Organizational consulting firm Korn Ferry (NYSE: KFY) reported Q1 CY2025 results topping the market’s revenue expectations, with sales up 2.8% year on year to $719.8 million. On the other hand, next quarter’s revenue guidance of $685 million was less impressive, coming in 1% below analysts’ estimates. Its non-GAAP profit of $1.32 per share was 4.7% above analysts’ consensus estimates.

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“Even amid the ever-changing global economic and political dynamics, we continue to deliver on our financial and strategic objectives, just as we have over the past several years. Our results reinforce the premise of Korn Ferry’s diversification strategy and our continued momentum,” said Gary D. Burnison, CEO, Korn Ferry.

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

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

With $2.76 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 grew its sales at a decent 6.9% compounded annual growth rate over the last five years. This shows its offerings generated slightly more demand than the average business services company, 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 marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 1.8% over the last two years.

This quarter, Korn Ferry reported modest year-on-year revenue growth of 2.8% but beat Wall Street’s estimates by 3%. Company management is currently guiding for flat sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 1.6% over the next 12 months. Although this projection indicates its newer products and services will fuel better top-line performance, it is still below the sector average.

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Operating Margin

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Korn Ferry has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 11.7%, higher than the broader business services sector.

Looking at the trend in its profitability, Korn Ferry’s operating margin rose by 4 percentage points over the last five years, as its sales growth gave it operating leverage.

In Q1, Korn Ferry generated an operating margin profit margin of 14.5%, up 2.6 percentage points year on year. This increase was a welcome development and shows it was more efficient.

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 a remarkable 11% compounded annual growth rate over the last five years, higher than its 6.9% 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 quality to better understand the drivers of its performance. As we mentioned earlier, Korn Ferry’s operating margin expanded by 4 percentage points over the last five years. On top of that, its share count shrank by 1.9%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

In Q1, Korn Ferry reported EPS at $1.32, up from $1.26 in the same quarter last year. This print beat analysts’ estimates by 4.7%. Over the next 12 months, Wall Street expects Korn Ferry’s full-year EPS of $4.92 to grow 1.8%.

Key Takeaways from Korn Ferry’s Q1 Results

We enjoyed seeing Korn Ferry beat analysts’ revenue expectations this quarter. We were also happy its EPS guidance for next quarter outperformed Wall Street’s estimates. On the other hand, its revenue guidance for next quarter slightly missed. Overall, this print had some key positives. The stock traded up 4% to $69.35 immediately following the results.

Is Korn Ferry an attractive investment opportunity at the current price? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.