CS Disco enters its Q1 2026 earnings report today with the stock deep in the red — down nearly 20% on the session and 17% over the past week to $3.72. The numbers themselves just printed ahead of the close: Q1 adjusted EPS of $(0.07) beat the $(0.09) estimate, and revenue of $41.9 million cleared the $40.3 million consensus. The company also raised full-year 2026 revenue guidance to $169.25–$178.75 million from the prior range, nudging above the Street's $172.7 million estimate. A beat-and-raise, and yet the market has punished the stock aggressively. That gap between the headline numbers and the price action is the story heading into the after-hours call.
The options market telegraphed something unusual well before the print. Put/call positioning has rotated sharply toward calls in recent weeks — the PCR collapsed from a towering 4.5 at its April 20 peak to just 0.96 today, a reading 1.3 standard deviations below its 20-day average of 2.68. That is a dramatic swing from extreme downside protection toward bullish positioning, which makes the stock's brutal one-day drop all the more striking. Meanwhile, cost to borrow spiked 302% over the past week to 1.81% — still far from punishing in absolute terms, but the pace of increase is notable ahead of results. Short interest is modest at roughly 1.9% of the free float, barely changed, and borrow availability remains loose with utilization well under 5%.
The debate around has been defined by a structural tension between its legal tech niche and persistent profitability pressure. The bull case rests on accelerating software revenue growth toward the $125–$131 million annual range, an 8% year-on-year increase in six-figure customers to 318, and a beat track record that ranks in the 91st percentile on EPS surprise. Bears point to deteriorating operating cash flow — which fell $3.2 million year-on-year to negative $10.5 million last quarter — alongside gross margin compression of 80 basis points and an EV/EBITDA multiple of negative 52x that reflects how far the company remains from profitability. Analyst coverage is thin and targets are largely stale; Canaccord cut its target to $6 in late February, a level now more than 60% above the current price. With the stock down 40% year-to-date, the Street's buy convictions have not translated into support.
Insider activity around the February earnings print was notably clustered and bullish. Director Robert Goodman bought over $3.2 million in shares at around $3.19, CEO Eric Friedrichsen added $45,000 at $2.90, and independent director Krishna Srinivasan purchased $144,000 across two days — all within a week of that print. The net insider buying over the 90-day window ending March 3 totalled roughly $4.1 million. The prior quarterly result, reported in late February, produced an 18% one-day gain and a 61% five-day rally. The question the print will now test is whether the revised guidance range — and whatever management says about the path to positive cash flow — is enough to explain why the stock gave back all of those gains, and then some, before this quarter even arrived.
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