Forrester (FORR) Q1 2026: Forrester AI Usage Surges 55% as Embedded Access Drives Retention Gains
Forrester’s first quarter marked a decisive pivot toward embedding AI across client workflows, with Forrester AI usage up 55% year-over-year and prompt volumes climbing 65%. The company’s focused exit from strategy consulting and reinvestment in AI-powered research and access options is stabilizing core metrics, with wallet and client retention both improving sequentially and year-over-year. Looking forward, leadership’s increased guidance and visible traction in product adoption signal a business model increasingly aligned with the accelerating AI transformation agenda of its enterprise clients.
Summary
- AI Integration Momentum: Forrester AI adoption and embedded access are reshaping client engagement and retention.
- Consulting Exit Reallocates Focus: Sunsetting legacy consulting frees resources for research and AI-driven products.
- Retention and Pipeline Strengthen: Improved metrics and robust event demand underpin a return to growth narrative.
Business Overview
Forrester is a research and advisory firm that delivers insights, data, and consulting services to enterprise clients navigating technology, marketing, and operational change. Revenue is generated primarily through research subscriptions, advisory, and consulting engagements, with a growing emphasis on digital and AI-enabled research products. The company’s business is segmented into research, consulting, and events, with research accounting for the majority of sales and an expanding share of product innovation.
Performance Analysis
Forrester delivered $85.5 million in revenue for Q1 2026, down 5% year-over-year, reflecting a strategic exit from the strategy consulting business and a reimagined events portfolio. Research revenue, which constitutes the core of the business, declined 2%, while consulting fell 13%—the latter driven by the deliberate wind-down of non-core offerings. Key forward indicators improved: wallet retention rose two points sequentially to 89%, and client retention reached 78%, up five points year-over-year.
Importantly, contract value (CV) decline moderated to 3%, a sequential improvement, and management expects incremental gains through the year as embedded AI offerings and product portfolio enhancements take hold. Free cash flow was robust at $19 million, and excluding one-time headquarters CapEx, underlying cash generation was even stronger. Operating expenses decreased by 1% despite one-time litigation costs, with headcount down 8% as efficiency initiatives take hold.
- AI-Driven Product Uptake: Forrester AI usage hit all-time highs, with 55% growth in overall usage and prompt volumes up 65%.
- Retention Lifecycle Execution: Customer success efforts accelerated onboarding and engagement, driving improved retention metrics.
- Consulting Drag, But Portfolio Mix Improves: Consulting revenue decline is offset by growth in research reprints and AI-based access products.
Management’s increased confidence in the revenue outlook is grounded in stronger event sponsorship bookings and visible traction in embedded AI solutions. The business model is shifting toward recurring, digitally delivered research and advisory, positioning Forrester for improved resilience and leverage as AI adoption accelerates across its client base.
Executive Commentary
"Change is the gasoline that drives our model faster, and the AI wave is forcing unpredictable and relentless change on our clients… We are leading this new era by expanding our research coverage of AI."
George Colony, Chief Executive Officer and Chairman
"With the improvement in our metrics and progress on our strategy of embedding our products where our clients work, we are raising the low end of our revenue guidance for the year."
Chris Finn, Chief Financial Officer
Strategic Positioning
1. Embedding Forrester AI Where Clients Work
Forrester’s “where you work” strategy is rapidly embedding AI-powered research directly into client workflows, notably through Microsoft Teams and Copilot integrations. This move is designed to reduce friction, boost engagement, and make Forrester’s insights more actionable—driving a step-change in usage and client stickiness. The launch of Forrester AI in the Microsoft Marketplace and its certification for Teams signal a deliberate push to meet clients in their daily tools, with further integrations planned for the year.
2. Product Portfolio Optionality and AI Access
The company is expanding access options for its research products, highlighted by the AI Access offering, which provides flexible price points and is attracting both new clients and win-backs. AI Access now represents just under 5% of the portfolio, with management targeting 10% by next year. This strategy is designed to broaden the addressable market and reduce churn by aligning offerings with evolving client needs and budgets.
3. Sales Force Realignment and Industry Focus
New sales leadership has reorganized the North American team around six core industries with high expertise and growth potential, while also retraining sales reps to sell AI-driven products and enterprise-wide solutions. Early momentum is visible in high tech, industry sectors, and international pockets, with an emphasis on large enterprise deals and pipeline consistency. Sales productivity per rep rose 6% year-over-year, reflecting these operational changes.
4. Actionable, All-Seasons Research
Forrester is investing in research that is both immediately applicable and relevant in non-transformation periods, creating 70 new initiative blueprints in Q1 alone. This “all-seasons” approach aims to ensure that Forrester’s value proposition is resilient regardless of macro cycles, supporting client engagement and retention even when transformation budgets pause.
Key Considerations
Forrester’s Q1 reflects a business in strategic transition, moving from legacy consulting toward digitally delivered, AI-powered research and advisory. The following considerations frame the investment thesis for the coming quarters:
Key Considerations:
- AI Integration Drives Engagement: Embedded AI offerings are materially increasing client usage and driving improved retention and upsell metrics.
- Consulting Exit Reduces Drag: Winding down strategy consulting is freeing resources and focus for higher-margin, scalable research products.
- Product Optionality Expands TAM: Flexible access models like AI Access support new client acquisition, win-backs, and reduced churn risk.
- Sales Execution and Industry Focus: Realignment around core industries and enterprise deals is yielding early signs of improved pipeline and productivity.
- Strong Cash Position Supports Investment: Over $145 million in cash and limited debt provide ample capital for continued product and platform innovation.
Risks
Forrester’s revenue mix remains in transition, with legacy consulting declines not yet fully offset by growth in AI-driven products. Execution risk is elevated as the company shifts sales, product, and delivery models simultaneously, and the pace of client AI adoption may be uneven across industries. Macroeconomic uncertainty, competitive pressure from larger research and advisory peers, and the need to continually demonstrate differentiated value in AI guidance are ongoing headwinds. Management’s ability to sustain retention gains and accelerate CV growth will be critical to validating the pivot.
Forward Outlook
For Q2 and the full year 2026, Forrester guided to:
- Revenue of $350 to $360 million for 2026, down 9% to 12% versus 2025
- Operating margin in the 6% to 6.5% range
- EPS of $0.72 to $0.82 for the full year
Management cited improved retention, stronger event sponsorship bookings, and growing AI product adoption as drivers of increased confidence. Guidance assumes continued mid-single-digit decline in research, low-20s decline in consulting, and mid-to-high teens decline in events, with expected stabilization and growth in CV by year-end.
- Embedded AI offerings and product enhancements will continue to support CV improvement.
- Sales execution and industry-focused pipeline development are expected to sustain momentum.
Takeaways
Forrester’s transition to an AI-first research company is gaining traction, with embedded access and product flexibility driving improved client metrics and operational momentum.
- AI Usage and Embedded Access: Record Forrester AI usage and successful integrations into client workflows are delivering tangible engagement and retention gains.
- Portfolio Realignment: Exiting low-margin consulting and investing in scalable, digital research is improving business quality and positioning Forrester for future growth.
- Watch for Sustained CV Growth: The key test for the model will be delivering sustained contract value expansion as product adoption deepens and events rebound.
Conclusion
Forrester’s Q1 2026 results underscore a business in active transformation, with AI integration, product optionality, and operational discipline beginning to offset legacy drag. Execution on embedding AI and driving industry-focused sales will determine whether recent metric improvements translate into durable growth and margin leverage in the quarters ahead.
Industry Read-Through
Forrester’s experience highlights the growing imperative for research and advisory firms to embed digital and AI capabilities directly into client workflows, rather than relying solely on traditional subscription models. The rapid adoption of AI-powered insights and flexible access options signals a broader shift in how enterprise buyers expect to engage with knowledge providers. Firms that can demonstrate differentiated, actionable AI guidance and meet clients “where they work” will be best positioned to capture share as the pace of enterprise AI transformation accelerates. The exit from legacy consulting also reflects a wider trend toward scalable, digital-first business models in the professional services sector.