Organizational consulting firm Korn Ferry (NYSE: KFY) announced better-than-expected revenue in Q3 CY2025, with sales up 7% year on year to $729.8 million. On the other hand, next quarter’s revenue guidance of $687 million was less impressive, coming in 1.4% below analysts’ estimates. Its non-GAAP profit of $1.33 per share was 1.4% above analysts’ consensus estimates.

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Company Overview

With clients including 97% of the S&P 100 and operations in 103 offices across 51 countries, Korn Ferry (NYSE: KFY) is a global consulting firm that helps organizations design optimal structures, recruit talent, develop leaders, and create effective compensation strategies.

Revenue Growth

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years.

With $2.84 billion in revenue over the past 12 months, Korn Ferry is a mid-sized business services company, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale. On the bright side, it can still flex high growth rates because it’s working from a smaller revenue base.

As you can see below, Korn Ferry’s 10% annualized revenue growth over the last five years was impressive. This shows it had high demand, a useful starting point for our analysis.

Long-term growth is the most important, but within business services, a half-decade historical view may miss new innovations or demand cycles. Korn Ferry’s recent performance shows its demand has slowed significantly as its revenue was flat over the last two years.

This quarter, Korn Ferry reported year-on-year revenue growth of 7%, and its $729.8 million of revenue exceeded Wall Street’s estimates by 1.7%. Company management is currently guiding for a 1.5% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 2.5% over the next 12 months. While this projection suggests its newer products and services will spur better top-line performance, it is still below the sector average.

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Operating Margin

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after subtracting all core expenses, like marketing and R&D.

Korn Ferry has managed its cost base well over the last five years. It demonstrated solid profitability for a business services business, producing an average operating margin of 12.4%.

Analyzing the trend in its profitability, Korn Ferry’s operating margin decreased by 2.9 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, Korn Ferry generated an operating margin profit margin of 13.5%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Korn Ferry’s EPS grew at an astounding 24.8% compounded annual growth rate over the last five years, higher than its 10% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into Korn Ferry’s earnings to better understand the drivers of its performance. A five-year view shows that Korn Ferry has repurchased its stock, shrinking its share count by 1.6%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Korn Ferry, its two-year annual EPS growth of 13.8% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.

In Q3, Korn Ferry reported adjusted EPS of $1.33, up from $1.21 in the same quarter last year. This print beat analysts’ estimates by 1.4%. Over the next 12 months, Wall Street expects Korn Ferry’s full-year EPS of $5.15 to grow 4.8%.

Key Takeaways from Korn Ferry’s Q3 Results

It was encouraging to see Korn Ferry beat analysts’ revenue expectations this quarter. On the other hand, its revenue guidance for next quarter slightly missed and its EPS guidance for next quarter fell slightly short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock remained flat at $64.87 immediately after reporting.

Korn Ferry’s latest earnings report disappointed. One quarter doesn’t define a company’s quality, so let’s explore whether the stock is a buy at the current price. The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.