Forrester (FORR) Q2 2025: Multi-Year Contracts Rise 8 Points as Pipeline Grows 15%
Forrester’s Q2 saw pipeline expansion and a strategic pivot to multi-year deals, even as revenue and margins contracted amid persistent macro uncertainty. The company is leaning into AI-driven research and product innovation to differentiate, while cost discipline and targeted salesforce improvements are aimed at stabilizing performance. Investors should watch for execution on pipeline conversion and further traction in government and AI advisory as key levers for the second half.
Summary
- Sales Pipeline Expansion: Pipeline grew 15% QoQ, but conversion remains a work in progress.
- Multi-Year Contract Momentum: Share of multi-year deals increased by 8 points YoY, now at 72% of contract value.
- AI and Research Differentiation: Izola adoption and new research frameworks are central to Forrester’s evolving value proposition.
Performance Analysis
Forrester’s Q2 revenue fell 8% year-over-year as both research and consulting businesses posted mid-single-digit declines, and events revenue dropped sharply. Research, the company’s core subscription business, saw a 7% decline, with feedback from clients indicating ongoing budgetary pressure and macro caution. The consulting segment’s decline moderated versus prior quarters, reflecting some stabilization, but the outlook for the back half remains cautious due to government cost-cutting and shifting demand away from one-time consulting spend.
Events revenue contracted 23% despite higher attendance and record satisfaction at flagship summits, as sponsorships remained challenged in a crowded market. The company’s cost actions, including a 12% YoY headcount reduction, helped limit margin compression, but operating income and EPS both fell by nearly a quarter. Forrester maintained margin and EPS guidance for the year, signaling confidence in cost control and targeted growth bets, but tightened the top end of revenue guidance in response to event and consulting headwinds.
- Subscription Research Pressure: Subscription research revenue slipped 3%, with retention stabilizing but enrichment still under pressure.
- Consulting Deceleration Slows: Consulting revenue declines moderated to 5%, but federal cost-cutting is shifting wallet share to research.
- Events Underperformance: Events revenue missed expectations, with sponsorship lagging despite improved attendee metrics.
Cash flow remained solid and the balance sheet is healthy, providing flexibility to reinstate share repurchases in the second half. However, the company’s ability to drive revenue growth will depend on converting a growing pipeline and extracting more value from its research and AI offerings.
Executive Commentary
"As I noted on the previous call, the last mile of our transition is upscaling our sales organization to consistently sell, enrich, and renew foreshore decisions. And we're making progress in four areas. Number one, leadership. We have five strong executives under Nate Swan, our head of sales. Two, pipelines. The total sales pipeline continues to grow, increasing 15% from Q1 of 2025. Three, performance management. We are moving faster to take out low-performing sales reps. And finally, number four, hiring. The average time to hire new reps has improved 21% as compared to Q1."
George Colony, Chief Executive Officer and Chairman
"We are maintaining our margin and EPS guidance for the year. Q2 saw a 7% CV decline. This mirrors our first quarter performance. We anticipate improved performance in the second half to come from opportunities in the government space, along with demand driven by our groundbreaking research and expanded offerings in our Forrester Decisions product portfolio aimed at broadening the market reach for our products."
Chris Finn, Chief Financial Officer
Strategic Positioning
1. Pipeline and Salesforce Transformation
Forrester’s sales pipeline grew 15% sequentially, reflecting increased demand generation and a focus on multi-year contract structures. The company is aggressively managing salesforce performance, with faster removal of underperformers and a 21% reduction in time-to-hire for new reps. While pipeline growth is robust, conversion remains the key challenge, with management emphasizing earlier managerial involvement and better qualification to improve close rates.
2. Multi-Year Contract Focus
Multi-year contracts now represent 72% of contract value, up 8 points year-over-year, with a growing share of three-year deals. This shift is designed to stabilize retention and provide revenue visibility, though enrichment (upsell) remains soft due to client budget caution. Leadership sees this as a critical lever for future retention improvement and margin stability.
3. Generative AI Differentiation
Izola, Forrester’s generative AI research tool, saw a 22% increase in clients and a 44% jump in usage prompts quarter-over-quarter. Recent product enhancements allow Izola to extract insights from charts and specific reports, deepening its value proposition. AI research and advisory now rank among the top three priorities for all Forrester Decisions services, positioning the company as a thought leader in AI-driven business transformation.
4. Research and Product Innovation
Two new research frameworks launched in Q2—Buying Networks (B2B) and Total Experience Score (B2C)— are gaining traction with clients and opening doors to senior-level engagements. These frameworks address evolving buyer behavior and the convergence of brand and customer experience, driving new advisory opportunities and reinforcing Forrester’s reputation for original thought leadership.
5. Events Realignment and Modernization
Despite revenue headwinds, Forrester is modernizing its events offering, expanding beyond traditional booths to more outcome-based sponsorships and relocating key events to boost international appeal. The integration of events with marketing aims to drive contract value expansion, with early signs of improved attendee engagement and satisfaction.
Key Considerations
Forrester’s Q2 was defined by disciplined cost management, strategic salesforce upgrades, and a push to differentiate through AI and proprietary research. The company’s ability to convert pipeline and deepen client value will shape the trajectory for the balance of the year.
Key Considerations:
- Pipeline Conversion Focus: While pipeline is growing, management is prioritizing improved qualification and earlier managerial engagement to lift conversion rates and reduce stalled deals.
- Retention and Enrichment Dynamics: Client and wallet retention remain under pressure, with enrichment lagging due to macro uncertainty and budget scrutiny among enterprise clients.
- AI Adoption as Differentiator: Izola’s rapid uptake and AI research leadership are central to Forrester’s strategy to win new business and defend share in a crowded advisory market.
- Government Sector Opportunity: New wins in U.S. and European government are offsetting some private sector softness, with a shift from consulting to recurring research contracts.
- Events Sponsorship Challenge: Despite higher attendance, sponsorship revenue remains a drag, prompting a revamp of offerings and event locations to drive renewed growth.
Risks
Persistent macroeconomic and budgetary caution, especially in enterprise and vendor segments, continues to weigh on revenue growth and enrichment. The company faces competitive pressure in both research and events, and a crowded sponsorship environment could prolong events underperformance. Execution risk around pipeline conversion and salesforce scaling remains high, with potential for further margin and revenue pressure if conversion does not improve as planned.
Forward Outlook
For Q3 2025, Forrester guided to:
- Revenue in the range of $400 to $410 million for the full year (down 5% to 8% YoY).
- Operating margin of 8% to 9% and EPS of $1.20 to $1.35 for the year.
Management expects:
- Continued margin discipline and cost control to support earnings stability.
- Improved performance in government and AI advisory to offset ongoing challenges in consulting and events.
Takeaways
Forrester’s Q2 was a story of pipeline growth, cost rigor, and strategic repositioning around AI and research innovation. The company is betting on multi-year contracts and differentiated offerings to stabilize retention and reignite growth, but must deliver on pipeline conversion and events modernization to drive a sustained turnaround.
- Pipeline and Contract Structure Shift: Robust pipeline growth and a rising share of multi-year deals are positive, but the company must translate these into higher conversion and retention to offset top-line pressure.
- AI and Research Leadership: Izola’s adoption and new research frameworks are creating new client engagement opportunities, but competitive intensity and rapid technology shifts require continued investment and agility.
- Execution Watchpoint: Investors should monitor conversion rates and enrichment trends, as well as the impact of events realignment and government sector wins on second-half performance.
Conclusion
Forrester’s Q2 2025 reflects disciplined execution in a tough environment, with strategic progress on salesforce transformation, contract structure, and AI-driven differentiation. The path to recovery hinges on converting pipeline, deepening client value, and delivering on new product and event strategies.
Industry Read-Through
Forrester’s results highlight the ongoing challenges facing research, consulting, and B2B event providers in a slow-growth, budget-constrained environment. The pivot to multi-year deals and AI-driven advisory is becoming a sector-wide imperative, with clients demanding more measurable ROI and actionable insights. Event sponsorship headwinds and the need for product modernization are likely to persist across the industry. Providers with differentiated AI tools and proprietary research frameworks are best positioned to capture share as clients navigate digital and operational transformation.