Innodata shares plunge 25% after laying off 550 workers, losing client

Shares of Innodata, an AI-focused company that reached a $1 billion valuation during the recent AI boom, tumbled more than 25% yesterday following the dismissal of 550 staff.

The scale of the layoffs rattled investors, raising fears that the firm may have lost its key client. Dismissal notices cited the phasing out of work from a client as the reason.

Within one trading day, shareholders wiped $500 million off Innodata's market capitalization. The company's common stock, listed on the Nasdaq, has a large workforce outside the US.

When markets closed yesterday, Innodata had lost every dollar of market value its investors had gained since November 11, 2024.

This week, Innodata terminated about 550 employees in India and also cut jobs in the Philippines. The data labeling company's stock plunged on Tuesday with trading volume seven times its usual level.

Yesterday's drop was the stock's worst since February 15, 2024, when a Wolfpack Research short-selling report preceded a 30% slump.

Innodata is among the AI sector's small-cap success stories. As recently as 2020, its shares traded at penny-stock levels.

The firm, based in New Jersey, now provides data labeling and safety testing services for artificial intelligence laboratories.

As of December 31, 2025, the company had 10,107 workers, and it has posted 12 straight quarters of year-over-year revenue increases.

Despite the steep drop, Innodata's market capitalization remained above $1.5 billion.

A regular Monday turned into a bloodbath for employees. Local news reports indicate that staff logged in on October 26, rumors of layoffs circulated by midday, and their office credentials were revoked by the afternoon.

Two customers supplied 70% of Innodata's Q2 revenue

Innodata's quarterly filing noted that the project work is "primarily at-will," and clients have the ability to "reduce, delay or cancel projects" at any time.

By the evening of the layoffs, no Form 8-K had appeared on the SEC's filing system.

The company's second-quarter earnings report showed that its top client accounted for about 37% of revenue for the period ending June 30, 2026. The second-largest client provided 34% over the same three months.

Given such heavy reliance on two clients, the unnamed customer was clearly a concern for investors on Tuesday.

Although the identity of the reduced customer remains unknown, market watchers have already targeted a candidate. Speculation on X focused on Meta, which Hunterbrook Media reported in September as being probable Innodata's largest client.

The company may issue an official statement through a press release or an 8-K filing at any point. Innodata is scheduled to announce its third-quarter 2026 earnings on November 5, which will serve as another chance to provide clarity.