Innodata Stock Is Up 65% Since Our Pick. We're Still Bullish. -- Barrons.com

By Dan Victor

Innodata has been a big winner since Barron's picked it in September, returning 65% since its selection, including an 18% rally so far in 2026.

At the same time, shares of the artificial-intelligence data-engineering company have been exceptionally volatile, with a slide of about 36% from a record high they set in October. We think investors should hang on for more upside in 2026.

The Ridgefield Park, N.J.-based company has been public for more than three decades, but seems to have finally found its calling pioneering techniques for curating data used to train AI models. We previously highlighted how the $1.9 billion market-capitalization company counts five of the Magnificent Seven tech businesses as its customers, supplying data sets covering text, code, images, and video that teach foundational AI models to function.

It isn't just proprietary software. Innodata stands out with a network of more than 4,000 subject-matter experts, including lawyers, doctors, and engineers, who are tasked with ranking AI responses. As AI models become increasingly complex, training steps such as "human preference optimization" and "supervised fine tuning" are critical for smarter and more accurate results.

Business has been brisk. For the first nine months of 2025, Innodata delivered revenue of $179.3 million, representing an organic increase of 61% year over year. The company is profitable too, with net income reaching $23.3 million, or 67 cents per diluted share, over the period.

Comments from CEO Jack Abuhoff reflect confidence the momentum will continue. Speaking to investors in early November, he said Innodata keeps winning contracts, including with multiple new big tech customers. He reiterated an earlier forecast for full-year revenue growth of 45% or more, and said he sees a broadening of the markets the company can serve.

Perhaps the most exciting recent development is Innodata's entry into defense applications through the launch of Innodata Federal, which creates AI programs for U.S. military and intelligence agencies. The company said on Tuesday it won a contract for technology to be used in the Missile Defense Agency's SHIELD program, an acronym for Scalable Homeland Innovative Enterprise Layered Defense.

Innodata has also disclosed discussions with governments around the world to build " sovereign AI" programs, part of a movement for countries to build, and control their digital infrastructure, including for sensitive information.

The progress on those fronts underscores the importance of Innodata's core strength in improving AI quality, reliability, and safety as the technology moves from one-and-done generative AI responses toward autonomous systems that can plan, execute, and complete multistep processes. The rise of specialized enterprise-specific agentic AI means that customers should increasingly depend on Innodata's expertise to refine their pretraining data and final outputs.

Recognizing many of these factors, BWS Financial founder and analyst Hamed Khorsand named Innodata the research shop's top pick for 2026. His price target of $110 implies 86% upside. "In 2026, Innodata is poised to capture more business as the AI landscape continues to evolve." Khorsand says in a report published Jan 5.

Other Wall Street analysts are also bullish. Dan Ives from Wedbush Securities reiterated an Outperform rating on the stock and a $90 price target, naming Innodata among "30 companies closely tied to the AI revolution" he says has triggered an accelerating $2 trillion global spending wave.

Trading at 53 times forward earnings and six times forecast sales in the next 12 months, shares of Innodata are hardly cheap, but the valuation makes sense. It reflects a premium for the company's financial strength and long-term potential -- the likelihood that the company can continue to exceed expectations as the market tends to reward disruptive innovation.

Solid fourth-quarter earnings with positive guidance when the company reports in February could key to jump-starting the next rally higher in the stock. A date for the report hasn't been confirmed.

There's always the possibility of an operational setback or disappointing results, either of which could drag shares lower. A lack of indications that Innodata is doing more business with companies beyond the Big Tech clients that now dominate sales could hurt the stock as well.

Still, it seems the balance of risks is favorable. Innodata is proving to be a leading small-cap offering exposure to a distinct segment of the AI value chain.

Investors ready to ride out near-term volatility could be rewarded with outsize returns in the long run.

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January 23, 2026 16:47 ET (21:47 GMT)

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