FTI Consulting’s Crossroads: Navigating Headwinds and Restructuring in 2025

FTI Consulting (NYSE: FTC) has long been a bellwether for corporate turbulence, offering crisis management, restructuring, and litigation support to clients worldwide. Yet in its first-quarter 2025 earnings report, the firm revealed a stark reality: even a titan of disruption is now battling its own. With revenue falling 3.3% year-over-year and shares dropping 2.1% pre-market despite an adjusted EPS beat, FTI’s story has become a cautionary tale of headwinds, restructuring, and the high-stakes gamble of maintaining growth in a contracting market.

The Guidance Holds, But the Ground Is Shifting

FTI’s management chose not to revise its full-year 2025 guidance, a decision reflecting both resolve and uncertainty. CEO Steven Gunby emphasized the firm’s “commitment to navigating disruption,” yet CFO Ajay Sabarwal acknowledged an “incredibly disruptive environment” for clients. The numbers underscore the tension:

• Revenue Misses Expectations: First-quarter revenue totaled $898.3 million, below the $906.9 million consensus estimate. The 3.3% year-over-year decline marked the third consecutive quarter of revenue contraction.
• Segment Weakness: Economic Consulting revenue plunged 12.1%, while Corporate Finance & Restructuring fell 6.1%, driven by a 60% drop in U.S. M&A deal volume—the lowest level in nearly five years.

The Restructuring Gamble: Cost Cuts vs. Client Demand

To offset these pressures, FTI has embarked on aggressive restructuring, cutting 5% of its 8,300-person workforce. The move, which carried a $25.3 million special charge in Q1 alone, aims to generate $85 million in annualized cost savings by 2025. Yet the trade-offs are stark:

• Margin Pressures: While Adjusted EBITDA rose to 12.8% of revenue, key segments like Technology and Corporate Finance saw margins shrink due to lower demand and rising compensation costs.
• Cash Flow Strain: Operating cash use surged 69% to $465.2 million, as higher variable compensation and forgivable loan issuances drained liquidity. Cash reserves fell from $660.5 million to $151.1 million, a red flag for investors.

The Investor Disconnect: Growth vs. Reality

Wall Street’s reaction was telling: shares fell despite an adjusted EPS beat of $2.29 (vs. $1.80 estimates). The disconnect lies in execution risks:

• M&A Dependency: FTI’s reliance on dealmaking is its Achilles’ heel. With U.S. M&A activity at a five-year low, segments like “second request” services—critical to litigation and regulatory work—are starved of demand.
• Competitive Pressures: Firms like Alvarez & Marsal and FTI’s smaller rivals may capitalize on its cost-cutting by poaching talent or undercutting prices.

Betting on the Long Game: AI, Cybersecurity, and Resilience

Management has staked its future on strategic bets. FTI is doubling down on high-growth areas like AI-driven risk analytics, cybersecurity consulting, and regulatory compliance—a shift CEO Gunby calls “depth and breadth of capabilities.”

• Strategic Communications Growth: The segment rose 7.2% to $87 million, fueled by corporate reputation services.
• Forensic & Litigation Resilience: This segment grew 8.3%, highlighting demand for data analytics and risk mitigation.

The Bottom Line: A Gamble on Recovery

FTI’s path forward hinges on two variables: a rebound in M&A activity and the efficacy of its restructuring. The company’s $85 million in cost savings could stabilize margins, but its cash burn and reliance on cyclical markets leave little room for error.

• Positive Signs: Its $1.7 billion share repurchase program signals confidence, and non-GAAP metrics show improvement.
• Risks: If M&A stays muted, the $85 million savings may not offset the 12.1% drop in Economic Consulting revenue.

In the end, FTI’s story mirrors that of many firms in cyclical industries: survival requires agility in cost-cutting and innovation in high-growth niches. For now, investors are betting on the latter—hoping that FTI’s pivot to AI and cybersecurity can outweigh its dependence on a stagnant M&A market. The jury, however, remains out.

Conclusion: A Delicate Balance

FTI Consulting’s Q1 results underscore a company at a crossroads. With its restructuring yielding cost savings and strategic bets in emerging fields, it has a path to recovery. Yet its reliance on M&A activity—a sector showing no signs of revival—poses existential risks.

The numbers tell the tale:
- Revenue Decline: 3.3% year-over-year, with no near-term growth catalysts.
- Margin Gains: Adjusted EBITDA up to 12.8%, but uneven across segments.
- Cash Burn: A $465 million operating cash outflow signals liquidity strains.

Investors must weigh whether FTI’s long-term bets—$85 million in annualized savings, AI-driven services—can offset its current struggles. For now, the stock’s 20.8x P/E suggests skepticism. If M&A rebounds, FTI could thrive. If not, its restructuring may prove a bridge too far.

In the world of corporate disruption, FTI is now the disrupted. The question is whether it can disrupt itself back to growth.