This article first appeared on GuruFocus .
Release Date: August 05, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Total revenue grew 13% year-over-year to $43.1 million, with software revenue also up 13% to $36.8 million.
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The number of customers generating over $100,000 in the last 12 months increased 15% year-over-year, now representing 77% of total revenue.
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Revenue from generative AI and agentic AI capabilities more than tripled year-over-year, driven by strong adoption of Cecilia and Auto Review.
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The new DISCO platform commercial model exceeded internal expectations, hitting its December 2026 run-rate goal by June, with strong customer adoption.
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The company is on track to achieve adjusted EBITDA positivity in Q4 2026, with full-year guidance raised to $172-$179 million in total revenue.
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The launch of the unified litigation solution, which integrates evidence and case law, has received positive early feedback from pilot customers, positioning the company as a leader in AI for litigators.
Negative Points
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Adjusted EBITDA remained negative at -$3.4 million in Q2, with a margin of -8%, slightly worse than the prior year's -7%.
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Net loss widened to $3.6 million in Q2, compared to $2.8 million in the same period last year.
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The company may experience short-term revenue impacts from lower ingest fees as the DISCO platform adoption grows, potentially affecting near-term results.
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The unified litigation solution is still in a pilot phase with no firm pricing or monetization plan, and revenue from it is not expected in 2026.
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Research and development expenses increased to 31% of revenue, reflecting continued heavy investment in new products, which could pressure profitability in the near term.
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The company faces intense competition from general-purpose legal AI tools like Harvey and Legora, which may limit market share gains despite DISCO's deeper focus on litigation.
Q & A Highlights
Q: What does the customer adoption cycle of the new Unified Litigation Solution look like, and how should we think about its pricing model? A: Richard Crum, Chief Product Technology and Strategy Officer, stated the company is deliberately in a "learning phase" with a small, hand-selected group of customers on live matters. They are not putting a firm pricing or monetization plan in the market yet, as they want to learn how capabilities resonate and how customers' commercial needs should shape engagement. He emphasized this is an ambitious multi-year bet and the first step of a larger vision, advising not to build revenue from the solution into models for 2026. CEO Erik Friedrichsen added that this is customer-driven, as clients are demanding more value from outside counsel, and DISCO is uniquely positioned to help litigators win, not just be more efficient.
Q: Where does the confidence come from for the reacceleration in subscription revenues implied in the fourth quarter guidance? A: CFO Aaron Barfoot attributed the confidence to three key factors: 1) Execution against the strategy of winning more large matters from the largest customers, which is expected to continue; 2) The strong adoption of the DISCO platform, which has exceeded expectations in pricing and volume; and 3) Positive traction in Auto Review, driven by improving customer AI readiness and new capabilities that simplify the process.
Q: As legal AI platforms expand, do you foresee having to open up your platform to general-purpose tools like Harvey or Legora? A: Richard Crum explained that litigation is fundamentally more complex and adversarial than transactional legal work. DISCO's differentiation lies in its deep access to both the full evidentiary record and the comprehensive corpus of US case law, allowing it to reason across both. Erik Friedrichsen added a strategic point: companies that own data are not always willing to give it up. He noted that a competitor's partnership with a case law provider only has access to 1% of the data, whereas DISCO has access to all of it, which is a significant differentiator.
Q: How much of the strong DISCO platform adoption is coming from new logo wins versus expansion with existing customers? A: CEO Erik Friedrichsen stated it is a combination of both. The new platform and pricing approach were designed to improve consideration for new customers and new large matters within the existing base. The goals were to improve consideration (as past pricing seemed opaque), improve close rates, and preserve margins by reducing the need for over-discounting. All three goals are being achieved, benefiting both new and existing customer acquisition.
Q: Can you provide an update on sales productivity and whether new sales reps are reaching productivity faster due to easier-to-demonstrate AI capabilities? A: Erik Friedrichsen highlighted several drivers of improved sales efficiency: 1) An integrated go-to-market approach that enables law firm customers to sell DISCO on their behalf; 2) A focus on winning larger, strategic matters that stay on the platform longer; 3) The "with you in every case" services approach; 4) An ideal matter profile approach targeting specific practice areas and industries; and 5) Innovation in AI capabilities (Cecilia, Advanced Research, Auto Review) that helps win larger matters. The new DISCO platform pricing has also made salespeople much more productive.
Q: Can you elaborate on the expansion motion into corporate legal departments compared to traditional law firm customers? A: Erik Friedrichsen explained that while they have 354 customers spending over $100,000 annually (77% of total revenue), they still only have 15-20% wallet share with these large customers. They have created an integrated go-to-market approach where sales, marketing, and customer success teams enable law firm customers to market DISCO internally to their case teams and externally to their corporate clients. He noted that law firms are increasingly asking DISCO to help them market their services, as corporate clients are demanding differentiation and AI-driven efficiency.
Q: What were the key financial drivers behind the strong Q2 results, particularly in services revenue and Auto Review? A: CFO Aaron Barfoot reported total revenue of $43.1 million (up 13% YoY) and software revenue of $36.8 million (up 13% YoY). Services revenue grew 18% to $6.3 million, driven by professional services and Auto Review-related managed review work tied to the largest matters. He noted that Auto Review set a new revenue record in Q2, driven by a record number of reviews executed and growth in average review size, reversing the Q1 trend where some customers chose traditional routes due to AI readiness concerns.
Q: What is the company's financial guidance for Q3 and the full year 2026? A: CFO Aaron Barfoot provided Q3 guidance of total revenue between $43.75 million and $45.75 million, software revenue between $38.1 million and $39.1 million, and adjusted EBITDA between negative $1.75 million and negative $0.25 million. For the full year, the company raised total revenue guidance to $172 million to $179 million and software revenue guidance to $147.5 million to $152.5 million. Full-year adjusted EBITDA guidance was updated to negative $8 million to negative $5 million, with the company still expecting to be adjusted EBITDA positive in Q4.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
