Korn Ferry's Q2 2026: Contradictions Emerge on Digital Strategy, Talent Suite Timelines, and RPO Composition

Date of Call: December 16, 2025

Financials Results

• Revenue: $722M consolidated fee revenue, up 7% YOY
• EPS: $1.33 adjusted diluted EPS, up 10% YOY
• Operating Margin: 17.3% adjusted EBITDA margin

Guidance:

• Q3 FY26 fee revenue expected to range from $680M to $694M.
• Q3 adjusted EBITDA margin expected to range from 17.2% to 17.4%.
• Q3 consolidated adjusted diluted EPS expected to range from $1.19 to $1.25.
• Q3 GAAP diluted EPS expected to range from $1.15 to $1.21.

Business Commentary:

• Financial Performance and Strategic Execution:
• Korn Ferry reported adjusted EBITDA of $125 million, up 7% year-on-year, and adjusted diluted earnings per share of $1.33, up 10% year-on-year for Q2 2026.

• The company's continued strategic execution, including the integration of solutions and a focus on client-centricity, drove this performance.

• Executive Search Growth:

• Executive Search fee revenue grew 10% year-over-year, marking the sixth consecutive quarter of year-over-year growth.

• This growth is attributed to factors like the need for leadership skills in a changing business environment, retirements, and shifts in work-life balance.

• RPO and New Business:

• RPO delivered $253 million of new business in the quarter, with 16% coming from new logos and 84% from renewals.

• Strong performance in RPO was driven by high-quality IP, use of AI, and successful cross-sell efforts under the "We Are Korn Ferry" strategy.

• Digital Segment and Strategic Shift:

• The digital segment experienced a decline, impacted by a deliberate reduction in sales force and a pivot towards enterprise-oriented selling and larger transformational engagements.

• This strategic shift aims to better monetize foundational IP and align with broader company goals.

• Talent Suite Launch and Impact:

• The launch of the new Talent Suite technology platform in November integrated all data sets into a single repository, enhancing analytics and client access.
• This platform is expected to support the company's move towards becoming a holistic talent partner and leverage its foundational assets more effectively.

Sentiment Analysis:

Overall Tone: Positive

• "In the quarter, our performance was outstanding." "Our firm sits at the intersection of these opportunities..." "I'm more confident and excited than I have ever been about what this company can become." "We have been on a deliberate journey to build a more durable and stable base of fee revenue and profitability."

Q&A:

• Question from Joshua Chan (UBS): It seems like the Executive Search business continues to perform well. Could you talk about where you're seeing the sources of strength within North America and how you think about the business in light of slower job market velocity, but you're still posting pretty good results?
  Response: Strength driven by need for new leadership skills, baby boomer retirements, and work-life balance shifts, combined with the company's strategy and high internal business referrals (~28%).

• Question from Trevor Romeo (William Blair): Is some of that improvement due to a turn in client willingness to hire/spend more, or mostly cross-sell efforts from the new strategy?
  Response: The strategy is clearly working, as evidenced by positive growth vs. competitors in a labor recession; improvements in Pro Search and Interim are due to strategy and integration, not a macro turn.

• Question from Trevor Romeo (William Blair): On consulting bill rates up 10% YOY, what drives the mix of services and seniority, and is AI causing pricing pressure?
  Response: Growth in larger, more impactful transformational engagements (e.g., org strategy) and effective use of IP and talent; bill rates have risen significantly over several years, reflecting value-based services.

• Question from Unknown Analyst (Goldman Sachs): With current strength in new business, should we expect different seasonality this year, offsetting usual Q3 softness?
  Response: No, guidance factors in expected holiday-related softness across the board; the usual seasonal pattern is not forecasted.

• Question from Unknown Analyst (Goldman Sachs): Consulting bill rates were strong, but margins flat. How much more upside is there in mix shift to higher-value engagements?
  Response: substantial opportunity remains to move toward larger transformational engagements; current environment drives demand for strategic, high-impact consulting.

• Question from Tobey Sommer (Truist): Are AI tools shortening time-to-fill in search, or are clients just requesting more work?
  Response: Processes are more efficient due to technology and remote work (post-COVID), with AI having a bigger impact in RPO; some limited further efficiency expected in Executive Search.

• Question from Tobey Sommer (Truist): Could you elaborate on the sunsetting of the old system and the accounting impact?
  Response: The new Talent Suite platform unified data, replaced the old fragmented system, and required accelerated depreciation of the old system's remaining cost.

• Question from Tobey Sommer (Truist): What are expectations for the financial impact from the new Talent Suite?
  Response: The platform is expected to be incredibly positive by enabling holistic use of IP, facilitating larger deals (e.g., pay transparency), and improving client analytics.

• Question from Unknown Analyst (Robert W. Baird): What drove the digital decline, and what's the pace of new sales and client outlook?
  Response: Digital decline due to a deliberate pivot: reducing sellers by ~35%, shifting to enterprise sales, and moving toward more licensing arrangements; some large deals shifted to this quarter.

• Question from Unknown Analyst (Robert W. Baird): On new RPO contracts, where are they coming from (switches vs. new logos) and how much from cross-sell?
  Response: Majority from renewals (84%) of large marquee clients in healthcare and industrial sectors; about 16% from new logos. Historically, ~50% of RPO revenue comes from referrals outside the solution.

Contradiction Point 1

Digital Business Performance and Strategic Rationale

This is a significant contradiction regarding a core segment's performance driver. The explanation for the Digital business decline shifted from being due to a tough prior-year comparison (2025Q3) to being attributed to a deliberate, large-scale strategic headcount reduction (2026Q2). This represents a major change in narrative about a key business unit's challenges, moving from external market factors to an internal, strategic pivot.

What caused the decline in the Digital business, and what is the pace of new sales and client conversations? - Alex Sinatra (Robert W. Baird)

20251209-2026 Q2: The decline was strategic. The firm reduced Digital sellers by ~35% to pivot towards enterprise selling and leveraging IP firm-wide. - Gary Burnison(CEO)

What caused the 8% decline in Digital new business this quarter compared to 10% growth last quarter? - Keen Fai Tong (Goldman Sachs)

2025Q3: The decline was due to a tough year-over-year comparison. Last year's quarter had significant licensing deals for compensation databases in multiple countries. Excluding that, Digital performance has been very stable over the last eight challenging quarters. - Gary Burnison(CEO)

Contradiction Point 2

Talent Suite Platform Rollout and Benefits Timeline

This involves a clear change in the communicated timeline for financial benefits from a major product launch, a key strategic initiative. The expectation shifted from benefits materializing "towards the end of calendar 2026" (2026Q1) to the platform being described as a "major opportunity" with immediate strategic importance in the current quarter (2026Q2). This alters the investment horizon and expected payoff for stakeholders.

What is the expected financial impact of the Talent Suite? - Tobey Sommer (Truist)

20251209-2026 Q2: The platform is crucial for operating as one business... It represents a major opportunity (e.g., ~$2B market for pay transparency compliance in EU/US). - Gary Burnison(CEO)

For the November Talent Suite launch, what are the key milestones you will track, and what is the timeline for benefits to impact financials? - Trevor Romeo (William Blair)

2026Q1: Benefits are expected to materialize towards the end of calendar 2026. - Gary Burnison(CEO)

Contradiction Point 3

Digital Business Performance and Strategy

This contradiction highlights a significant strategic shift in the Digital segment's narrative. The portrayal changed from reporting "very consistent" new business in a tough market (2025Q4) to attributing a decline to a deliberate strategic pivot involving significant seller reductions (2026Q2). This indicates a major change in operational strategy and performance expectations for this business line.

What caused the decline in the Digital business, and what is the current pace of new sales and client conversations? - Unknown Analyst (Alex Sinatra, Robert W. Baird)

20251209-2026 Q2: The decline was strategic. The firm reduced Digital sellers by ~35% to pivot towards enterprise selling and leveraging IP firm-wide. - Gary Burnison(CEO)

What was the year-over-year growth for new business in the consulting segment and overall digital? - Keen Fai Tong (Goldman Sachs)

2025Q4: Digital new business has been very consistent in a tough market. - Gary Burnison(CEO)

Contradiction Point 4

RPO (Recruitment Process Outsourcing) New Business Composition

This represents a notable shift in the market strategy and growth drivers for a key service line. The primary source of RPO new business changed from being predominantly new client logos (2025Q3) to being primarily renewals from existing large clients (2026Q2). This indicates a strategic pivot in focus from market expansion to deepening relationships with the existing client base.

What is the source breakdown for new RPO contracts (new clients, competitor switches, cross-sells)? How many were cross-sells? - Alex Sinatra (Robert W. Baird)

20251209-2026 Q2: The majority were renewals from existing large 'marquee and diamond' clients... About 25% were new logos. - Gary Burnison(CEO)

What drove the growth in RPO new business? Was it competitive gains, new clients, or increased hiring? - Trevor Romeo (William Blair)

2025Q3: RPO growth was driven by a combination of factors. Two-thirds of the new business came from new logos, much of it from targeted marquee/diamond accounts... - Gary Burnison(CEO)

Contradiction Point 5

Leadership Demand and Skillset

This points to a change in the market strategy and client positioning regarding leadership competencies. The critical skill emphasized shifted from the ability to "embrace and thrive in ambiguity" (2025Q4) to a focus on "old leadership skills" and demographic factors like the retirement of baby boomers (2026Q2). This change in narrative could impact the company's value proposition and target client segments.

Where are the sources of strength for the Executive Search business in North America, and how is the business performing despite a slower job market, and how are you achieving strong results? - Joshua Chan (UBS)

20251209-2026 Q2: The strength is attributed to several factors: a realization that old leadership skills won't suffice; the retirement of baby boomers ("Peak 65"); and a shift in work-life balance. - Gary Burnison(CEO)

What are Boards looking for when seeking a "different type of leader"? - Mark Marcon (Baird)

2025Q4: In addition to traditional skills, the critical need is the ability to embrace and thrive in ambiguity. - Gary Burnison(CEO)