Korn Ferry's Q2 2026: Contradictions Emerge on Digital Sales, AI Integration, Consulting Strategy, and Executive Search Growth

Date of Call: None provided

Financials Results

• Revenue: $722.0M, up 7% year-over-year
• EPS: $1.33 adjusted diluted EPS, up $0.12 (10%) year-over-year
• Operating Margin: Adjusted EBITDA margin 17.3%

Guidance:

• Fee revenue for Q3 FY2026 expected to be $680M–$694M.
• Adjusted EBITDA margin expected approx. 17.2%–17.4%.
• Consolidated adjusted diluted EPS expected $1.19–$1.25.
• GAAP diluted EPS expected $1.15–$1.21.
• Guidance assumes no further material changes in geopolitical/economic conditions and reflects year-end holiday impacts.

Business Commentary:

• Strong Financial Performance:
• Korn Ferry reported consolidated fee revenue growth of 7% year-over-year to $722 million in Q2 FY2026.

• The growth was driven by an intentional execution of business referrals, integration of multiple solutions, and a focus on client centricity.

• Executive Search Growth:

• Executive search fee revenue showed consistent growth, up 10% year-over-year, marking the sixth consecutive quarter of growth.
• This growth is attributed to the realization that past leadership skills may not be sufficient for current challenges, as well as the retirement of baby boomers and evolving work-life balances.

• Recruitment Process Outsourcing (RPO) Expansion:
• RPO delivered $253 million in new business in Q2, with 16% from new logos and 84% from renewals.

• The success in RPO is due to the quality of Korn Ferry's IP and the strategic use of AI in their solutions.

• Consulting Bill Rate Growth:

• Hourly bill rates in consulting remained strong at $460 per hour, with consulting and interim solutions contributing significantly to growth.

• The increase in bill rates reflects the integration of the firm and the delivery of larger, more impactful engagements at scale.

• Digital Transformation and Integration:

• The launch of Korn Ferry's new Talent Suite technology platform has enhanced the firm's ability to deliver expanding and differentiated solutions to clients.
• This integration is expected to drive long-term, profitable, and sustainable growth by leveraging foundational assets and expanding the firm's holistic talent partner approach.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management repeatedly described the quarter as "outstanding," noted a fourth consecutive quarter of accelerating growth, highlighted strategic wins (RPO and cross-sell), and said "I’m more confident and excited than I have ever been about what this company can become."

Q&A:

• Question from Josh Chan (UBS): Where is executive search strength in North America coming from given slower job-market velocity?
  Response: Strength is driven by secular demand for new leadership (skills shift, retirements/"Peak 65"), client need for different leadership, and the firm's cross-sell/referral strategy driving global growth.

• Question from Josh Chan (UBS): Historically where have referrals been and what is the target as you lean into the 'We Are Korn Ferry' strategy?
  Response: Referrals historically ~25%–26%; most recent quarter ~27.6%; management targets ~35% over time and sees sizable upside from better cross-selling.

• Question from Trevor Romeo (William Blair): Are improvements in placement solutions driven by cross-sell (We Are Korn Ferry) or by clients being more willing to hire?
  Response: Primary driver is the go-to-market strategy and cross-sell integration; market demand has shown some green shoots but the company attributes gains largely to strategy execution.

• Question from Josh Chan (UBS): What is driving consulting bill-rate growth and are you seeing AI pressure on pricing?
  Response: Bill-rate growth reflects selling larger, integrated org-strategy engagements (higher-value work) rather than commoditized services; management sees sustainable upside, not AI-driven price erosion.

• Question from Sami (for George Tong) (Goldman Sachs): With typical Q3 step-down in exec search, does strong new business change seasonal pattern this year?
  Response: No—guidance already factors in holiday-driven seasonality and management did not assume the usual Q3 step-down would be offset by new business.

• Question from Sami (for George Tong) (Goldman Sachs): Consulting bill rates were strong but margins flat—how much runway remains and do delivery costs cap margin upside?
  Response: Significant runway remains; firm is shifting to larger transformational engagements which should drive upside without inherent margin caps from delivery.

• Question from Toby Summer (Truist): Are AI/tools shortening time-to-fill in search or are clients consuming the time savings by asking for more work?
  Response: Processes are more efficient (especially sourcing/research) and COVID-era virtual work sped things up; AI has larger impact in RPO, while executive search remains high-touch with limited AI substitution.

• Question from Toby Summer (Truist): Explain the sunsetting of the old system with Talent Suite and the accounting impact.
  Response: Talent Suite (launched Nov 17) unified data/repositories and single sign-on; the old Talent Hub was sunset and the remaining undepreciated costs were accelerated, producing a one-time accelerated depreciation charge.

• Question from Toby Summer (Truist): What is the expected financial impact of Talent Suite?
  Response: Management expects long-term positive impact via cross-sell and monetization of IP (e.g., pay-transparency market opportunity), though revenue realization will take time as clients adopt broader solutions.

• Question from Toby Summer (Truist): Any change in competitive behavior since Heidrick went private?
  Response: No observed change in competitor behavior; market remains populated by several strong firms.

• Question from Alex Sinatra (Robert W. Baird): What drove the digital decline and what to expect for new sales pace there?
  Response: Decline partly due to a purposeful 35% reduction in sellers to pivot to enterprise-oriented sales, timing of large transformational deals (some shifted quarters), and a shift toward licensing—management expects recovery as enterprise capabilities ramp.

• Question from Alex Sinatra (Robert W. Baird): For the new RPO contracts, how many were from switches vs renewals and how much came from cross-sell?
  Response: Majority were renewals (~75%) from house Marquee/Diamond accounts (which drive ~40% of firm revenue); roughly 25% were new logos, and a significant portion reflects intra-firm referrals/cross-sell.

Contradiction Point 1

Digital Sales Strategy

It involves a significant change in strategic direction and execution for the digital sales segment, which directly impacts product and service offerings and potentially affects revenue growth.

What caused the decline in digital sales, and what is the business's future outlook? - Alex Sinatra (Robert W. Baird)

2026Q2: The decline in digital sales is purposeful, as the firm reduces the number of sellers in the solution. The focus now shifts to enterprise sellers and consultants, with more licensing arrangements and multi-million-dollar engagements expected. - Gary Burnison(CEO)

Your digital business shifted from 10% growth to an 8% decline in constant currency this quarter. Can you explain what caused the decline? - Keen Fai Tong (Goldman Sachs)

2025Q3: Digital has remained stable despite a challenging environment over the last eight quarters. - Gary Burnison(CEO)

Contradiction Point 2

AI Impact on Search Process

The differing perspectives on the role and impact of AI in the search process could influence operational strategies and client expectations, affecting the company's competitive positioning.

Have you seen time savings from AI tools in the search process, and are customers requesting more services due to these efficiencies? - Toby Summer (Truist)

2026Q2: AI has led to efficiencies in research and sourcing, particularly in RPO. The executive search process remains high-touch, but there is potential for further optimization. - Gary Burnison(CEO)

Which business areas have shown the most productivity success? What productivity growth potential exists without relying on near-term market or macro demand improvements? - Trevor Romeo (William Blair)

2025Q3: We're also looking at AI and gen AI to enhance productivity, though it's hard to quantify at this moment. - Robert Rozek(CFO)

Contradiction Point 3

Consulting Solution Growth and Strategy

The inconsistencies in strategic direction and growth expectations for the consulting solution could impact revenue forecasts and business strategy, affecting investor trust.

What are the bill rate growth drivers in consulting solutions? Is AI affecting pricing pressures? - Trevor Romeo (William Blair)

2026Q2: Bill rate growth is driven by larger, more impactful engagements, with a focus on org strategy and technology integration. - Gary Burnison(CEO)

How do you expect the new consulting business to perform for the remainder of the year? - Joshua Chan (UBS Investment Bank, Research Division)

2026Q1: Consulting is challenging in the Americas, but there's momentum in Europe and Asia. We're moving towards larger, integrated solutions. - Gary Burnison(CEO)

Contradiction Point 4

Executive Search Growth and Market Conditions

It reflects differing viewpoints on the growth and market conditions for the executive search business, which is a crucial revenue stream for Korn Ferry, affecting investor expectations.

Where are the sources of strength in North America’s executive search business amid slower job market velocity? - Josh Chan(UBS)

2026Q2: The executive search business is growing worldwide due to the realization that existing leadership skills may not be sufficient for current challenges. Factors driving growth include the retirement of baby boomers, changing work-life balances, and the need for new skills in a fluctuating economy. - Gary Burnison(CEO)

What drove the 15% growth in the executive search business this quarter? - Trevor Romeo(William Blair)

2025Q4: There are no significant changes quarter to quarter. The firm has consistently delivered 10%-11% growth. The current environment is influenced by demographic factors and the need for different types of leaders. - Gary Burnison(CEO)

Contradiction Point 5

Impact of Economic Environment on Business

It demonstrates differing views on how the economic environment affects business growth and cost-cutting measures, which are critical for financial performance and investor confidence.

Will strong new business affect the seasonality of executive search? - Sami(Goldman Sachs)

2026Q2: The guidance does not imply a change in seasonality, but there is potential for softer third-quarter performance due to holidays, which is factored into the forecast. - Gary Burnison(CEO)

Recent updates on sales cycles and client spending behaviors across segments? - Keen Fai Tong(Goldman Sachs)

2025Q4: There's a cost of living crisis reducing growth, and companies are cutting costs consistently. A challenging environment is expected. - Gary Burnison(CEO)