This Growth Stock Continues to Crush the Market

Here's a bit of a flashback for you. Innodata's (NASDAQ: INOD) stock price more than doubled in November 2024, thanks to a fantastic earnings report.

Innodata's gains didn't stop there, though. The stock caught a second wind in September 2025, rising as much as 118% above the new highs established last year. the stock backed down a bit from the new all-time high, but it's still on fire. As of this writing on Nov. 24, 2025, Innodata is up 48% in the last quarter and a staggering 1,779% in 3 years.

The data engineering expert is soaring in the artificial intelligence (AI) boom. Demand for its data-cleaning and organization services is skyrocketing, as squeaky-clean and elaborately tagged data is perfect food for AI-training systems.

Let's peek under Innodata's hood

Skyrocketing growth stocks are exciting of course, but they also raise my skeptical hackles sometimes. When a stock goes parabolic like this, doubling in a month, then doubling again... it takes a lot of financial derring-do to support that kind of rocket ride. If the fundamentals can't keep pace, you're looking at a house of cards.

So let's check out Innodata's numbers. First stop: early November's analyst-stumping Q3 2025 report that sent the stock 13% higher in the week after its release.

Innodata's Q3 sales rose 20% year over year. Double-digit percentage jumps are often good news, but this quarter lagged behind Innodata's broader revenue growth in 2025. Still, management reiterated its full-year target of at least 45% top-line growth. That sales trend can be lumpy, since Innodata often deals with large clients and high contract prices; A single deal dropping into the next quarter or landing early can make a big difference to any single reporting period's financials.

Further down the income statement, earnings held steady at $0.24 per diluted share, backing out a one-time tax benefit from the year-ago profits. Innodata ramped up sales and marketing expenses plus its research and development budget in line with the top-line increases.

Dancing with trillion-dollar partners

Judging by the earnings call, Innodata is doubling down on its "deepening relationships of trust" with a handful of very large tech companies. No names were shared, but you know the usual suspects -- typically trillion-dollar members of the Magnificent 7 club. CEO Jack Abuhoff was very excited about these tighter relationships, hoping to capture even larger contracts with new services like creating AI pre-training data from scratch and the brand-new Innodata Federal data service.

"Our platforms and expertise already serve the world's leading technology companies and Fortune 1000 enterprises," Abuhoff said. "We are now bringing that same proven excellence to federal missions with the security, compliance, and speed that government operations demand."

Image source: Getty Images.

The red flags behind the rocket ship

These results don't exactly inspire me to buy Innodata stock right now. There's more sizzle than steak in that soaring stock chart, and shares are trading at a nosebleed-inducing 59 times trailing earnings. That's higher than Nvidia (NASDAQ: NVDA), whose red-hot stock has cooled down to a P/E of 45. It's a concentration risk dressed up in Silicon Valley's finest.

"Deepening relationships of trust" with unnamed trillion-dollar companies sounds great in theory, but you can also call it "putting all your eggs in a very expensive basket."

Abuhoff deserves credit for his proactive strategy, though. Diversifying into federal contracts could be a game-changer -- just look at Palantir Technologies (NASDAQ: PLTR) for a great example of government-powered hypergrowth. Federal work is sticky, predictable, and boring in all the right ways. Will the new Federal office actually win any contracts for Innodata on Capitol Hill? That's one key issue to watch over the next couple of years.

I think the market's betting on flawless execution here. Innodata's lofty stock price could deflate very quickly on the first hint of bad news. One stumble, one lost mega-client, one quarter where that 45% full-year growth target becomes 30%, and pop goes the single-ticker bubble.

Innodata is a respectable company with nearly four decades of operating history, and the last few months have been a thrill ride for longtime shareholders. I'm not sure the stock can keep soaring on these unpredictable business results, though. I'm certainly not buying any Innodata shares at this lofty valuation, and maybe it's time for current owners to cash in some of their profits. There are too many question marks and not enough exclamation points in this growth story, at least for me.

Anders Bylund has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia and Palantir Technologies. The Motley Fool has a disclosure policy.