CS Disco (LAW) Q4 2025 earnings summary

Executive summary

• Q4 2025 total revenue was $41.2M, up 11% year-over-year, with software revenue at $35.1M, up 14% year-over-year; full-year 2025 total revenue reached $157M, up 8%, and software revenue was $134M, up 12%.

• Adjusted EBITDA improved to -$2.2M in Q4 (margin -5%) and -$10.2M for the year (margin -7%), both showing significant margin improvement year-over-year.

• Growth was driven by increased usage, large matters, expansion with large customers, and rapid adoption of generative AI capabilities, including Cecilia AI and Auto Review, which saw over 600% year-over-year growth in Q4.

• New pricing and packaging model launched, combining all AI and core capabilities into a single offering to simplify adoption and drive growth.

• Customer base included 330 customers generating over $100K in revenue, accounting for 76% of total revenue.

Financial highlights

• Q4 services revenue was $6M, down 3% year-over-year; full-year services revenue was $22.8M, down 8% year-over-year due to decline in traditional review.

• Gross margin in Q4 was 77%; full-year gross margin was 76%, up from 75% in 2024.

• Sales and marketing expense for 2025 was $54.4M (35% of revenue), down from 39% in 2024.

• Research and development expense for 2025 was $48.4M (31% of revenue), up from 30% in 2024.

• Net loss for Q4 was $2.5M (-6% margin); full-year net loss was $10.7M (-7% margin), both improved from prior year.

• Ended Q4 with $114.6M in cash and no debt; cash and cash equivalents at year-end 2025 were $19.7M, down from $52.8M at year-end 2024.

Outlook and guidance

• Q1 2026 revenue guidance: $39.0M–$41.5M; software revenue: $33.75M–$35.25M; adjusted EBITDA: -$6M to -$4M.

• FY 2026 revenue guidance: $167M–$177M; software revenue: $145.5M–$152.5M; adjusted EBITDA: -$8.5M to -$4.5M.

• Targeting adjusted EBITDA breakeven by Q4 2026.

• Management optimistic about achieving 20%+ growth rate, driven by large customers, AI adoption, and new pricing.