8-K: Kelly Services Reports Q2 2026 Earnings, Revenue Declines

Kelly Services announced second-quarter 2026 results, reporting a revenue of $1.0 billion, a 5.8% decrease year-over-year, with an improved underlying revenue decline of 0.6%.

Summary

• Kelly Services reported second-quarter 2026 revenue of $1.0 billion, a 5.8% decrease compared to the prior year, with underlying revenue decline improving to 0.6% after excluding discrete impacts.
• Operating earnings for Q2 2026 were $16.1 million, down from $22.2 million in Q2 2025.
• Adjusted EBITDA for the quarter was $31.1 million, a 15.9% decrease year-over-year, but the adjusted EBITDA margin improved 110 basis points versus the prior quarter to 3.0%.
• For the first six months of 2026, revenue was $2.1 billion, an 8.3% decrease year-over-year, with an underlying revenue decline of 2.0%.
• The company has increased its fiscal 2026 revenue outlook to a low-to-mid-single digit decline and affirmed its adjusted EBITDA margin expectation of modest year-over-year growth.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this as a slightly negative sentiment due to declining revenues and earnings, despite improvements in year-over-year decline rates and a positive outlook for the latter half of the year.

Positives

• Underlying revenue decline improved by approximately 500 basis points versus the prior quarter.
• Underlying revenue performance shows strength in ETM and SET segments, each improving at least 300 basis points versus the prior quarter.
• Adjusted EBITDA margin improved 110 basis points year-over-year versus the prior quarter, reaching 3.0%.
• Company increases its fiscal 2026 revenue outlook to a low-to-mid-single digit decline.
• Affirms adjusted EBITDA margin expectation of modest year-over-year growth driven by accelerating underlying revenue growth and operating efficiencies.
• SET revenue grew sequentially for the first time in over two years.
• Technology modernization efforts, including the launch of an enterprise-wide CRM system, are on track.

Negatives

• Total revenue for Q2 2026 decreased by 5.8% to $1.0 billion compared to Q2 2025.
• Operating earnings decreased by 27.5% to $16.1 million in Q2 2026 compared to Q2 2025.
• Adjusted EBITDA decreased by 15.9% to $31.1 million in Q2 2026 compared to Q2 2025.
• Net earnings for Q2 2026 were $11.4 million, a 40.0% decrease from $19.0 million in Q2 2025.
• Diluted earnings per share decreased to $0.31 in Q2 2026 from $0.52 in Q2 2025.
• For the first six months of 2026, revenue decreased by 8.3% to $2.1 billion.
• For the first six months of 2026, net earnings decreased by 77.8% to $5.5 million.
• For the first six months of 2026, diluted earnings per share decreased to $0.15 from $0.67.

Risks

• Changing market and economic conditions.
• Disruption in the labor market and weakened demand for human capital due to technological advances, competitive pressures, and pricing.
• Loss of large corporate customers and government contractor requirements.
• Impact of laws and regulations, including federal, state, and international tax laws.
• Unexpected changes in claim trends on workers' compensation, unemployment, disability, and medical benefit plans.
• Litigation and other legal liabilities in excess of estimates.
• Cyberattacks or other breaches of network or information technology security.

Future Outlook

The company has increased its fiscal 2026 revenue outlook to a low-to-mid-single digit decline and affirmed its adjusted EBITDA margin expectation of modest year-over-year growth. For Q3 2026, underlying revenue growth is expected to be 1% to 2%, with total revenue flat to a 2% decline, and adjusted EBITDA margin in the low 2% range. For Q4 2026, mid-to-upper single digit revenue growth and approximately 200 bps of year-over-year adjusted EBITDA margin expansion are expected.

Management Comments

• In the second quarter, we measurably exceeded our guidance for both revenue and adjusted EBITDA margin driven by growing momentum from our growth and efficiency initiatives as well as constructive demand trends in parts of our portfolio.
• We delivered sequential improvements in each of our businesses as we continued to capitalize on organic growth drivers.
• Notably, Kellys adjusted EBITDA margin returned to 3.0% in the quarter, demonstrating our ability to generate operating leverage in pursuit of growth.
• Our progress strengthens our conviction in our strategy and reinforces our confidence in our expectation of further measurable improvement in our year-over-year performance as we progress through the second half of the year.

Industry Context

StockSavvy.ai notes that Kelly Services operates in the competitive talent solutions and staffing industry, which is sensitive to macroeconomic conditions and labor market dynamics. The reported revenue decline aligns with broader trends of cautious hiring and economic recalibration seen in parts of the industry, while the sequential improvements and positive outlook suggest resilience and strategic execution.

Comparison to Industry Standards

• The reported Q2 2026 revenue decline of 5.8% is a significant factor when compared to industry peers. While specific comparable companies are not detailed in the filing, general industry trends for Q2 2026 would need to be assessed to determine if this decline is an outlier or in line with sector performance.
• The improvement in adjusted EBITDA margin by 110 bps year-over-year versus the prior quarter, reaching 3.0%, indicates effective cost management. Industry benchmarks for EBITDA margins in the staffing sector vary, but this sequential improvement is a positive indicator of operational efficiency.
• The company's increased revenue outlook for the full year 2026 (low-to-mid-single digit decline) suggests a more optimistic view than some industry forecasts might predict, especially if competitors are facing steeper declines.
• The focus on technology modernization and AI innovation is a key strategic imperative across the staffing industry, aiming to improve efficiency and service delivery. Kelly's launch of an enterprise-wide CRM system is a concrete step in this direction, comparable to initiatives by other large players in the market.

Stakeholder Impact

• Shareholders may be concerned by the year-over-year decline in revenue and earnings, although the improved underlying revenue trends and positive outlook may offer some reassurance.
• Employees may see continued focus on efficiency and technology modernization, potentially impacting roles and required skills.
• Customers may benefit from improved service delivery through technology investments, but could also be affected by shifts in demand or specific segment performance.
• Suppliers may experience fluctuations in business volume based on Kelly's overall performance and segment-specific demand.

Next Steps

• Continue to capitalize on organic growth drivers across the business.
• Integrate legacy acquisitions to capture revenue and cost synergies.
• Enhance go-to-market approach to strengthen large account management and expand new customer acquisition.
• Advance technology modernization and AI innovation.
• Execute on Q3 and Q4 2026 financial outlook targets.

Key Dates

Recommendation

The company is showing signs of stabilization and improvement in underlying trends, with an optimistic outlook for the second half of the year. However, the continued year-over-year revenue and earnings decline in the reported quarter warrants a cautious approach. A 'hold' recommendation reflects the balance between the negative current results and the potential for recovery indicated by management's guidance and strategic initiatives.

Keywords

talent solutions, staffing, revenue, earnings, EBITDA, financial results, outlook, operations