8-K: CS Disco Reports Q1 2026 Results, Revenue Up 14%

CS Disco announced its first quarter 2026 financial results, showing a 14% year-over-year increase in total revenue to $41.9 million and a reduced net loss.

Summary

• CS Disco reported total revenue of $41.9 million for the first quarter ended March 31, 2026, a 14% increase compared to the same period in 2025.
• Software revenue for the quarter was $34.7 million, up 12% year-over-year.
• The company reported a GAAP net loss of $9.6 million, an improvement from a $11.4 million net loss in Q1 2025.
• Adjusted EBITDA was $(3.5) million, showing a 32% improvement from $(5.1) million in the prior year's first quarter.
• The number of customers with revenue exceeding $100,000 grew by 9% to 347 as of March 31, 2026, compared to March 31, 2025.
• The company provided financial outlook for the second quarter and full year 2026, projecting total revenue between $41.5 million - $43.5 million for Q2 and $169.25 million - $178.75 million for the full year.

Sentiment

Score: 6

Explanation: StockSavvy.ai views this as a moderately positive report, with solid revenue growth and improved profitability metrics, though the company still operates at a net loss.

Positives

• Total revenue increased by 14% year-over-year to $41.9 million.
• Software revenue grew by 12% year-over-year to $34.7 million.
• GAAP net loss decreased to $9.6 million from $11.4 million in the prior year's quarter.
• Adjusted EBITDA improved by 32% to $(3.5) million from $(5.1) million.
• Customer base with over $100,000 in revenue increased by 9% to 347.
• The company highlights customer reception to its new all-inclusive platform and advanced AI capabilities.

Negatives

• The company continues to report a net loss, with a GAAP net loss of $9.6 million for the quarter.
• Adjusted EBITDA remains negative at $(3.5) million, although improved.
• Total operating expenses increased to $41.176 million from $39.760 million in the prior year's quarter.

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 timing.
• Potential for computer system failures, security breaches, or data privacy issues.
• Competition from existing players and new market entrants.
• Impact of general macroeconomic conditions, inflation, and interest rates.
• Unfavorable conditions in the legal industry, including reduced regulatory enforcement or government shutdowns.

Future Outlook

For the second quarter of 2026, CS Disco projects software revenue between $36.1 million - $37.1 million and total revenue between $41.5 million - $43.5 million, with Adjusted EBITDA between $(4.5) million - $(2.5) million. For the full fiscal year 2026, the company anticipates software revenue in the range of $146.0 million - $152.5 million and total revenue between $169.25 million - $178.75 million, with Adjusted EBITDA between $(8.0) million - $(4.0) million.

Management Comments

• "This was another quarter of strong execution with accelerating total revenue, customer growth, and progress towards profitability," said Eric Friedrichsen, CEO.
• "With the enthusiastic customer reception to our new all-inclusive DISCO platform and the excitement around our advanced agentic AI capabilities, our progress in the first quarter has helped further differentiate DISCO as a continued innovator in the industry and a clear leader in AI for litigation."

Industry Context

StockSavvy.ai notes that CS Disco's performance, with a 14% revenue increase and focus on AI, aligns with the broader legal technology sector's trend towards AI integration and platform consolidation to drive efficiency and innovation in litigation processes.

Management Changes

Legal Proceedings

• Expenses associated with stockholder litigation are mentioned as a factor in Adjusted EBITDA reconciliation.

Stakeholder Impact

• Shareholders: Potential for increased value due to revenue growth and improved profitability metrics, offset by continued net losses.
• Employees: Continued investment in AI and platform innovation may lead to new opportunities and job growth.
• Customers: Benefit from advanced AI capabilities and an all-inclusive platform designed for efficiency.
• Partners: Opportunities for ecosystem growth and strategic relationship maintenance.

Next Steps

• Continue to execute on platform and AI capabilities.
• Focus on customer acquisition and increasing usage with existing customers.
• Expand sales coverage and establish a digital sales channel.
• Pursue international expansion.
• Grow the partner ecosystem.
• Expand offering portfolio to a wider range of legal processes.

Key Dates

Recommendation

The company shows positive revenue growth and improving profitability metrics, but continues to operate at a net loss. The outlook is cautiously optimistic, but the inherent risks in the legal tech sector and the company's history of losses warrant a 'hold' recommendation until sustained profitability is demonstrated.

Keywords

CS Disco, Legal Tech, eDiscovery, AI Litigation, Financial Results, Q1 2026, Revenue Growth, Adjusted EBITDA