Kelly Services stock slipped 2.8% to US$15.19 in the first trading session after earnings, even though the headline numbers pointed to a cleaner quarter than many investors had grown used to. The company posted Q2 revenue of about US$1.04b and returned to positive earnings per share of roughly US$0.33, with adjusted earnings before interest, tax, depreciation and amortization margin improving to 3%. For a staffing and workforce solutions stock that has been wrestling with losses and modest revenue growth, that profit turn is the story to focus on first.

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Q2 2026 Earnings Summary

• Revenue (Q2 2026 vs Q2 2025): US$1,038.2m vs. US$1,101.8m (revenue declined 5.8%)
• Net Income (Q2 2026 vs Q2 2025): US$11.4m vs. US$18.4m (net income declined 38%)
• Basic EPS (Q2 2026 vs Q2 2025): US$0.33 vs. US$0.52 (earnings per share declined 37%)
• Adjusted EBITDA Margin (Q2 2026 vs Q1 2026): 3.0% vs. 1.5% (margin improved by 150 basis points quarter on quarter)

Prefer clean visuals instead of scrolling through blocks of earnings tables and raw figures for Kelly Services? See the full financial picture, including how profitability trends flow through the rest of the business, in our company report for Kelly Services.

Kelly Services bull case meets key margin tests

Bulls argue that Kelly Services is turning its mix shift and tech push into a real margin story, with outsourcing, managed services, and AI tools lifting profitability even while headline revenue is under pressure. Q2 gives some support to that view. Adjusted EBITDA margin reached 3% compared with 1.5% in Q1, and underlying revenue excluding federal and three large Enterprise & Talent Management customers was roughly flat at a 0.6% decline despite reported revenue falling 5.8%. Talent Solutions grew about 6% again with double digit MSP and RPO growth, and outcome based work now represents about 40% of SET compared with roughly 33% a year earlier. Free cash flow of US$47.7m and a US$52.4m cut in net debt also fit the thesis that the business is becoming more cash generative as the mix shifts toward higher margin, recurring contracts.

Bear case on Kelly Services still flags revenue strain

Bears focus on structural weakness in legacy staffing, customer concentration and the risk that transformation savings never quite outrun revenue pressure. Q2 does not dismiss those concerns. Total revenue declined 5.8% year over year and net income fell 38% to US$11.4m, so profitability remains thin despite better adjusted EBITDA. Education revenue declined 4.4% and SET revenue was still down about 3% even though both improved versus Q1, which shows the recovery is uneven across the portfolio. Management also guided to a low to mid single digit revenue decline for full year 2026 and expects ongoing restructuring and integration charges, which supports the view that the margin story is still fragile. The share price reaction, with Kelly Services stock down 2.8% after the release, suggests investors are not yet convinced that cost actions and AI driven efficiency fully offset the underlying revenue and concentration risks.

After thin margins, customer concentration and a dividend that is not well covered by earnings, are there deeper structural warning signs? Review our independent risk analysis for Kelly Services which shows 2 important warning signs.

Stay Ahead With Kelly Services Insights

If the mixed Q2 picture at Kelly Services has you watching for a clearer margin trend and a better entry point, register for free with Simply Wall St and add it to a Watchlist to track price against fair value and key fundamentals in one place. After you decide to take a position, keep your focus on what matters most by using the Portfolio Command Center to cut through noise and surface only the most important developments on Kelly Services and your other holdings. For a broader view, join the Community to see how other investors are thinking about the same risks and potential catalysts. This way you can spot hidden shifts in Kelly Services and the wider market early and act before most investors react.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.