Korn Ferry (KFY)

Organizational consulting firm Korn Ferry (NYSE:KFY) reported Q2 CY2025 results beating Wall Street’s revenue expectations, with sales up 4.8% year on year to $715.5 million. On the other hand, next quarter’s revenue guidance of $700 million was less impressive, coming in 0.8% below analysts’ estimates. Its non-GAAP profit of $1.31 per share was 6% above analysts’ consensus estimates.

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.

The Professional Staffing & HR Solutions subsector within Business Services is set to benefit from evolving workforce trends, including the rise of remote work and the gig economy. With companies casting a wider net to find talent due to remote work, the expertise of staffing and recruiting companies is even more valuable. For those who invest wisely, the use of predictive AI in recruitment and screening as well as automation in HR workflows can enhance efficiency and scalability. On the other hand, digitization means that talent discovery is less of a manual process, opening the door for tech-first platforms. Additionally, regulatory scrutiny around data privacy in HR is evolving and may require companies in this sector to change their go-to-market strategies over time.

Korn Ferry competes with global consulting firms like Aon, Mercer, Willis Towers Watson, McKinsey, and Deloitte in the organizational consulting space. In executive search, its competitors include Egon Zehnder, Heidrick & Struggles, Russell Reynolds Associates, and Spencer Stuart.

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 $2.79 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 sales grew at a solid 8.9% compounded annual growth rate over the last five years. 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 marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 1.3% over the last two years.

This quarter, Korn Ferry reported modest year-on-year revenue growth of 4.8% but beat Wall Street’s estimates by 2.5%. Company management is currently guiding for a 2.6% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 2% over the next 12 months. Although this projection suggests its newer products and services will fuel better top-line performance, it is still below the sector average.

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 12.3%.

Looking at the trend in its profitability, Korn Ferry’s operating margin decreased by 1.9 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.

In Q2, Korn Ferry generated an operating margin profit margin of 11.7%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Korn Ferry’s EPS grew at an astounding 20.6% compounded annual growth rate over the last five years, higher than its 8.9% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into Korn Ferry’s quality of earnings can give us a better understanding of its performance. A five-year view shows that Korn Ferry has repurchased its stock, shrinking its share count by 1.7%. 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 shorter period to see if we are missing a change in the business.

For Korn Ferry, its two-year annual EPS growth of 6.4% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q2, Korn Ferry reported adjusted EPS of $1.31, up from $1.20 in the same quarter last year. This print beat analysts’ estimates by 6%. Over the next 12 months, Wall Street expects Korn Ferry’s full-year EPS of $5.03 to grow 3.2%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Korn Ferry has shown terrific cash profitability, enabling it to reinvest, return capital to investors, and stay ahead of the competition while maintaining an ample cushion. The company’s free cash flow margin was among the best in the business services sector, averaging 13% over the last five years.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Although Korn Ferry hasn’t been the highest-quality company lately, it historically found a few growth initiatives that worked out well. Its five-year average ROIC was 19%, impressive for a business services business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Korn Ferry’s ROIC has decreased significantly over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Businesses that maintain a cash surplus face reduced bankruptcy risk.

Korn Ferry is a profitable, well-capitalized company with $721.1 million of cash and $434.3 million of debt on its balance sheet. This $286.9 million net cash position is 7.5% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

It was encouraging to see Korn Ferry beat analysts’ revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. On the other hand, its revenue guidance for next quarter slightly missed, but the market seems to be willing to forgive this. The stock traded up 5.6% to $76.59 immediately following the results.

Updated: December 4, 2025 at 11:12 PM EST

Before deciding whether to buy Korn Ferry or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

Korn Ferry isn’t a terrible business, but it doesn’t pass our quality test. Although its revenue growth was solid over the last five years, it’s expected to deteriorate over the next 12 months and its diminishing returns show management's prior bets haven't worked out. And while the company’s astounding EPS growth over the last five years shows its profits are trickling down to shareholders, the downside is its declining adjusted operating margin shows the business has become less efficient.

Korn Ferry’s P/E ratio based on the next 12 months is 12.6x. This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $81 on the company (compared to the current share price of $66.49).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.