Forrester's AI Inflection: From Decline to a 133% Rally

Forrester Research (FORR) has been on a dramatic tear, with shares up 133% in the last 90 days. The company, a boutique research and advisory firm, reported Q2 2026 results in line with expectations, but the market is betting on a turnaround fueled by the rapid adoption of Forrester AI. The stock's surge contrasts sharply with its fundamentals, which have been declining, yet the narrative has shifted decisively toward AI.

The AI Pivot is Real

The strategic pivot is unmistakable. CEO George Colony highlighted that Forrester AI usage hit new highs, with total users up 33% sequentially and prompts up 58%. The most telling metric: “Forrester AI eclipsed indexed search to become the dominant method used by Forrester Decisions clients to interact with our research database.” — George F. Colony, Chief Executive Officer · 2026-07-30 This is a fundamental shift in client engagement, from static research to conversational AI. Additionally, the company is embedding its research into workflow tools: “We are the first research company in our competitive set to have a presence in Microsoft Teams, and we are the first to have an agent an AI agent in Copilot.” — Carrie Johnson Fanlo, Head of Product or Product Leadership · 2026-07-30 This "where you work" strategy is a key differentiator. The company has also launched AI Access, a lower-priced product that booked $10 million in its first nine months, designed to win back lapsed clients and expand within existing ones. In the prior quarter, management admitted it was early days, but now it's showing real traction.

A Tale of Two Narratives

While the stock soars, financials still contract. The most recent reported quarter (Q1 2026, period end May 4) showed Total Revenue at $85M, down 5% YoY. However, Q2 revenue was $100.2M, down 10% YoY as the company exited the strategy consulting business. Operating income in Q2 was $10.4M on an adjusted basis, down 24% from the prior year, but still positive. The balance sheet is strong, with Effective Net Cash at $113M and over $130M in cash against only $35M in debt. This gives Forrester the firepower to accelerate AI investments and buy back shares, as they restarted repurchases in Q2. The market is pricing in a future where CV growth returns. Management reiterated full-year revenue guidance of $350-360M, implying continued decline, but they are confident about returning to CV growth by year-end. The pipeline is expanding, and new sales leadership has reorganized around six verticals.

The Road Ahead

The big question is whether AI adoption translates into durable contract value. In prior calls, there was skepticism about AI replacing Forrester's value, but management has countered with a moat of proprietary research. As George Colony noted earlier: “we highlight our Forrester AI solutions provide proprietary data, proprietary ideas, supported by human experts.” — Vincent Alexander Colicchio, Analyst · 2026-02-12 This is a recurring theme, now backed by real usage data. The company is also riding the global Agentic AI wave, releasing research on AI roles like the AI CIO and holding events like the B2B Summit that attracted record audiences. The events business is being restructured to smaller, more intimate forums, showing positive feedback. However, the stock's 133% rally in 90 days may have priced in perfect execution. The company still expects consulting to decline low-20s and events to be down mid-teens for the year. The turnaround is not yet reflected in GAAP numbers: the fundamentals show Operating Margin at -21.9% for Q1, though Q2 adjusted operating margin was 10.4%. There is a clear gap between reported and adjusted figures.

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