Robert Half's Staffing Recovery Takes Hold, But Protiviti's Regulatory Hangover Lingers

Talent Solutions logs third straight quarter of sequential growth and permanent placement turns positive, while a $45M cost cut and a pivot to tech consulting aim to restore Protiviti's growth after a U.S. regulatory pullback.

RHI · Earnings Call · 2026-07-23

Introduction

Robert Half Inc. (RHI) reported second-quarter results that mark a turning point. Talent Solutions – the company's core staffing franchise – delivered its third consecutive quarter of sequential revenue growth, permanent placement turned positive year-over-year, and the company signaled a return to year-over-year growth in the third quarter. The market has voted decisively: the stock has rallied roughly 90% over the past 90 days, a move that dwarfs the broader market's gains. Yet the headline numbers are still negative – total revenue fell 2% reported (3% adjusted) and EPS dropped to $0.26 from $0.41 a year ago. The key is that the trajectory has inflected, and management is guiding to a much stronger third quarter (EPS guidance $0.43–$0.53).

Talent Solutions: A Real Bottom

The most encouraging signals come from Talent Solutions. Management noted that sequential revenue growth has now persisted for three straight quarters, and the exit rate is improving. Contract revenues in June were down just 2% year-over-year versus the full quarter's 2% decline, and July's first two weeks improved to -1%. Permanent placement revenues were up 4% in June and up 4% in the first three weeks of July. “Talent Solutions delivered its third consecutive quarter of sequential revenue growth on an adjusted basis while its permanent placement operations, also posted adjusted year-on-year revenue growth of 2.5%.” — M. Waddell, President and Chief Executive Officer · 2026-07-23 Bill rates rose 2.3% year-over-year, although that decelerated from 2.6% in Q1, partly reflecting a cooling of wage inflation in the broader labor market. Management stressed that gross margins held steady, underscoring pricing power. This optimism builds on the cautious but improving tone from earlier this year. In April, CEO Keith Waddell noted, “We've had a false start or 2 the last 2 years. Last year, it was tariffs. This year, so far, the conflict in Iran doesn't seem to have an impact.” — M. Waddell, President and Chief Executive Officer · 2026-04-23 He also argued that the current recovery has more favorable tailwinds than previous cycles – low unemployment, elevated job openings, and a tightening of the labor market for specialized talent.

Protiviti: Restructuring for a New Regulatory Reality

The clearest drag on results is Protiviti, the consulting arm that has been hit by a sharp pullback in U.S. financial-services regulatory and compliance work. Revenue fell 5% on an adjusted basis, and management took a $7 million severance charge as part of a broader cost action that will generate $45 million in annualized savings. The mix of work is shifting away from large-scale remediation projects toward shorter, more efficiency-oriented engagements.

The changes are more about the current administration and their stance on regulation broadly, and so it's certainly not a structural – there's less money laundering.
M. Waddell, President and Chief Executive Officer · 2026-07-23

Indeed, management argued that the lull in enforcement actions is likely to create pent-up demand longer term, and that money laundering itself hasn't gone away. The bright spot within Protiviti is technology consulting, which management said posted its best revenue quarter ever, and which now represents the largest solution area. The company's Compliance solutions practice, by contrast, is under pressure, though it accounts for less than 20% of Protiviti's revenue. Management expects Protiviti to return to growth in the "not-too-distant future," aided by a strong pipeline and a growing non-FSI practice. The cost actions should also help margins, which have contracted sharply (adjusted gross margin fell to 18.5% from 22.3% a year ago).

AI: A Complement, Not a Replacement

Management was also eager to counter the narrative that AI will hollow out demand for staffing. “Artificial intelligence continues to complement, not replace the work performed by the professionals we place.” — M. Waddell, President and Chief Executive Officer · 2026-07-23 In fact, the company sees AI as a tailwind: the technology is making it harder for clients to hire on their own (as AI-generated resumes flood in), and it increases the value of RHI's proprietary candidate assessment tools. The company has invested heavily in its own AI-driven matching and lead-scoring engines, which have improved conversion rates and reduced the cost to acquire clients.

Fundamentals Lag the Stock, But Guidance Points Up

Despite the rally, the trailing financials still show a business in recessionary territory. Operating income fell 68% from its 2022 peak, and operating margin has compressed to 2.8% (from a peak of 12.8%). Operating margin has yet to recover, but the company expects meaningful leverage as revenue inflects. Third-quarter guidance implies EPS of $0.43–$0.53, up sharply from $0.26, and management has again highlighted the potential for margins to exceed prior peaks, driven by a richer mix of higher-skilled roles and structural efficiency gains. In January, Waddell said the company expects to “retrace in a positive way the negative leverage we've had to deal with over the last 4 years.” — M. Waddell, President and Chief Executive Officer · 2026-01-29 That retracing is now beginning to show up in the guidance. The 90-day price action (+90%) suggests the market is pricing in a sustained recovery before the fundamentals confirm it. But if the guidance -- and the sequential trends -- hold, RHI could be at the start of a multi-quarter upcycle. The key risk is that geopolitical or macro headwinds (e.g., Middle East tensions) could yet derail the inflection, but management's tone is markedly more confident than in prior quarters.