Why Innodata Stock Jumped 29% in 2025

Shares of Innodata (NASDAQ: INOD), the data-labeling specialist, were among the winners last year as a combination of strong growth, continued interest in AI stocks, Meta Platforms' acquisition of rival Scale AI, and a reasonable valuation pushed the stock higher.

According to data from S&P Global Market Intelligence, the stock finished last year up 28.9% on the news. As you can see from the chart below, it was a volatile year for Innodata, and it pulled back sharply from its peak in October, though it still finished with substantial gains.

INOD data by YCarts

What happened with Innodata this year

An earlier surge in Innodata's revenue has faded, but the company is still growing quickly. Through the first three quarters of the year, revenue jumped 61% to $179.3 million. In the third quarter, however, revenue growth slowed to just 20%.

Innodata is a small-cap stock, making it somewhat unique in the AI space as most AI stocks are mega-cap stocks. Innodata is profitable as well, unlike a number of smaller tech stocks.

Through the first three quarters, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) jumped 106% to $42.2 million.

Innodata gets much of its business from big tech companies, and Meta's deal to pay $14 billion for 49% of Scale AI and hire its CEO seemed to validate the data-labeling sector. Companies like Innodata and Scale help companies organize and track AI data, so it's easier to manage and use.

The company has expanded into a federal practice, serving the federal government at a time when the government is embracing AI.

The stock pulled back in the last quarter of the year, seemingly on concerns about slowing growth and that a bubble could be forming in AI. Innodata's guidance called for 45% revenue growth for the full year, implying 17% growth.

Image source: Getty Images.

What's next for Innodata

Looking ahead to 2026, the company touted further growth opportunities in addition to the new federal practice, which it said had engaged a new, high-profile customer, which would bring in $25 million in revenue, mostly this year.

It's also invested in pre-training data capabilities that have led to $68 million in expected revenue, based on contracts it's signed or expected to sign.

Innodata's growth is likely to be volatile as the company has a lot of customer concentration, but there's a lot of upside potential for the stock as it moves into new markets like the federal government.

Jeremy Bowman has positions in Meta Platforms. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool has a disclosure policy.