Innodata Inc.
Information Technology · IT Services
Structural: pure-play vendor on the "data labeling + eval is the picks-and-shovels of the LLM stack" thesis. ~80% of revenue now flows through DDS, anchored by five hyperscaler master agreements signed 2024-2025. Small-cap proxy when private comp $SCALE (acquired by $META at ~$14B) is off-limits; thinner moat than Scale but faster operating leverage on hyperscaler ramp.
(1) Customer #1 (widely identified as $MSFT-aligned hyperscaler) revenue scaled 5x+ YoY through 2025; customers #2-5 still in early-ramp phase. (2) Margin profile expanding as repeat work shifts from greenfield annotation to higher-margin eval / red-team contracts.
(3) Operates at fraction of Scale AI's headcount cost via offshore delivery (India / Philippines / Sri Lanka). (4) Generative-AI capex cycle from $NVDA / $AMD ecosystem flows downstream into data prep as a structural %. (5) Pristine balance sheet, no debt, ~$100M cash post equity raise.
(1) Customer concentration extreme - top customer was >60% of revenue in recent quarters; loss or scope cut would crater the multiple. (2) Hyperscalers ($GOOGL, $META, $MSFT) all building in-house data ops + acquiring labelers ($META/$SCALE) - Innodata risks being a transitional vendor.
(3) Multiple has expanded with the narrative; 2026 revenue must compound >50% to stay rich. (4) Annotation is commoditizing; pricing power sits with frontier-model labs, not vendors. (5) Eval / red-team revenue still small; not yet proven to offset annotation deflation.
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