Forrester Research cleared a low bar in the third quarter, but the more consequential news was a retreat on the growth narrative. On Earnings Whispers' normalized basis, the company earned $0.13 per share, a penny above the $0.12 consensus, an 8.3% surprise. Revenue of $86.11 million beat the $81.76 million consensus by 5.3%. Both lines still contracted sharply: earnings fell 43.5% year over year and revenue declined 8.7%. Management raised the low end of its full-year adjusted EPS range to $0.77, from $0.72, while keeping the top at $0.82. That is the central tension. The beat and the narrower guidance came from cost discipline and buybacks, while the top-line recovery that was supposed to define the second half has been pushed further out.

The quality of the quarter deserves scrutiny because the reported figures do not line up neatly. Forrester's own adjusted EPS was $0.24, down from $0.37 a year ago. On a GAAP basis, the net loss widened to $0.23 per share from $0.11. That wider loss came despite $2.5 million of pretax income, because the company booked $6.9 million of tax expense in the quarter. Investors should treat the Earnings Whispers normalized $0.13 as the consensus comparison and recognize that it sits between those two company-reported figures.

Operationally, adjusted operating income fell 35% to $6.5 million, a 7.6% margin. Expenses fell, but not as fast as revenue. Total headcount dropped to 1,337 from 1,485, and the sales force shrank to 504 from 550. Year-to-date capital spending jumped to $24.8 million from $1.9 million. On the release, management attributed the quarter to "stabilization" and "prudent expense management."

Beneath the headline, the business is splitting in two directions:

• **Improving:** Research revenue, the core subscription engine, declined only 3% after an 8% drop in the second quarter. Client retention improved to 78%, up four points year over year. Wallet retention held at 89% for a third straight quarter.
• **Deteriorating:** Consulting revenue collapsed 31%, a steeper decline than the 15% drop in the second quarter. Contract value fell 3.5% to $281.9 million, slightly worse than the roughly 3% declines in the first half. The client count slipped to 1,761.

In short, retention is fine. New business and upsell are not. On the call, management described upsell as still below plan and the pipeline as merely "consistent," after calling it up year over year in the second quarter.

The biggest disappointment was the walk-back on contract value. Through the first half, management framed 2026 as ending with contract-value growth; in the second quarter it said the company was on a path for growth by year end. That expectation has been replaced with a range of -2% to +2% centered on flat, and sustained growth is now a 2027 story. The trigger was U.S. federal deals that slipped on funding issues. Management had called federal business a "turning point" last quarter and is now planning those deals more cautiously. Bears have legitimate ammunition here, for three reasons:

• Roughly 40% of annual bookings land in the fourth quarter.
• Complex enterprise deals are taking longer to close.
• Growth-oriented sales hiring has been deferred in favor of productivity.

The catalyst slate is real but early. Forrester launched AI Access Plus, which combines AI access with quarterly analyst inquiries, and introduced Team Solutions. It also added a Claude plugin through a limited early-adopter program and is exploring Slack and Gemini integrations. Usage of Forrester AI is growing quickly, with prompts up 142% year over year and users up 65%. More than half of sales reps now sell AI Access. Still, the AI Access mix target was trimmed to about 5% of contract value by year end, versus talk in the first quarter of approaching 10%. Capital return is the more tangible support:

• Buybacks accelerated to about $10 million in the third quarter, from roughly $1 million in the second.
• Debt was cut to $30 million from $35 million.
• Cash stood at $117.6 million.

The market had been leaning into the stabilization story ahead of the report. Shares closed at $12.04 before the release, up 14.8% from the open following the July report. That left the stock about 41% above its 200-day moving average and 5.6% below the 52-week high of $12.75 set on September 4. Investor sentiment improved meaningfully, rising to -0.04 from -0.17, though it remained slightly negative. The Earnings Whispers AVWAP reading is positive, while price and momentum trends are neutral, consistent with a rally that has paused near its highs. A stock positioned for a turn in contract value now has to absorb guidance that defers that turn.

The bottom line is that Forrester delivered a cleaner bottom-line quarter than feared, protected by cost cuts, a lower share count and steadier retention. However, the evidence that the franchise can grow again weakened. Research revenue is stabilizing, but consulting is shrinking faster, the sales force is smaller, and the contract-value growth promise has been reset to flat. With the stock near its highs entering the report, fourth-quarter bookings and federal deal timing now carry the investment case.