Assessing RGP's Strategic Turnaround: Can Cost Discipline and AI-Driven Refocus Restore Growth?

The question of whether RGP (Resources Connection) can rekindle growth through cost discipline and AI-driven transformation hinges on two critical factors: the efficacy of its operational restructuring and its ability to bridge the widening gap between AI ambition and readiness. As the firm navigates a challenging macroeconomic environment-marked by prolonged client decision-making cycles and global trade uncertainties-its strategic pivot toward digital transformation and workforce development offers both promise and peril.

Cost Discipline: A Double-Edged Sword

RGP's Q4 2025 earnings report reveals a revenue decline to $139.3 million, down from $148.2 million in the prior year, amid macroeconomic headwinds. While the company maintained a robust gross margin of 40.2%, its SG&A expenses surged to $50.6 million, driven by restructuring costs and ERP system implementation. This underscores a paradox: cost discipline, while essential for long-term efficiency, incurs short-term pain. The $69.0 million non-cash goodwill impairment charge further signals structural fragility, raising questions about the sustainability of its asset base.

Yet, RGP's leadership appears to recognize that cost-cutting alone is insufficient. The firm's focus on modernizing enterprise systems-such as ERP integration-aligns with broader industry trends where CFOs allocate 57% of capital to technology and operational efficiency. However, the immediate financial toll of these initiatives suggests a high-stakes bet: will the long-term gains in automation and data-driven decision-making offset the near-term losses?

AI-Driven Transformation: Bridging the Ambition-Readiness Divide

RGP's strategic emphasis on AI readiness is both timely and ambitious. According to its June 2025 CFO Survey, 66% of CFOs anticipate significant AI ROI within two years, yet only 14% report measurable value today. This "AI Foundational Divide" is rooted in fragile data architectures, legacy systems, and workforce skill gaps- challenges RGP itself identifies as central to its consulting offerings.

The firm's positioning as a bridge between AI aspiration and execution is astute. For instance, 91% of organizations plan to increase workforce investment in 2025, with 46% prioritizing reskilling. RGP's focus on cross-functional talent strategies and governance frameworks mirrors the needs of clients struggling to operationalize AI. However, the firm's own AI initiatives face hurdles. The same survey notes that 86% of CFOs cite legacy systems as a barrier to AI readiness, a problem RGP must address internally while advising clients.

Industry Benchmarks: A Mixed Landscape

RGP's AI strategy must also contend with uneven industry progress. In financial services, 85% of firms now apply AI to fraud detection and risk modeling, yet regulatory scrutiny intensifies as algorithmic bias and cybersecurity risks emerge. RGP's advocacy for "governance-first" AI adoption- emphasizing explainable AI (XAI) and reusable frameworks-aligns with sector demands. However, large enterprises ($10B+ revenue) outpace mid-market firms in AI readiness, suggesting RGP's mid-market clients may lag in adopting the very solutions it promotes. According to the same survey, this gap persists across industry segments.

Strategic Risks and Opportunities

The path forward for RGP is fraught with duality. On one hand, its focus on cost discipline and AI readiness positions it to capitalize on a $10B+ market for digital transformation consulting. On the other, the firm's financial performance in Q4 2025-marked by declining revenue and a goodwill impairment-highlights operational vulnerabilities. The success of its ERP implementation and AI-driven consulting services will determine whether these investments translate into sustainable growth or exacerbate short-term losses.

For investors, the key question is whether RGP can balance the immediate costs of transformation with the long-term benefits of AI adoption. The firm's ability to help clients navigate data trust issues, legacy systems, and workforce reskilling will be critical. If RGP can demonstrate measurable ROI for its clients-and, by extension, its own operations-it may yet emerge as a leader in the AI-driven CFO agenda.

Conclusion

RGP's strategic turnaround is a high-stakes gamble. While its focus on cost discipline and AI readiness aligns with macro trends, the firm must navigate a treacherous landscape of macroeconomic volatility, structural operational challenges, and a widening gap between AI ambition and execution. For now, the jury is out on whether these initiatives will restore growth-or deepen the firm's vulnerabilities. Investors would be wise to monitor RGP's Q1 2026 results closely, particularly the traction of its ERP system and the scalability of its AI consulting offerings.