Analysis FCN
FTI raises its adjusted profit outlook as job cuts hit reported earnings
Record revenue and higher adjusted earnings tell only part of FTI Consulting’s quarter. The firm is cutting staff, and some of the earnings boost came from benefits that may not repeat.
FTI Consulting raised its full-year forecast for adjusted earnings after a record revenue quarter. At the same time, it lowered its forecast for reported earnings and disclosed plans to cut about 4% of its workforce. The difference matters: the stronger adjusted result excludes restructuring costs and includes some benefits management says may not recur.
The advisory firm, which helps businesses with restructuring, disputes and other complex problems, reported third-quarter 2026 revenue of $1.013 billion, up 5.9% from a year earlier. All five business segments grew. Reported net income, however, fell 23% to $63.4 million.
What the adjusted record leaves out
FTI recorded a $46 million charge for staffing and real estate changes, mostly salary and benefit costs. It expects a further charge of about $7 million in the fourth quarter. Together, those actions are expected to produce about $80 million in annual savings. The savings are a management forecast, rather than money already earned.
Reported figures follow standard U.S. accounting rules. FTI's adjusted earnings strip out those charges and certain legal expenses, with their tax effects. On that basis, third-quarter profit rose 25% to $103.7 million. Adjusted earnings per share rose faster, by 48% to $3.84, helped by a roughly 15% decline in the average diluted share count. That count allows for potential extra shares, such as those from employee awards. Buybacks spread earnings across fewer shares.
That improvement still deserves a closer look. Management said record success fees and a lower effective tax rate helped the quarter. Success fees are payments tied to particular client outcomes, so they can vary sharply between periods. Both benefits remain in adjusted earnings. Excluding restructuring costs does not make every dollar of the remaining profit repeatable.
The contrast with the previous quarter is striking. In the second quarter, adjusted earnings per share rose only slightly, to $2.16 from $2.13 a year earlier. The latest jump shows a stronger quarter, but it does not by itself establish a steady new rate of growth.
Two forecasts moving in different directions
FTI now expects full-year adjusted earnings of $9.50 to $10.00 per share, up from the $9.10 to $9.70 range given in July. Its forecast for reported earnings moved the other way, to $7.55 to $8.05 from $8.70 to $9.30.
The new reported outlook includes the staffing and property charges. Revenue guidance remains unchanged at $3.94 billion to $4.10 billion. These are revised forecasts for a year still in progress, rather than completed annual results.
Cash generation also gives a more measured picture than the adjusted earnings headline. Operating cash flow, the cash generated by day-to-day business, was $190.4 million in the quarter, down from $201.9 million a year earlier. FTI spent $79.4 million buying back shares. Total debt fell to $852 million from $1.02 billion at the end of June, but remained above the $510 million recorded a year earlier.
Key questions
Has FTI finished cutting staff?
The plan covers the third and fourth quarters. FTI said affected employees had been notified by October 29, with departures subject to applicable notice periods. Notification does not mean every departure has happened.
Why can adjusted profit rise while reported profit falls?
The adjusted measure removes specified expenses that remain in reported results. For this quarter, the main exclusions were the restructuring charge and $4.5 million of certain litigation costs, after accounting for their tax effects.