Legal technology company CS Disco (NYSE: LAW) delivered a solid second quarter for fiscal 2026, reporting 13% year-over-year revenue growth to $43.1 million. The results underscore accelerating adoption of the company’s generative AI and agentic AI capabilities, alongside expanding relationships with large enterprise customers.
Key Financial Highlights
- Total Revenue: $43.1 million (+13% YoY)
- Software Revenue: $36.8 million (+13% YoY)
- Services Revenue: $6.3 million (+18% YoY), driven by professional services and managed-review work tied to Cecilia AutoReview
- Adjusted EBITDA: -$3.4 million
- Net Loss: $3.6 million ($0.06 per share)
- Cash & Short-Term Investments: $101.4 million, zero debt
- Operating Cash Flow: -$1.1 million (improved from -$4.2 million prior year)
AI Momentum Drives Growth
CS Disco reported that revenue attributable to its generative AI and agentic AI capabilities more than tripled year over year. Cecilia and AutoReview were key contributors, with AutoReview posting a material sequential increase fueled by pipeline growth, larger matters, higher matter volume, and repeat usage. CFO Aaron Barfoot noted AutoReview set a quarterly revenue record, supported by a record number of reviews executed and growth in average engagement size.
Notably, some customers who favored traditional review processes in Q1 shifted toward AutoReview in Q2 as their comfort and readiness with AI improved. The company also began rolling out an enhancement to AutoReview designed to simplify input creation for AI review, reducing the learning curve for customers at varying AI-readiness levels.
Unified Litigation Solution Enters Pilot
CEO Eric Friedrichsen announced the launch of the DISCO Unified Litigation Solution into a limited customer pilot. The platform connects case evidence with relevant legal authorities—case law, court rules, statutes, and regulations—through a unified interface. Chief Product, Technology and Strategy Officer Richard Crum explained the system maps claims to required legal elements and evaluates whether a matter’s evidence supports those elements.
Management emphasized the offering will not contribute revenue in fiscal 2026 as pricing, packaging, and timing are refined. Three provisional patents have been filed related to the approach.
Large-Customer Base Expands
Trailing-12-month revenue from customers generating over $100,000 grew 15% year over year. The company now counts 354 such customers, representing $128 million (77% of trailing-12-month revenue). The newer DISCO Platform commercial model—which includes Cecilia AI on every matter with simplified pricing—achieved its December 2026 year-end run-rate goal by June, aided by faster-than-expected adoption.
Profitability Outlook & Guidance
Non-GAAP gross margin held steady at 76%. Sales and marketing expense was $15.7 million (36% of revenue), while R&D reached $13.4 million (31% of revenue), reflecting continued investment in the Unified Litigation Solution, Advanced Research, and AutoReview.
CS Disco maintained its expectation of adjusted EBITDA profitability in Q4 fiscal 2026. For Q3, the company forecasts:
- Total revenue: $43.75M – $45.75M
- Software revenue: $38.1M – $39.1M
- Adjusted EBITDA: -$1.75M to -$0.25M
Full-year guidance was raised:
- Total revenue: $172M – $179M
- Software revenue: $147.5M – $152.5M
- Adjusted EBITDA loss: $8M – $5M
Barfoot noted the higher outlook reflects confidence in large-matter execution, large-customer adoption, DISCO Platform momentum, and AutoReview strength. He flagged that lower ingest fees on the platform could create near-term revenue pressure if adoption exceeds expectations, but expects offset over time via ongoing platform fees and larger, longer-lasting matters.
About CS Disco
CS Disco, Inc. provides cloud-native, AI-driven legal applications that streamline e-discovery, document review, and compliance for law firms and corporate legal departments. The Austin, Texas-based company’s flagship e-discovery application supports early case assessment, data processing, review analytics, and production workflows.
FAQ
1. What is CS Disco’s Unified Litigation Solution and when will it generate revenue?
The Unified Litigation Solution is a platform connecting litigation evidence with case law, court rules, statutes, and regulations. It is currently in a limited pilot; management does not expect revenue contribution in fiscal 2026 as pricing and packaging are finalized.
2. How fast is CS Disco’s AI revenue growing?
Revenue from generative AI and agentic AI capabilities more than tripled year over year in Q2 fiscal 2026, driven by Cecilia and AutoReview adoption.
3. When does CS Disco expect to reach adjusted EBITDA profitability?
The company maintains its target of achieving adjusted EBITDA profitability in the fourth quarter of fiscal 2026.
