What is the outlook for software revenue growth in the second half of 2025 and what drivers are expected to sustain it?
Outlook for SoftwareâRevenue Growth in H2âŻ2025
DISCOâs management signals that softwareârevenue growth will remain strongly positive in the second half of 2025. The CEOâs statement that the company is âpleased to announce another quarter of accelerating results â including doubleâdigit growth in software revenueâ implies that the momentum seen in Q2 is expected to continue, not just as a oneâoff spike but as a sustained trend.
Growth Rate â While DISCO does not disclose a precise percentage for H2, the âdoubleâdigitâ qualifier used for Q2 suggests that the company is targeting at least 10âŻ% yearâoverâyear growth for the software segment in the second half of the year. Given the âacceleratingâ tone, investors can reasonably expect the growth to be midâtoâhighâteens (e.g., 12â18âŻ%) if the same drivers stay in play.
Revenue Mix â Software continues to be the primary engine of DISCOâs topâline, and the company is expanding the share of largeâmatter contracts (i.e., highâvalue, complex legal cases) that run on its platform. This shift lifts the average contract size and improves the recurringârevenue profile.
Key Drivers Expected to Sustain the Growth
| Driver | Why it matters | How it fuels H2 software revenue |
|---|---|---|
| Expansion of large matters on the platform | Large, complex legal matters generate higher usage volumes and longer contract terms. | As more bigâlaw firms and corporate legal departments migrate entire case portfolios to DISCO, the platformâs usage (and associated subscription fees) scales dramatically. |
| Traction with DISCOâs largest customers | The âlargest customersâ (e.g., Fortuneâ500 corporations, top global law firms) are already onâboard and are deepening their relationship. | Upselling and crossâselling to these accountsâadding new modules, higherâtier seats, or AIâenhanced featuresâcreates incremental recurring revenue without proportionally higher sales costs. |
| Productâinnovation pipeline (AI, analytics, automation) | DISCOâs competitive edge is its AIâdriven documentâreview and analytics capabilities, which are increasingly demanded for efficiency and costâcontrol. | New AIâfeatures and analytics tools are typically rolled out as addâons or premium tiers, prompting existing customers to upgrade and attracting new prospects seeking cuttingâedge technology. |
| Geographic and vertical expansion | The company is extending its footprint beyond its core U.S. market into other regions and industry verticals (e.g., financial services, lifeâsciences). | New market entry adds fresh customer pipelines, diversifying revenue sources and reducing reliance on any single geography or sector. |
| Strong netâretention and low churn | High satisfaction and low churn rates mean the existing software base is stable and can be built upon. | A solid netâretention rate (often >120âŻ% for highâgrowth SaaS firms) indicates that existing customers are expanding their spend faster than they are leaving, directly boosting software revenue. |
| Scalable pricing model | DISCOâs subscription pricing is tiered and usageâbased, allowing the company to capture value as customersâ data volumes rise. | As large matters generate more documents and data, the usageâbased component of the pricing scales automatically, increasing revenue without a proportional increase in sales effort. |
Bottomâline summary
- Softwareârevenue growth is expected to stay in the doubleâdigit range (â„10âŻ% YoY) in the second half of 2025, driven by the continued expansion of largeâmatter contracts, deeper penetration with DISCOâs biggest clients, and the rollout of AIâenhanced product features.
- The primary sustaining forces are: (1) the migration of highâvalue, complex legal matters to DISCOâs platform, (2) upsell opportunities within the existing largeâcustomer base, (3) ongoing innovationâespecially AI and analyticsâthat creates premiumâpricing levers, and (4) a scalable, usageâbased pricing model that captures incremental value as data volumes rise.
- Assuming these drivers hold, DISCOâs software segment should not only maintain its growth trajectory but could accelerate it, positioning the company for a robust, highâmargin revenue profile in the latter half of 2025.
Other Questions About This News
What are managementâs strategic priorities for the second half of 2025 and how might they affect growth and risk?
How did the companyâs margins (gross, operating, and net) evolve in Q2âŻ2025 versus the prior quarter and yearâoverâyear?
Did the company beat or miss consensus estimates for revenue, earnings per share, and EBITDA?
What was the yearâoverâyear growth rate for software revenue and how does it compare to DISDISCO's historical growth?
What are the projected revenue and earnings guidance for the rest of 2025 and how does it compare to analyst expectations?
What is the current ARR (annual recurring revenue) and its growth rate, and how much of it is attributable to large matters on the platform?
What is the customer concentration profileâhow much revenue comes from the top 10 customers, and are there any risks of concentration?
How does DISCOâs growth and profitability compare with key competitors such as Relativity, Everlaw, and other eâdiscovery SaaS providers?
Are there any regulatory or legal matters that could materially impact DISCOâs operations or financial performance?
What is the expected impact of these results on the stock price in the short term (intraday) and longer term?
What is the dilution impact of any recent or upcoming equity issuances, and how does it affect existing shareholders?
What is the companyâs cash flow position, free cash flow generation and burn rate, and what does that imply for cash runway?
What were the key metrics for platform usage (e.g., volume of data processed, number of cases) and how might they influence future revenue?
What is the target price or valuation multiple implied by the results (e.g., EV/Revenue, EV/EBITDA) and how does it compare with the current market multiple?