DISCO’s Q2 2026: Growth, GAAP gaps, and a new path forward in unified litigation

The market often treats the tickers like talismans, and DISCO (NYSE: LAW) released its second-quarter 2026 results with a signal flare for growth in software, a clear tilt toward enterprise customers, and a reminder that not every good quarter is a profitable one. The press release foregrounds revenue progression and a broadened product strategy while leaving EPS and earnings surprise discussions largely to the analyst confessional. In other words, a narrative built on revenue forecast optimism, tempered by a persistent loss on a GAAP basis.

Key numbers at a glance

Quarter ended June 30, 2026: DISCO reported total revenue of $43.1 million, up 13% year over year.
Software revenue: $36.8 million, up 13% year over year.
GAAP net loss: $8.7 million, improved from $10.8 million in the second quarter of 2025.
Adjusted EBITDA: $(3.4) million, versus $(2.7) million in Q2 2025.
Customer momentum: 354 customers with revenue above $100,000 in the trailing 12 months as of June 30, 2026, up 10% year over year.

The company also highlighted a strategic development on the people and product fronts: a new Director Appointment to the board and the launch of a Unified Litigation Solution, a move described as extending DISCO beyond traditional ediscovery into full-stack litigation capabilities.

Strategy note: AI, unified litigation, and enterprise expansion

CEO Eric Friedrichsen framed the quarter as a continuation of deeper customer relationships and the acceleration of large, complex matters. The press release quotes him praising the “lead in AI built specifically for litigators” and signaling a broader, AI-native platform. The introduction of a unified litigation solution is presented as a natural evolution—bringing together matters, related case law, and critical information into a single interface. It’s not just clever branding; it’s a product thesis about reducing toggles in a high-stakes workflow.

On the commercial side, DISCO emphasized growth in its software business and the resilience of its annual active customer base, a signal that the company is aiming for higher-quality, multi-year deployments rather than one-off transactions. The 354 customers with >$100k revenue in the trailing 12 months suggests an ongoing emphasis on enterprise footprint, which often translates into favorable revenue visibility—even if profitability remains a work in progress.

Outlook: revenue forecast and EBITDA trajectory

For the third quarter of 2026, the company provided a revenue forecast that emphasizes software revenue in the range of $38.1 million to $39.1 million and total revenue in the range of $43.75 million to $45.75 million. The Adjusted EBITDA guidance for Q3 is negative, in the range of $(1.75) million to $(0.25) million.

For fiscal year 2026, DISCO guides software revenue of $147.5 million to $152.5 million, total revenue of $172.0 million to $179.0 million, and Adjusted EBITDA of $(8.0) million to $(5.0) million. The company cautions that this outlook rests on a set of assumptions subject to change, and there can be no assurance that the company will achieve these results.

Notably, the release does not present per-share figures or EPS data, and there is no explicit EPS consensus or earnings surprise disclosure. In many earnings cycles, investors compare reported EPS to consensus estimates; here, the focus is on revenue progression, gross and operating dynamics, and cash burn implied by Adjusted EBITDA. Analysts will be parsing whether the revenue forecast can translate into meaningful improvements in profitability as the company scales.

Implications for DISCO and sector peers

The quarter’s mix—steady software revenue growth, a meaningful GAAP loss but a narrowing loss trajectory, and a high-visibility enterprise customer base—speaks to a classic early-stage, high-velocity software model in the legal tech space. Investors will watch the margin trajectory closely. The gap between GAAP net loss and Adjusted EBITDA remains wide, underscoring the tension between top-line expansion and cash flow generation.

The “Unified Litigation Solution” signals an ambition to take on more of the matter lifecycle—the kind of strategic cross-sell that can improve customer retention and lifetime value. If the product wins scale in organizations that prize AI-enhanced workflows, DISCO could pull forward an uplift in ARR (annual recurring revenue) and potentially improve the quality of the revenue forecast as contracts become more multi-year and higher value.

Sector peers watching DISCO’s moves may take note of two potential pathways: (1) acceleration of AI-native capabilities tied to core workflows that reduce operational friction for litigators, and (2) governance and board development that emphasizes security and enterprise readiness. The appointment of a former Meta security-focused executive to the board aligns with a broader industry trend toward strengthening risk controls as software platforms handle more sensitive, high-stakes data.

Final readings: numbers, narrative, and what to watch next

DISCO’s Q2 results deliver a reliable signal on revenue growth, especially in software, and a clear commitment to expanding the platform beyond traditional discovery into a unified litigation environment. The path to profitability remains tied to the pace of operating leverage and how quickly the company can translate top-line momentum into a more favorable EBITDA trajectory. For EPS and EPS consensus watchers, there may be an absence of explicit per-share updates in this release, but the evolving product strategy and customer concentration dynamics will likely feed earnings expectations over time.

In the near term, the revenue forecast for Q3 and FY2026 suggests that DISCO is steering toward growth with a cautiously negative EBITDA profile that might improve as the mix shifts and scaling benefits materialize. Sector peers—especially those in AI-enabled enterprise software and legal tech—will be sizing the company as a potential benchmark for how to balance product expansion, enterprise sales cycles, and cash burn in a high-velocity market.

Company: DISCO, ticker LAW (NYSE). The press release emphasizes forward-looking statements subject to risk and uncertainty inherent in revenue forecasts and profitability projections. Investors should watch for updates on per-share metrics and any changes to the assumed macro and product-market factors that drive the revenue forecast and EBITDA trajectory.

For readers seeking the raw data, the company’s Q2 2026 results show continued software strength and a disciplined approach to product expansion, while the GAAP outcomes underscore the ongoing trade-off between growth investment and cash utilization in this sector.