    CS Disco Q2 FY26 — Strong AI Adoption and Unified Litigation Solution Launch

    CS Disco delivered strong Q2 FY26 results, driven by increased adoption of its AI capabilities and the new DISCO platform. The company launched its ambitious Unified Litigation Solution, aiming to integrate facts and law for litigators, marking a significant strategic evolution beyond Ediscovery. Management remains focused on deepening customer relationships and scaling AI offerings while navigating potential short-term revenue shifts from new pricing models.

    Highlights

    5

    • Total revenue increased 13% year-over-year to $43.1 million.

    • Software revenue grew 13% year-over-year to $36.8 million.

    • Services revenue rose 18% year-over-year to $6.3 million.

    • The number of customers generating over $100,000 in the last 12 months grew to 354, representing 77% of total revenue.

    • Revenue attributable to generative AI and agentic AI capabilities more than tripled year-over-year.

    Concerns

    4

    • Adjusted EBITDA was negative $3.4 million, representing a negative 8% margin, compared to negative 7% in Q2 of the prior year.

    • Net loss was $3.6 million or 8% of revenue, compared to $2.8 million or 7% in Q2 of the prior year.

    • Net loss per share was $0.06, compared to $0.04 in Q2 of the prior year.

    • Potential for short-term revenue impacts from lower ingest fees due to the adoption of the new DISCO platform.

    Guidance & targets

    7
    CategoryTargetConfidence
    Total Revenue
    $43.75M to $45.75M
    high materiality
    High
    Software Revenue
    $38.1M to $39.1M
    medium materiality
    High
    Adjusted EBITDA
    negative $1.75M to negative $0.25M
    high materiality
    High
    Total Revenue
    $172M to $179M
    high materiality
    High
    Software Revenue
    $147.5M to $152.5M
    medium materiality
    High
    Adjusted EBITDA
    negative $8M to negative $5M
    high materiality
    High
    Adjusted EBITDA profitability
    positive
    high materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Total Company
    Overall revenue performance for the quarter.
    		$43.1M13%——
    Software
    Software revenue growth.
    		$36.8M13%——
    Services
    Services revenue growth, driven by professional services and Auto Review-related managed review work.
    		$6.3M18%——

    Operational metrics

    11
    Non-GAAP Gross Margin
    76%76% in Q2 FY25
    Q2 FY26

    Gross margin remained stable year-over-year.

    Sales and Marketing Expense
    $15.7M
    Q2 FY26

    Sales and marketing expense as a percentage of revenue remained consistent year-over-year.

    Research and Development Expense
    $13.4M
    Q2 FY26

    Dollar increase reflects continued investment in Unified Litigation Solution, Advanced Research, and Auto Review.

    General and Administrative Expense
    $7.7M
    Q2 FY26

    General and administrative expense as a percentage of revenue decreased year-over-year.

    Adjusted EBITDA
    negative $3.4M
    Q2 FY26

    Adjusted EBITDA for the quarter.

    Adjusted EBITDA Margin
    negative 8%negative 7% in Q2 FY25
    Q2 FY26

    Adjusted EBITDA margin for the quarter.

    Net Loss
    $3.6M$2.8M in Q2 FY25
    Q2 FY26

    Net loss for the quarter.

    Net Loss Per Share
    $0.06$0.04 in Q2 FY25
    Q2 FY26

    Net loss per share for the quarter.

    Cash and Short-Term Investments
    $101.4M
    Q2 FY26

    Balance sheet position at the end of the quarter, with no debt.

    Customers generating >$100K (LTM)
    354up 15% YoY
    LTM Q2 FY26

    Growth in large customer segment, contributing significantly to total revenue.

    Revenue attributable to generative AI and agentic AI capabilities
    more than tripledYoY
    Q2 FY26

    Strong growth in AI-driven revenue, with Cecilia and Auto Review as key drivers.

    Industry KPIs

    4
    MetricValueDetails
    Revenue growth$43.1MUSD
    Customer account count354customers
    Operating FCF margin rule of 40-2.55%%
    Ai product adoption monetizationmore than tripledYoY growth

    Product announcements

    2
    ProductTypeDetails
    Unified Litigation Solutionlaunch
    Advanced Researchexpansion

    Risks & headwinds

    1
    Potential short-term revenue impacts from lower ingest fees due to DISCO platform adoptionShort-term

    Not seen a meaningful drag on results to date, but may in the future.

    Mitigation: Expected to be offset over time by ongoing fees from the DISCO platform and by larger, longer, and more complex matters it attracts, leading to a positive long-term revenue profile.

    What to watch in Q3 FY26

    5

    Adjusted EBITDA profitability

    Q4 FY26
    CurrentNegative $3.4M (Q2 FY26)
    TargetPositive

    Why it matters

    Achieving Adjusted EBITDA positive status is a key financial milestone, indicating improved operational efficiency and progress towards sustainable profitability.

    We remain on track to be adjusted EBITDA positive in Q4 of this year.

    Q&A highlights

    6

    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

    2 min read5 chapters

    Detailed Narrative

    01

    Unified Litigation Solution Launch

    Disco announced a new Unified Litigation Solution, marking a strategic expansion beyond Ediscovery to serve the comprehensive needs of litigators with purpose-built AI. This solution aims to integrate evidence and controlling law within a single interface, covering legal facts, case strategy, and trial preparation. It leverages Disco's Ediscovery database, including metadata and work product, alongside a licensed corpus of U.S. case law, court rules, statutes, and regulations. The system is designed to reason like a litigator, mapping claims to legal elements and evaluating evidence, and is currently in a pilot phase with select customers on live matters.

    02

    Accelerating AI Adoption and Impact

    The company reported significant growth in the adoption of its generative AI and agentic AI capabilities, with revenue attributable to these features more than tripling year-over-year. Cecilia and Auto Review were key drivers, with Auto Review experiencing a material increase in Q2 due to pipeline growth, larger matters, and repeat usage. Advanced Research, another agentic AI capability, is gaining traction and is slated for rollout to all customers in the coming weeks, promising deeper insights for complex matters.

    03

    DISCO Platform Exceeds Expectations

    The new commercial model, the DISCO platform, has significantly outpaced internal goals, achieving its December 2026 year-end run rate by June. This success is attributed to its straightforward pricing and the inclusion of Cecilia AI, which attracts more and larger matters to the platform. While acknowledging potential short-term revenue impacts from lower ingest fees, management expects the platform to increase the lifetime value of each matter, representing a positive long-term trade-off for the business.

    04

    Growth in Large Customers and Matters

    CS Disco continues to strengthen relationships with its largest customers and secure increasingly complex matters. The number of customers generating over $100,000 in the last 12 months increased to 354, contributing 77% of total revenue, a 15% year-over-year growth. Larger matters are particularly valuable, as they generate more revenue, expand with case development, remain on the platform longer, and drive higher AI adoption and usage.

    05

    Enhanced Sales Productivity and Go-to-Market Strategy

    Sales efficiency has notably improved over recent quarters, driven by an integrated go-to-market approach that empowers law firm customers to market DISCO internally and to their corporate clients. This strategy, combined with a focus on larger, strategic matters, a 'with you in every case' services model, targeted ideal matter profiles, and continuous innovation in AI capabilities, has led to increased productivity among the sales team. The new DISCO platform pricing has also contributed to this efficiency.

    AI-generated summary of the company’s earnings call. Not investment advice.