Korn Ferry's Q1 2026 Earnings Call: Contradictions in Executive Search Growth, Digital Revenue, and TalentSuite Timelines

The above is the analysis of the conflicting points in this earnings call

Date of Call: September 16, 2025

Financials Results

• Revenue: $709M fee revenue, up 5% YOY
• EPS: $1.31 adjusted diluted EPS, up 11% YOY
• Operating Margin: 17% adjusted EBITDA margin, up 50 bps YOY

Guidance:

• Q2 FY26 fee revenue expected at $690M–$710M.
• Adjusted EBITDA margin expected at ~17%–17.5%.
• Adjusted diluted EPS expected at $1.23–$1.33.
• GAAP diluted EPS expected at $1.10–$1.16.
• GAAP EPS includes ~$10M (~$0.14/share) accelerated depreciation as legacy platform sunsets with November TalentSuite launch.
• Outlook assumes no further changes in geopolitical, economic, financial markets, or FX conditions.

Business Commentary:

• Revenue Growth and Strategic Diversification:
• Korn Ferry reported consolidated fee revenue growth of 5% year-over-year, reaching $709 million in Q1 fiscal 2026.

• This growth was supported by a diversified business model that includes loyal, repeatable clients generating almost 40% of revenue, a 10-year revenue CAGR of 10%, and strong top-line synergies with 25% of revenue from cross-solution referrals.

• Regional Performance and Economic Uncertainties:

• Fee revenue in the Americas was down 2% year-over-year, while EMEA and APAC saw growth of 19% and 12% respectively.

• The disparity in regional performance was influenced by economic uncertainties, particularly in the Americas, where businesses remain cautious due to lingering geopolitical tensions and unresolved tariff issues.

• Digital Subscription and Licensing Growth:

• Digital subscription and licensed new business grew 10% year-over-year in Q1, contributing 39% of total digital new business.

• This growth is attributed to the increasing adoption of digital solutions and integrated, at-scale solutions that facilitate broader client engagement and scalability.

• Expertise and Solution Expansion:

• Korn Ferry's emphasis on integrated solutions and its consulting-led approach resulted in notable engagements, such as a multi-year engagement with a top pharma company and partnerships with HCM providers.
• This strategic focus on expanding expertise and solutions has enhanced Korn Ferry's ability to provide comprehensive talent and organizational performance solutions, contributing to stronger client relationships.

Sentiment Analysis:

• Management highlighted resilient growth and profitability: fee revenue grew 5% YOY to $709M, adjusted EBITDA rose 8% to $120M (margin up 50 bps to 17%), and adjusted diluted EPS increased 11% to $1.31. EMEA grew 19% YOY and APAC 12% YOY with broad-based strength. Leadership emphasized optimism and durable strategy despite macro uncertainty and issued measured guidance.

Q&A:

• Question from Trevor Romeo (William Blair): What milestones and timeline should we expect for the TalentSuite launch and when benefits show in financials?
  Response: Benefits should materialize by late calendar 2026; key milestones include deepening HCM partnerships, training ~1,800 consultants over six months, and targeted rollout to marquee/diamond accounts.

• Question from Trevor Romeo (William Blair): Long-term goal for Digital subscriptions as a percentage of segment revenue?
  Response: Target is north of 60%, driven by scaled partnerships with large HCM players.

• Question from Trevor Romeo (William Blair): Q2 guidance implies slight sequential dip despite typical seasonal strength—conservatism?
  Response: Yes; guidance is set conservatively given macro uncertainties.

• Question from Tobey O’Brien Sommer (Truist Securities): What are customers telling you about demand and the macro backdrop?
  Response: Sentiment is mixed: EMEA/APAC are strong, the U.S. is cautious; cost inflation and AI’s workforce impact are key themes; industrials and private equity are strong, life sciences/healthcare softer.

• Question from Tobey O’Brien Sommer (Truist Securities): Are you participating in increased M&A/divestiture consulting activity?
  Response: Yes, in select engagements, with larger activity skewed to private equity portfolios.

• Question from Tobey O’Brien Sommer (Truist Securities): Do you have capacity if demand accelerates, or will you need to hire and pressure margins?
  Response: There is capacity; AI/GenAI initiatives should boost throughput, limiting the need for rapid hiring.

• Question from Sammy on behalf of George Tong (Goldman Sachs): How did Consulting new business perform and what’s the outlook?
  Response: Consulting new business was positive; backlog is growing with more large, multi-year deals; expect continued EMEA/APAC momentum and a tougher Americas.

• Question from Sammy on behalf of George Tong (Goldman Sachs): Why reduce Digital headcount ahead of TalentSuite?
  Response: Workforce was rebalanced to enable firmwide delivery; focus shifts to 1,800 consultants selling and delivering the platform versus standalone Digital sellers.

• Question from Joshua K. Chan (UBS Investment Bank): Why is North American Executive Search growing despite a softer macro?
  Response: Demographic retirements, post-COVID leadership reassessment, and elevated C-suite turnover are supporting demand.

• Question from Joshua K. Chan (UBS Investment Bank): How do you win in a weaker environment?
  Response: Lean into a one-firm, integrated solutions model as clients seek guidance amid AI-driven change and uncertainty.

• Question from Mark Steven Marcon (Robert W. Baird & Co.): Can you elaborate on the large HCM client program?
  Response: It’s a multi-year leadership development engagement combining licensed IP with consulting, assessments, and coaching to transform workforce skills and mindset.

• Question from Mark Steven Marcon (Robert W. Baird & Co.): How large can these programs be?
  Response: Typically several million dollars over multiple years; service consumption is paced by clients, contributing to rising Consulting backlog.

• Question from Mark Steven Marcon (Robert W. Baird & Co.): What’s your M&A posture in Professional Search and Interim?
  Response: Prioritize Interim acquisitions and international expansion; avoid contingent search as it conflicts with brand and marquee/diamond strategy.

• Question from Mark Steven Marcon (Robert W. Baird & Co.): How are you investing in AI and what’s the impact on efficiency/headcount?
  Response: Centralized ~40 AI/GenAI specialists under a leader; rolling out role-based licenses; focus on ‘human + AI’ efficiency now, with agents to integrate into workflows later—boosting capacity and gradually impacting headcount.