EXPO Q3 Deep Dive: Diversified Demand and Dispute Consulting Drive Growth, AI and Hiring in Focus

Scientific consulting firm Exponent (NASDAQ:EXPO) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 9.6% year on year to $137.1 million. Its GAAP profit of $0.55 per share was 8.1% above analysts’ consensus estimates.

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StockStory’s Take

Exponent’s third quarter performance was led by robust demand for its dispute-related consulting work, particularly in the energy, transportation, life sciences, and construction sectors. Management highlighted that reactive projects—those addressing urgent client challenges such as litigation or failure analysis—were the primary growth driver, while proactive risk management and regulatory consulting also contributed, especially in utilities and chemicals. CEO Catherine Corrigan noted, “Our diversified portfolio and deep technical capabilities position us well to capture this demand and deliver meaningful value for our clients.” Management did acknowledge a slowdown in consumer electronics activity, though they observed signs of improvement as the quarter ended.

Looking forward, Exponent’s growth strategy is centered on continued investment in talent and expanding expertise in emerging areas such as artificial intelligence, digital health, and advanced vehicle technologies. Management emphasized that hiring will be targeted toward segments showing the strongest demand, with Corrigan outlining, “Our philosophy remains the same in terms of targeting the recruiting toward the areas where we are seeing the growth.” The company expects utilization and realized rates to return to historical ranges, with ongoing regulatory and industry shifts providing new opportunities, but also acknowledging that headwinds such as changes in work mix and increased junior hiring could moderate rate increases.

Key Insights from Management’s Remarks

Exponent’s management attributed Q3 growth to elevated demand for dispute consulting and risk management, while investments in hiring and technology supported expansion in targeted sectors. The company’s proactive and reactive service mix played a notable role in shaping results.

• Reactive consulting strength: Dispute-driven work in energy, transportation, life sciences, and construction was the main growth engine, as clients sought Exponent’s expertise in failure analysis and litigation support for both legacy systems and emerging technologies.
• Proactive demand in utilities and chemicals: Risk management and asset integrity projects for utility clients, along with regulatory consulting in the chemicals sector, provided stable growth, demonstrating the firm’s ability to support critical infrastructure and compliance needs.
• Consumer electronics activity mixed: While proactive consulting for consumer electronics lagged year-over-year, management reported improving trends late in the quarter, particularly in human-machine interaction studies, suggesting a recovery in this vertical.
• AI integration across client work: Artificial intelligence is increasingly embedded in Exponent’s engagements, from advising on AI-driven systems in regulated medical devices to modeling risk in energy and transportation. Management described AI as both a source of new business and a layer of complexity, requiring the firm’s multidisciplinary expertise.
• Hiring aligned to sector needs: Recruiting was focused on areas with the most growth, such as digital health, automated vehicles, and energy, with hiring plans for 2026 expected to return to a 4-6% growth range. This approach is designed to ensure the firm remains responsive to evolving client demand and technological change.

Drivers of Future Performance

Exponent’s outlook is shaped by targeted hiring, sector-specific growth, and evolving demand for complex consulting, while margin expectations normalize as hiring ramps up and work mix evolves.

• AI and technology-driven opportunities: Management expects artificial intelligence, digital health, and advanced vehicle systems to generate ongoing project demand, both in dispute consulting and proactive risk management. Corrigan highlighted that AI is “integrating its way into our work significantly, and it’s around the product life cycle.”
• Hiring and utilization trends: As the company increases technical headcount, particularly at entry levels, realized rate increases are expected to moderate to historical norms around 3-3.5%. This shift reflects a balance between experienced consultants for complex disputes and newer staff for scalable project work.
• Regulatory and industry dynamics: Regulatory enforcement in chemicals, medical devices, and consumer products is expected to remain active, providing consulting opportunities. However, management cited potential headwinds from government spending uncertainty and evolving regulatory timelines, especially in federal contracts, which comprise a small portion of revenue.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will be closely tracking (1) the pace and effectiveness of Exponent’s hiring in high-demand sectors like AI and digital health, (2) the recovery in proactive consulting, particularly in consumer electronics, and (3) the firm’s ability to sustain utilization and margin levels as work mix shifts. Additional attention will be paid to the influence of regulatory changes and macroeconomic factors on client consulting demand.

Exponent currently trades at $66.65, in line with $66.79 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free for active Edge members).

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