CS Disco, Inc.

Q2 total revenue was $43.1 million, up 13% year over year; software revenue was $36.8 million, up 13%; services revenue was $6.3 million, up 18%. Gross margin was 76%, unchanged from the prior year. Adjusted EBITDA was negative $3.4 million versus negative $3.4 million? The company stated it was negative $3.4 million in Q2 with an adjusted EBITDA margin of negative 8% compared to negative 7% in Q2 of the prior year. Net loss was $3.6 million, or $0.06 per share, versus a net loss of $2.8 million, or $0.04 per share, in the prior-year quarter. For Q3 FY2026, guidance is total revenue of $43.75 million to $45.75 million, software revenue of $38.1 million to $39.1 million, and adjusted EBITDA of negative $1.75 million to negative $0.25 million. For FY2026, management raised guidance to total revenue of $172 million to $179 million, software revenue of $147.5 million to $152.5 million, and adjusted EBITDA of negative $8 million to negative $5 million, while still expecting to be adjusted EBITDA positive in Q4.

Eric Friedrichsen framed the quarter as evidence that DISCO is gaining trust with large customers and winning larger, more complex matters while expanding AI adoption. His main strategic message was that the company is moving beyond e-discovery with a Unified Litigation Solution that combines evidence, case law, and litigation-specific workflows in a single interface. His tone was highly upbeat and confident, emphasizing that DISCO is building toward what he called a long-term opportunity to define AI for litigation.

Aaron Barfoot emphasized the quarter’s operating progress and gave the key financial details: $43.1 million of revenue, 76% gross margin, negative $3.4 million adjusted EBITDA, and $101.4 million of cash and short-term investments with no debt. He said sales and marketing was $15.7 million, R&D was $13.4 million, and G&A was $7.7 million, with R&D investment tied to the Unified Litigation Solution, Advanced Research, and Auto Review. He also said operating cash flow improved to negative $1.1 million from negative $4.2 million last year, and noted that stronger DISCO platform usage could create short-term ingest fee pressure, though he expects that to be offset over time by ongoing fees and larger matters.

Analysts focused on how the new Unified Litigation Solution would be commercialized, whether it requires existing e-discovery customers, and what pricing model it might use. Management said the product is in a learning phase with a small hand-selected pilot group on live matters, and that it is intentionally not giving a firm pricing, monetization, or timing plan yet; they also said investors should not build revenue from it into models for 2026. Questions also probed the company’s confidence in second-half acceleration and platform adoption, and management pointed to execution on large matters, stronger DISCO platform adoption, and improving Auto Review traction as the drivers behind the raised full-year outlook.