Disco Turns Adjusted Ebitda Positive a Quarter Early

The Tip Desk · November 4, 2026 · 3 min read

Third-quarter revenue was $45.3 million, up 11% year over year, as the litigation-software company posted $0.1 million of Adjusted EBITDA.

CS Disco, Inc. (LAW) reported Adjusted EBITDA of $0.1 million for the third quarter ended September 30, 2026, a swing from a $0.3 million loss a year earlier and a quarter ahead of the schedule the company had previously set.

The Austin-based litigation-software company said total revenue was $45.3 million, up 11% from the third quarter of 2025, or 15% excluding $1.3 million of contingent-matter revenue recognized in the year-ago period. Sequential revenue rose from $43.1 million in the second quarter, while year-over-year growth slowed from 13% in that quarter. Actual total revenue landed near the top of the $43.75 million to $45.75 million range issued in August.

Software revenue was $38.6 million, up 10% year over year, or 13% excluding $1.2 million of contingent-matter software revenue in the prior-year quarter. Sequential software revenue increased from $36.8 million in the second quarter; year-over-year software growth slowed from 13% then. The figure sat inside the $38.1 million to $39.1 million third-quarter software range. Chief Executive Eric Friedrichsen said the quarter marked a sixth consecutive period of double-digit software growth.

GAAP net loss narrowed to $5.0 million from $13.7 million a year earlier. Operating loss was $5.6 million, and operating margin improved to (12)% from (35)%. General and administrative expense fell to $9.7 million from $16.9 million a year earlier, as $7.0 million of stockholder-litigation expenses recorded in the year-ago quarter did not recur. Non-GAAP gross margin held at 77%. Non-GAAP operating margin improved to (2)% from (3)%.

Adjusted EBITDA of $0.1 million exceeded the prior third-quarter outlook of $(1.75) million to $(0.25) million. Sequential Adjusted EBITDA improved from $(3.4) million in the second quarter after a $(3.5) million loss in the first quarter. GAAP net loss also narrowed sequentially from $8.7 million in the second quarter.

As of September 30, 2026, DISCO had 374 customers with more than $100,000 of trailing-12-month revenue, a 15% increase versus September 30, 2025, and up from 354 as of June 30. Friedrichsen said the DISCO Platform had grown 10 times since the first quarter of 2026 and that the unified litigation solution added a second pilot cohort. The company announced general availability of Advanced Research, an agentic AI application.

For the fourth quarter of 2026, DISCO is issuing software revenue of $39.4 million to $40.4 million, total revenue of $45.8 million to $47.8 million, and Adjusted EBITDA of $0.0 million to $1.5 million. For fiscal 2026, it is issuing software revenue of $149.5 million to $150.5 million, total revenue of $176.1 million to $178.1 million, and Adjusted EBITDA of $(6.8) million to $(5.3) million. The full-year Adjusted EBITDA range narrowed from $(8.0) million to $(5.0) million issued in August; the total-revenue range narrowed from $172.0 million to $179.0 million.