Issue #52

Two "pick-and-shovel" winners powering the next decade of enterprise intelligence.

The artificial intelligence boom isn’t being won by the loudest models or the flashiest demos — it’s being decided in the trenches of data engineering and the precision of personalized automation. As the "arms race" moves from training foundational models to making those models work for the enterprise, two specific layers have become the ultimate gatekeepers: the high-fidelity data that feeds the brain, and the intelligent cloud that activates it.

This is where the AI conversation shifts from speculative hype to mission-critical infrastructure — and where the most durable winners are emerging by solving the industry’s two biggest problems: data quality and consumer engagement.

👉 One company has become the "human-in-the-loop" engine for the world’s most powerful tech giants, cleaning and structuring the massive datasets that make Generative AI possible.

👉 The other is transforming how the global economy interacts with consumers, using a proprietary data cloud of 245 million profiles to turn AI signals into billions of dollars in revenue.

👉 Both are profitable, growing at a pace that leaves legacy software in the dust, and are becoming increasingly indispensable to the AI supply chain.

In this edition, we break down the data architect and the marketing brain powering the next phase of the AI economy — and why these two stocks sit at the foundation of the 2026 AI breakout.

Innodata (NASDAQ: INOD)

Innodata (NASDAQ: INOD) is a global data engineering leader that has rapidly evolved into a critical architect of the Generative AI revolution. By providing the high-quality data used to train, test, and fine-tune large language models (LLMs), Innodata has positioned itself as a "pick-and-shovel" play for the AI era. Its platform and services enable the world's most prominent technology giants—often referred to as the "Magnificent Seven"—to build and deploy safer, more accurate AI applications.

Business Model and Revenue Streams 📦

Innodata’s business model is centered on the premise that AI is only as good as the data powering it. The company leverages a global workforce of subject matter experts and proprietary AI technology to transform raw data into the structured, high-quality datasets required for advanced model training. The company operates through three primary segments:

• Digital Data Solutions (DDS): This is the company’s powerhouse, driving over 85% of total revenue. It focuses on large-scale data engineering and "human-in-the-loop" services for AI, including data collection, annotation, and Reinforcement Learning from Human Feedback (RLHF).
• Agility: A high-margin SaaS platform that provides AI-enabled media intelligence and public relations tools. This segment allows brands to monitor and analyze their digital footprint using Innodata’s proprietary AI models.
• Synodex: A specialized platform that uses AI to transform medical records into usable digital data for the insurance industry, focusing on risk assessment and underwriting efficiency.

Innodata’s revenue is increasingly driven by massive multi-year contracts with "Big Tech" innovation labs. In terms of macroeconomic impact, management has noted that the company is largely insulated from short-term business cycles or trade policies. Because its primary clients are heavily invested in the AI "arms race," their capital expenditure on AI training remains a high priority even during periods of broader economic uncertainty.

Recent Performance and Corporate Developments 📈

Innodata reported explosive growth throughout 2025, consistently raising guidance as demand for pre-training data accelerated. The company’s recent performance marks its transition from a micro-cap service provider to a high-scale AI technology partner.

Q3 2025 Financial Highlights: 💰

• Total Revenue: For the third quarter of 2025, revenue hit $62.6 million, a 20% increase year-over-year. For the first nine months of 2025, revenue grew a staggering 61% to $179.3 million.
• Net Profit: The company reported a net income of $8.3 million for the quarter. While lower than the prior year's tax-incentive-boosted figure, the underlying operational profitability remained robust.
• Adjusted EBITDA: Adjusted EBITDA rose to $16.2 million, a 17% increase year-over-year, reflecting a healthy 26% margin.
• Cash Position: Innodata ended Q3 2025 with $73.9 million in cash and short-term investments, nearly doubling its reserves from the end of 2024 while remaining essentially debt-free.

Strategic Initiatives and Mergers: 🤝

A major development in late 2025 was the launch of Innodata Federal, a new business unit designed to capture U.S. government AI spending. To bolster this initiative, the company appointed General (Retired) Richard D. Clarke to its board. This unit has already secured an initial project estimated at $25 million, which is expected to be a major revenue driver in 2026. Additionally, Innodata recently expanded its partnership with its largest customer, a move that could result in substantial new revenue streams in the coming year.

Profitability and Fair Value 🎯

Innodata has successfully pivoted from a legacy data business to a highly profitable AI service model. Its path to sustained value is defined by:

• Operating Leverage: The company’s ability to grow profit significantly faster than revenue as it scales its AI data engineering processes.
• Strategic Reinvestment: Innodata is currently reinvesting cash flow into sales and technology to secure multi-year contracts, which may temporarily cap net margins but builds long-term terminal value.

Regarding fair value, Innodata trades at a premium compared to traditional professional services, with a forward P/E ratio currently hovering around 50–60x. While some value-focused models suggest the stock is overvalued based on historical assets, growth-oriented analysts argue that its unique position in the AI supply chain justifies a higher multiple. With a 2025 revenue growth outlook of 45% or more, the market is pricing in the company’s role as an indispensable partner to the world’s leading AI labs.

Analyst Estimates and Ratings 📊

• Consensus Rating: The consensus among analysts is a "Strong Buy." Within the last 30 days, several firms have reiterated their bullish stance following the Q3 earnings beat and the launch of the Federal unit.
• Price Targets: Analyst price targets for INOD are highly aggressive, with an average target of approximately $91.67. High-end estimates from firms like BWS Financial have reached as high as $110.00 to $115.00, suggesting significant upside from current trading levels.

Investor-Focused Takeaway: Is INOD Right for Your Portfolio?

Innodata provides a pure-play investment in the data layer of the AI stack. Unlike companies that are purely speculative, Innodata is already profitable, debt-free, and generating record cash flow.

What to Watch in the Near Term: 📈

• Federal Contract Execution: Success in the new Federal unit could provide a massive, stable revenue floor that is less dependent on the shifting priorities of Big Tech.
• LLM "Pre-Training" Demand: As AI models move toward specialized, high-reasoning capabilities, the demand for "expert-level" training data (Innodata's specialty) is expected to rise.
• Concentration Risk: Watch for continued customer diversification; while its largest client is a major growth engine, expanding the "Big Tech" roster will reduce volatility.

Recommendation:

Innodata (INOD) is a compelling high-growth pick for investors looking to trade the AI trend before 2026. With its recent leadership changes, new government initiatives, and dominant position in the LLM data supply chain, it remains a favorite among tech-focused analysts.

Zeta Global (NYSE: ZETA)

Zeta Global (NYSE: ZETA) is a data-driven AI marketing cloud that helps the world’s largest brands acquire, grow, and retain customers. Founded by David A. Steinberg and former Apple CEO John Sculley, Zeta leverages a massive proprietary database of over 245 million U.S. consumer profiles to deliver personalized marketing at scale. By integrating identity, intelligence, and omnichannel activation, Zeta provides an "all-in-one" alternative to legacy marketing clouds like Salesforce and Adobe.

Business Model and Revenue Streams 📦

Zeta’s business model is built on the Zeta Marketing Platform (ZMP), an AI-powered hub that processes over one trillion consumer signals monthly. The company generates revenue through two primary mechanisms:

• Subscription Revenue: This provides a predictable base of income from enterprises paying for access to the ZMP and its various modules like the Customer Data Platform (CDP) and AI-driven analytics.
• Usage-Based Revenue: Tied to the volume of marketing activity—such as emails sent, social ads managed, or mobile messages delivered—this model allows Zeta to capture more value as clients scale their successful campaigns.

In terms of macroeconomic impact, Zeta is sensitive to shifts in global marketing budgets. While inflation and high interest rates can lead some companies to tighten ad spend, Zeta’s platform is designed to improve Return on Investment (ROI)—moving it from a 6x to a potential 10x return. This value proposition helps protect the company during downturns, as brands prioritize efficient, data-backed tools over generic advertising.

Recent Performance and Corporate Developments 📈

Zeta has maintained an impressive "beat and raise" streak throughout 2025, consistently exceeding Wall Street expectations and raising its full-year guidance.

Q3 2025 Financial Highlights: 💰

• Total Revenue: For the third quarter of 2025, revenue reached $337.2 million, a 26% increase year-over-year, beating analyst estimates by nearly $9 million.
• Adjusted EBITDA: The company reported $78 million in Adjusted EBITDA, a 46% jump from the previous year, with a margin expansion to 23.2%.
• Free Cash Flow (FCF): Zeta achieved its highest FCF margin in history at 14%, generating $47 million for the quarter.
• Customer Growth: "Super-scaled" customers (those spending over $1 million annually) grew by 25% year-over-year, demonstrating strong adoption among the world's largest enterprises.

Strategic Initiatives and Mergers: 🤝

In late 2025, Zeta completed its transformative acquisition of Marigold’s enterprise software business (including brands like Sailthru and Cheetah Digital) for approximately $325 million. This move significantly deepened Zeta’s penetration into Fortune 500 brands and added high-margin subscription revenue. Additionally, the company launched Athena, its next-generation AI agent, which automates complex marketing workflows and further separates Zeta from its competitors.

Profitability and Fair Value 🎯

Zeta is approaching a critical tipping point in its financial journey. While it has reported GAAP net losses in the past due to heavy stock-based compensation (SBC), it is now reporting significant adjusted profitability. The company has aggressively reduced its SBC as a percentage of revenue from 57% in 2021 to a projected 15% in 2025.

In terms of fair value, many analysts view Zeta as undervalued. Following the Marigold acquisition and the Q3 beat, internal and external models suggest a fair value closer to $28 to $30 per share. Given its current trading range near $18–$20, the stock presents a significant "gap" to fill as it moves toward sustained GAAP profitability in 2026.

Analyst Estimates and Ratings 📊

• Consensus Rating: The stock holds a "Buy" consensus. Over the last 30 days, 11 out of 14 analysts have maintained "Buy" or "Strong Buy" ratings.
• Price Targets: The average 12-month price target is approximately $30.26, representing a potential upside of over 60%. High-end targets from firms like Needham and B. Riley sit between $43.00 and $46.00.
• Recent Momentum: Firms including BofA Securities and D.A. Davidson have recently reiterated their Buy ratings, citing the accretive nature of the Marigold deal and the acceleration of AI-driven consumption.

Investor-Focused Takeaway: Is ZETA Right for Your Portfolio?

Zeta Global offers a high-growth entry point into the AI marketing sector. Its proprietary data assets make it difficult for competitors to replicate its results, and the recent acquisition of Marigold provides a massive cross-selling opportunity for 2026.

What to Watch in the Near Term: 📈

• Marigold Integration: Success in migrating Marigold's legacy clients onto the AI-powered ZMP will be a major catalyst for margin expansion.
• Athena Adoption: Monitor the rollout of the Athena AI agent; management believes this could further increase client ROI and drive higher platform usage.
• Stock Repurchases: Zeta has authorized a $200 million share buyback program, signaling management's belief that the stock is currently undervalued.

Recommendation:

Zeta (ZETA) is a top-tier pick for investors seeking exposure to the "software" side of the AI boom. With accelerating revenue, record-high free cash flow, and a strong analyst consensus, it is well-positioned for a breakout as we head toward 2026.

Final Take: The Data Architect and the Marketing Brain Powering AI

The AI revolution is entering its most profitable phase: the shift from building models to making them useful. That requires two things: pristine data to train the models and intelligent platforms to deploy them to the world.

That’s where Innodata (INOD) and Zeta Global (ZETA) stand apart.

🏗️ Innodata (INOD) — The Architect of the AI Supply Chain

• ✔ The "Pick and Shovel" play: Provides the high-quality, human-refined data that the world’s largest LLMs require to function.
• ✔ Massive Federal Expansion: Recently launched a dedicated unit to capture the surge in U.S. government AI spending.
• ✔ High-Octane Growth: Reporting 60%+ revenue growth with zero debt and a rapidly expanding cash pile.
• ➤ Best for: Investors looking for a high-growth, mid-cap "pure play" on the essential data infrastructure required by every AI company on earth.

🧠 Zeta Global (ZETA) — The Intelligence Hub of Modern Marketing

• ✔ Proprietary Data Moat: Uses an AI cloud of 245M+ consumer profiles to outperform legacy competitors like Salesforce and Adobe.
• ✔ Strategic Scale: The recent Marigold acquisition adds massive enterprise reach and high-margin recurring revenue.
• ✔ Free Cash Flow Machine: Achieving record cash margins while aggressively reducing stock-based compensation.
• ➤ Best for: Investors seeking exposure to the "software layer" of AI where proprietary data and machine learning drive measurable ROI for Fortune 500 brands.

Investor Insight

• 🧩 Want the essential fuel that makes AI models smart? → INOD
• ⚙️ Want the AI engine that turns that intelligence into revenue? → ZETA

Bottom Line:

AI cannot scale on "good enough" data, and it cannot survive without a way to reach customers. Innodata builds the foundation of the models themselves, while Zeta Global builds the bridge between those models and the global consumer.

As we look toward 2026, these aren't just names to watch—they are the foundational infrastructure for the next leg of the AI bull market.

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Happy Trading
​— Team Premium Stock Alerts