Key Highlights

  • Q1 2026 (ended March 27, 2026) revenue before reimbursements fell to $67.8 million from $76.2 million a year earlier and landed below management's own guidance range of $70.5 million to $72.0 million.
  • SAP Solutions was the only one of Hackett's three reporting segments to grow revenue in the quarter; Global S&BT and Oracle Solutions both contracted by double-digit percentages.
  • The company paid its second-ever quarterly dividend of $0.12 per share in July 2026 and kept repurchasing stock even as adjusted diluted earnings per share slipped to $0.34 from $0.41 a year earlier.
  • Fernandez framed the pullback as the cost of repositioning the firm, saying "over the past two years, we have made disciplined, systematic investments to build a cohesive and highly differentiated AI foundation" and that the company is "already seeing meaningful productivity gains and expanding scope on engagements" tied to its Gen AI platforms.

The Hackett Group, Inc. (NASDAQ:HCKT) closed its first quarter of fiscal 2026 with revenue down more than 11% year over year even as the Miami-based consultancy leans harder into generative-AI advisory work through platforms such as Hackett AI XPLR and ZBrain. A new dividend and an active buyback underline a still-profitable core, but the May 2026 results also show a business searching for its next growth engine.

A Profitable Consultancy Faces Its Toughest Growth Test in Years

The Hackett Group has spent three decades selling benchmarking data and process-improvement advice to the world's largest companies, a franchise it says reaches 97% of the Dow Jones Industrials and 90% of the Fortune 100. That legacy business is now being reshaped around generative AI, and the first-quarter 2026 numbers, reported May 5, 2026, show the strain. Total revenue of $68.8 million was down from $77.9 million a year earlier, and revenue before reimbursements of $67.8 million missed the low end of management's own $70.5 million to $72.0 million guidance range issued only three months earlier.

Chairman and CEO Ted A. Fernandez framed the pullback as the cost of repositioning the firm, saying "over the past two years, we have made disciplined, systematic investments to build a cohesive and highly differentiated AI foundation" and that the company is "already seeing meaningful productivity gains and expanding scope on engagements" tied to its Gen AI platforms. Investors weighing that message against a double-digit revenue decline must judge whether the investment phase is nearing an inflection point or still has further to run.

Inside The Hackett Group's Three-Segment Consulting Model

Hackett reports three segments: Global S&BT (Gen AI consulting, implementation, licensing, benchmarking and executive advisory), Oracle Solutions (EPM/ERP and AI-enablement) and SAP Solutions (SAP applications and services). In Q1 2026, Global S&BT revenue before reimbursements fell to $36.4 million from $42.6 million a year earlier; Oracle Solutions fell to $15.4 million from $20.4 million; and SAP Solutions rose to $16.0 million from $13.2 million. SAP Solutions was the lone bright spot, with segment contribution climbing to $5.0 million from $4.3 million, while Global S&BT's fell to $9.1 million from $12.8 million and Oracle Solutions' fell to $3.6 million from $4.4 million.

The Hackett Group's AI XPLR and ZBrain Bet on Turning Benchmarks Into Software

The centerpiece of Hackett's pivot is a suite of proprietary Gen AI platforms, most prominently AI XPLR and ZBrain. By the company's own description, AI XPLR is a readiness and opportunity-assessment tool that helps organizations prioritize AI use cases with measurable ROI, while ZBrain is a Gen AI orchestration platform for building custom AI agents and automating workflows across finance, HR, IT, legal and procurement, built on a proprietary "solution language model" grounded in Hackett's benchmarking database. On March 18, 2026, the company announced a collaboration in which IBM Consulting will use AI XPLR to help enterprise clients align AI potential with existing workflows.

Notably, Hackett has not disclosed a revenue figure specific to AI XPLR, ZBrain or Gen AI engagements; it reports only that recurring revenue before reimbursements was approximately 24% of total revenue before reimbursements in Q1 2026, leaving investors without a clean way to size how much new AI bookings offset legacy contraction.

A First Quarter That Missed Its Own Revenue Guidance

Beyond segment mix, the quarter showed broader signs of transition. Consultant headcount fell to 1,247 from 1,332 a year earlier, and total headcount dropped to 1,535 from 1,618. Days sales outstanding rose to 67 from 55. Revenue concentration improved: the top customer accounted for 4% of revenue versus 9% a year earlier, and the top ten customers accounted for 22% versus 29%. Adjusted EBITDA fell to $13.8 million from $15.7 million, and adjusted gross margin slipped to 42.3% of revenue before reimbursements from 43.4%.

Cash, Credit and Capital Returns Amid a Shrinking Top Line

GAAP diluted EPS rose to $0.17 from $0.11, helped by lower stock-based compensation expense, but the non-GAAP measure management emphasizes told a different story: adjusted diluted EPS fell to $0.34 from $0.41, the low end of the company's own guidance. Cash stood at $6.1 million as of March 27, 2026, against $79.0 million outstanding on the credit facility, and operations used $5.1 million of cash versus $4.2 million generated a year earlier.

Hackett still returned cash to shareholders, declaring its first-ever quarterly dividend of $0.12 per share with Q4 2025 results, paid April 3, 2026, and a second $0.12 dividend paid July 6, 2026. It also repurchased 212,000 shares for $2.97 million at an average $14.00 per share, below the $30.16 average paid a year earlier, leaving $22.0 million under its buyback authorization after the board added $13.6 million during the quarter.

Where the Next Leg of Growth Could Come From

The IBM collaboration gives Hackett distribution through IBM Consulting's client base for AI XPLR assessments, and the 2024 LeewayHertz acquisition was meant to strengthen Gen AI implementation capability. For Q2 2026, Hackett guided to revenue before reimbursements of $68.5 million to $70.0 million and adjusted diluted EPS of $0.33 to $0.35: a range that, if met, implies sequential stabilization even though it still trails 2025 levels.

The Risks Tied to Concentration, Debt and an Unproven AI Transition

The clearest risk is execution: guidance already proved optimistic once this year, with Q1 revenue landing roughly $2.7 million below its guided range. A second is balance-sheet flexibility: $79.0 million of credit-facility debt against $6.1 million of cash, plus a quarter of negative operating cash flow, leaves less room for error if Oracle Solutions and Global S&BT keep contracting faster than AI work replaces them. Hackett's own disclosures flag its ability to transition to Gen AI consulting, integrate LeewayHertz, and retain skilled talent as explicit uncertainties. The lack of a disclosed Gen AI-specific revenue metric also means investors cannot verify how much of the AI XPLR and ZBrain narrative is translating into bookings.

Outlook

The optimistic case rests on Hackett converting its benchmarking database and blue-chip client roster into software-delivered AI advisory work, aided by partners like IBM, while funding dividends and buybacks from a profitable base. The base case mirrors 2026 so far: adjusted profitability in the low-$0.30s per share while two of three segments shrink and only SAP Solutions grows. The cautious case is that AI-driven productivity gains could compress the consulting hours Hackett has traditionally billed, forcing it to prove new platforms generate incremental revenue fast enough to offset that pressure. None of these scenarios implies a specific share-price outcome.

Conclusion

The Hackett Group, Inc. (HCKT) enters the second half of 2026 as a profitable, dividend-paying consultancy mid-transition, with first-quarter revenue down 11.7% year over year and growing reliance on AI XPLR, ZBrain and its IBM collaboration to reverse the trend. Whether that AI push can outrun the decline in its legacy segments remains the central question for HCKT shareholders heading into second-quarter results.

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