8-K: CS Disco Reports 13% Revenue Growth in Q2 2026

CS Disco announced second quarter 2026 financial results, reporting a 13% year-over-year increase in total revenue to $43.1 million, alongside the launch of a new unified litigation solution.

Summary

• CS Disco reported total revenue of $43.1 million for the second quarter of 2026, a 13% increase compared to the same period in 2025.
• Software revenue also grew by 13% year-over-year, reaching $36.8 million.
• The company reported a GAAP net loss of $8.7 million for the quarter, an improvement from $10.8 million in Q2 2025.
• Adjusted EBITDA was $(3.4) million, a slight increase in loss compared to $(2.7) million in Q2 2025.
• DISCO announced the launch of a new unified litigation solution designed to provide litigators with instant access to critical information within a single AI-native application.
• The number of customers with revenue exceeding $100,000 grew by 10% to 354 as of June 30, 2026.
• The company provided financial outlook for Q3 2026 and the full fiscal year 2026, projecting continued revenue growth.

Sentiment

Score: 6

Explanation: StockSavvy.ai views this as a moderately positive report, with revenue growth and a new product launch offsetting continued net losses and a slight increase in Adjusted EBITDA loss.

Positives

• Total revenue increased by 13% to $43.1 million in Q2 2026 compared to Q2 2025.
• Software revenue increased by 13% to $36.8 million in Q2 2026 compared to Q2 2025.
• GAAP net loss improved to $8.7 million in Q2 2026 from $10.8 million in Q2 2025.
• The number of large customers (>$100,000 annual revenue) increased by 10% to 354 as of June 30, 2026.
• Launched a new unified litigation solution, enhancing product offerings with AI capabilities.
• Maintained a consistent non-GAAP gross margin of 76% for the six months ended June 30, 2026.

Negatives

• Adjusted EBITDA was a loss of $(3.4) million in Q2 2026, compared to a loss of $(2.7) million in Q2 2025, indicating a slight worsening of operational profitability on a non-GAAP basis.
• The company continues to report significant GAAP net losses, with $(8.7) million in Q2 2026.
• Cash and cash equivalents decreased from $19.7 million at the end of 2025 to $10.9 million at the end of Q2 2026.
• Net cash used in operating activities was $(12.8) million for the six months ended June 30, 2026.

Risks

• History of operating losses.
• Ability to maintain and advance innovation and brand.
• Ability to effectively add new customers and increase usage with existing customers.
• Dependence on revenue from customer usage, which fluctuates based on legal matter activity.
• Potential for computer or electronic systems, applications, or services to fail or suffer security or data privacy breaches.
• Ability to compete effectively with existing competitors and new market entrants.
• Impact of general macroeconomic conditions, such as inflation and interest rates.
• Impact of unfavorable conditions in the legal industry, including decreased regulatory enforcement or government shutdowns.

Future Outlook

For the third quarter of 2026, DISCO projects software revenue between $38.1 million and $39.1 million, total revenue between $43.75 million and $45.75 million, and Adjusted EBITDA between $(1.75) million and $(0.25) million. For the full fiscal year 2026, software revenue is projected between $147.5 million and $152.5 million, total revenue between $172.0 million and $179.0 million, and Adjusted EBITDA between $(8.0) million and $(5.0) million.

Management Comments

• "This was another strong quarter for DISCO as we continue to deepen our relationships with our largest customers, secure large and complex matters and extend our lead in AI built specifically for litigators," said Eric Friedrichsen, CEO of DISCO.
• "We are also excited to announce our new unified litigation solution that will move DISCO well beyond traditional ediscovery and into delivering full-stack litigation capabilities unlike anything else on the market."

Industry Context

StockSavvy.ai notes that CS Disco's announcement of a unified litigation solution leveraging AI aligns with broader trends in the legal technology sector, where companies are increasingly integrating artificial intelligence to enhance efficiency and provide more comprehensive services beyond traditional eDiscovery.

Management Changes

Legal Proceedings

• Expenses associated with stockholder litigation are noted as an adjustment in the reconciliation from GAAP to Non-GAAP results.

Stakeholder Impact

• Shareholders: Continued revenue growth and product innovation may positively impact long-term shareholder value, though ongoing net losses and a slight increase in Adjusted EBITDA loss require monitoring.
• Customers: The new unified litigation solution aims to provide enhanced capabilities and efficiency for litigators.
• Employees: Stock-based compensation continues to be a significant non-GAAP adjustment, impacting reported profitability.

Next Steps

• Continue to deepen relationships with largest customers.
• Secure large and complex legal matters.
• Extend lead in AI built for litigators.
• Deliver full-stack litigation capabilities with the new unified litigation solution.
• Host conference call and webcast to discuss Q2 2026 financial results and business highlights on August 5, 2026.

Key Dates

Recommendation

The company demonstrates consistent revenue growth and strategic product development with its new AI-powered litigation solution. However, the continued net losses and a slight deterioration in Adjusted EBITDA warrant a cautious 'hold' rating until profitability improves and cash burn is better managed.

Keywords

litigation technology, eDiscovery, AI, legal tech, software revenue, Adjusted EBITDA, unified litigation solution, financial results