CS Disco (LAW) Q3 2025 earnings summary

Executive summary

• Q3 2025 revenue grew 13% year-over-year to $40.9 million, with software revenue up 17% to $35.2 million and strong demand for core offerings.

• Adjusted EBITDA improved to $(0.3) million from $(4.5) million year-over-year, with margin at -1% and significant operational progress.

• Net loss (GAAP) for Q3 2025 was $13.7 million, compared to $9.2 million in Q3 2024, impacted by higher legal costs.

• Strategic partnerships, increased adoption of generative AI tools, and targeted initiatives in IP litigation contributed to growth.

• Ended Q3 with $113.5 million in cash and investments, and no debt.

Financial highlights

• Total revenue: $40.9 million (up 13% YoY); software revenue: $35.2 million (up 17% YoY); services revenue: $5.7 million (down 7% YoY).

• Non-GAAP gross margin: 77% in Q3 2025, up from 74% YoY.

• Adjusted EBITDA: $(0.3) million (margin -1%), a $4.2 million YoY improvement.

• Net loss per share: $(0.22) (GAAP); non-GAAP net loss per share: $(0.01), improved from $(0.06) YoY.

• Operating cash flow for the first three quarters: negative $15.7 million.

Outlook and guidance

• Q4 2025 revenue guidance: $38.75M–$40.75M; software revenue: $33.75M–$34.75M; adjusted EBITDA: $(3.5)M–$(1.5)M.

• FY2025 revenue guidance: $154.4M–$156.4M; software revenue: $132.6M–$133.6M; adjusted EBITDA: $(11.5)M–$(9.5)M.

• Management expects existing liquidity to fund operations for at least the next 12 months.

• Targeting adjusted EBITDA break-even for Q4 2026, with ongoing investments in growth and innovation.

• Focus on expanding wallet share, large matters, and international growth, especially in the UK and India.