AI data firm Innodata sinks on mass layoffs amid reduced work for major client

Innodata, which trains other companies’ AI models, saw its shares plunge more than 25% on the Nasdaq on Tuesday. India Today reported abrupt mass layoffs in India and the Philippines, citing a reduction in work on a project. The cuts could threaten the company’s ability to meet growth expectations for 2027.

Innodata shares tumbled more than 25% on Tuesday to $44.74 per share, their lowest close since early May. The selloff followed an India Today report that nearly 550 employees had been laid off in India, with additional cuts in the Philippines. The layoffs affected more than 5% of Innodata’s workforce, Motley Fool contributor Anders Bylund estimates.

Employees lost access to their work accounts mid-shift, and termination notices were sent to their personal email addresses because they could no longer access Innodata’s systems, according to the India Today article. Some workers said they had been told the cuts reflected a decline in the volume of services for a major client.

Investors quickly did the math: fewer active projects mean lower revenue and profits, Bylund notes, which is hard to forgive when a stock trades at a premium valuation. Even after the Tuesday selloff, Innodata was trading at 27 times forward earnings.

Innodata’s two largest customers accounted for 71% of revenue in the second quarter. A reduction in work on a major project could therefore put 2027 growth at risk, TIKR wrote. Innodata has not disclosed the names of its largest customers, but its website lists Google, Microsoft, Amazon, Apple, Sony, Hewlett-Packard, Snowflake, Boeing, and Deloitte. The company may also have helped train Muse, the personal AI agent from Facebook and Instagram parent Meta, Hunterbrook Media previously reported.

India Today described the final workday for nearly 550 Innodata employees in India. Monday began as usual: they logged into the company’s systems and recorded their attendance. The first sign of trouble came when word spread that the Philippines team had been dismissed during a Zoom call.

Some employees in India then checked the company’s HR portal and found that their pay stubs had been generated. “We frantically reached out to our managers, who were also taken aback at the news,” one employee told the daily.

As he and his colleagues tried to establish what was happening, they began losing access to their work devices one by one. “Laptops were logged out, and official IDs deactivated,” he said.

Only hours later did employees begin receiving emails from HR in their personal inboxes informing them that their employment was being terminated because of business requirements. India Today noted that it could not independently establish the full scale of the layoffs. Innodata had not responded to its request for comment.