Forrester (FORR) Q3 2025: AI Access Drives Multi-Million Dollar Pipeline Amid 8% Revenue Decline
Forrester’s AI Access launch delivered immediate traction, landing a major government deal and fueling a fast-growing pipeline, even as total revenue fell 8% under persistent consulting and events headwinds. The company sharpened its sales execution and cost control, while management set expectations for AI-driven growth to offset ongoing macro and government sector drag. Investors should watch for continued AI Access adoption and evolving sales conversion as key levers in Q4 and 2026.
Summary
- AI Access Launch Accelerates Pipeline: New self-service AI product quickly generated significant enterprise interest and a landmark deal.
- Sales and Cost Discipline Buoy Margins: Improved sales conversion and tight expense management partially cushioned revenue softness.
- Consulting and Events Drag Persists: Macro and government pullbacks continue to weigh on legacy lines, driving a guidance cut.
Performance Analysis
Forrester’s Q3 results reflect a business in transition, balancing AI-led innovation against persistent top-line headwinds. Total revenue declined 8% year-over-year, with research down 6% and consulting falling 8%, as federal government budget cuts and macro caution weighed on spending. The events segment was negligible due to a major event shift into Q4, compounding the revenue shortfall. However, operating income rose 21% and margin improved to 10.5%, driven by an 11% reduction in operating expenses, mainly from lower compensation and headcount down 8% versus last year.
Research remains the core business, contributing over 77% of total revenue, but even with stabilization in retention (74%) and a 1-point gain in wallet retention, enrichment challenges persist in the current budget environment. AI Access’s rapid pipeline build and the landing of one of the largest research deals in company history signal early product-market fit, but consulting’s high-single to low-double-digit decline and events’ continued sponsorship weakness required a $5 million revenue guidance cut for the year.
- AI Access Pipeline Momentum: The new product created a multi-million dollar, fast-growing pipeline within weeks, validating Forrester’s proprietary AI strategy.
- Sales Execution Improves: Average time to hire reps fell to 55 days, and sales conversion times dropped 27% on emerging tech teams, supporting faster deal cycles.
- Cost Controls Drive Margin: Aggressive headcount and expense management offset revenue pressure, enabling margin expansion despite topline softness.
With Q4 as the largest bookings period and AI Access gaining traction, Forrester is positioned for sequential improvement, but legacy business headwinds are likely to persist into 2026.
Executive Commentary
"We are very excited to be introducing AI access. And we look forward to using AI to democratize access to our research and to further establish Forrester as the AI research company."
George Colony, Chief Executive Officer and Chairman
"The release of the AI Access product and the first major contract win associated with the new offering has shown we have a differentiated product in the marketplace. As George discussed, we continue to believe Forrester will play a key role in the age of AI."
Chris Finn, Chief Financial Officer
Strategic Positioning
1. Proprietary AI as a Differentiator
Forrester’s Izola, its proprietary generative AI model, underpins the new AI Access product, offering clients access to exclusive research content not found in public large language models (LLMs). This intellectual property moat, built from decades of proprietary research, data, and frameworks, positions Forrester as a trusted “private research bank” in an AI-driven future. Clients increasingly seek trusted, organization-specific insights, especially as public models lack the depth and reliability for high-stakes business decisions.
2. AI Access Expands TAM and Lowers Entry Barriers
AI Access is designed as an entry-level, self-service research product, targeting executives who do not require full analyst guidance but want rapid, trusted answers. This approach broadens Forrester’s total addressable market (TAM) by enabling “land and expand” strategies within large enterprises and government agencies. Volume pricing and enterprise-wide deployments, as seen in the recent government win, support larger seat counts and easier adoption across client organizations.
3. Sales Engine Transformation
Sales process improvements are a key strategic pillar, with the Forrester Agile Sales Technique (FAST) and “social contract” methodology driving shorter sales cycles and higher conversion rates. Reps’ average time to close dropped from 80 to 59 days on emerging tech teams, and the company is pushing these practices across all sales units. Demand marketing alignment and pipeline management are also yielding higher opportunity creation rates.
4. Cost Discipline and Operational Flexibility
Expense control remains central, with 11% lower operating costs and an 8% headcount reduction, preserving margin despite revenue contraction. Forrester is managing hiring tightly, focusing on sales talent and attrition, and maintaining a rolling pipeline target per sales headcount. This operational discipline provides a buffer as the company pivots toward AI-driven growth.
5. Sector and Geographic Focus
Federal government and international markets are focal points, with AI Access generating strong interest from U.S. agencies despite ongoing budget pressure. Internationally, Forrester is capturing new logos and expanding in CPG, manufacturing, and financial services, with end user teams regaining momentum after a challenging period. Partnerships like Kerasoft are opening new government channels and may be replicated in other regions.
Key Considerations
This quarter, Forrester’s strategic pivot toward proprietary AI products is gaining real-world traction, but legacy business lines remain exposed to macro and sector-specific volatility. Investors should weigh the pace of AI Access adoption against the persistence of consulting and events headwinds.
Key Considerations:
- AI Access Adoption Curve: Early pipeline and deal wins are promising, but broad-based revenue impact will depend on sustained client uptake and seat expansion.
- Sales Process Scalability: FAST and social contract approaches are delivering faster closes and better conversion, but organization-wide adoption is still in progress.
- Legacy Business Drag: Government consulting remains a significant headwind, with continued budget cuts expected to constrain growth into 2026.
- Events and Sponsorship Risk: Events revenue is structurally challenged, with sponsorship weakness and timing shifts creating ongoing unpredictability.
- Cost Structure Flexibility: Margin expansion has been achieved through expense cuts, but long-term growth will require topline stabilization and AI-driven enrichment.
Risks
Forrester faces continued macro and sector-specific headwinds, especially in government consulting and events, which could offset early AI Access gains. Adoption risk remains high for new products, and competitive pressure from both public LLMs and traditional research providers persists. Revenue visibility is limited, with Q4 and 2026 dependent on pipeline conversion and retention stabilization.
Forward Outlook
For Q4 2025, Forrester guided to:
- Improved contract value (CV) performance, with a low single-digit decline expected for the year
- Continued pipeline growth from AI Access, with expectations for further large enterprise and government wins
For full-year 2025, management lowered guidance:
- Revenue of $395 to $405 million, down 6% to 9% versus 2024
- Operating margins of 7.5% to 8.5%
- EPS of $1.15 to $1.25
Management cited persistent headwinds in consulting and events, but expects AI Access to contribute positively to Q4 and 2026 performance. Focus remains on pipeline conversion, sales execution, and expanding the AI research portfolio.
- AI Access pipeline and conversion rates are the main swing factors for topline recovery
- Consulting and events will remain challenged through at least early 2026
Takeaways
Forrester’s Q3 marks a strategic inflection, with proprietary AI access products gaining real traction and management demonstrating operational discipline. However, legacy consulting and events segments remain under pressure, and AI Access must scale meaningfully to offset these declines.
- AI Access is the Key Growth Lever: Early wins validate the product, but investors should monitor the pace of client seat expansion and pipeline conversion into Q4 and 2026.
- Sales and Cost Discipline Buoy Results: Margin improvement and faster sales cycles are positives, but topline growth remains elusive without broader enrichment and retention gains.
- Watch for AI-Driven Revenue Mix Shift: The transition to AI-led research and self-service models will define Forrester’s competitive position and valuation trajectory over the next year.
Conclusion
Forrester’s Q3 demonstrates early success in pivoting to proprietary AI-powered research, but the company remains in a transition phase as legacy businesses weigh on results. Sustained AI Access adoption and continued sales execution will determine whether Forrester can return to growth and margin expansion in 2026.
Industry Read-Through
Forrester’s rapid AI Access adoption signals a new era for research and advisory firms, where proprietary data and trusted analysis are increasingly valued over generic public LLM outputs. Clients are seeking secure, organization-specific insights that public models cannot provide, suggesting a bifurcation in the research market between commodity and premium, trusted offerings. Events and consulting businesses across the sector face structural sponsorship and budget headwinds, reinforcing the need for digital, scalable product innovation. Peer firms should prioritize proprietary content and sales process transformation to remain competitive in the AI age.