Resources Connection (NASDAQ:RGP) shares dropped 12.3% in pre-market trading on Thursday to $3.28 after the professional services company reported weaker-than-expected first-quarter fiscal 2027 results and issued second-quarter revenue guidance below analysts’ forecasts.
The decline extended losses recorded in after-hours trading following the earnings announcement, as investors reacted to falling revenue, widening losses and continued weakness in demand for consulting services.
Resources Connection reported an adjusted loss of $0.16 per share for the quarter, compared with analysts’ expectations for a loss of $0.02 per share. The result represented a $0.14 per-share shortfall against consensus estimates.
Quarterly revenue reached $98.1 million, approximately $8 million below market forecasts, and declined 18.5% year on year on a constant-currency basis.
Management attributed the weaker performance primarily to reduced project activity and cautious spending among corporate clients. Customers have been extending approval processes and dividing larger projects into smaller phases, delaying revenue generation and limiting demand for professional services.
The downturn affected several of the company’s principal business segments.
Consulting revenue declined 25.8% to $32.4 million, while revenue from its On-Demand Talent division decreased 13.2% to $38.6 million.
Lower consultant utilisation also affected profitability, with gross margin narrowing to 37.4% from 39.5% in the corresponding period a year earlier.
The company’s net loss widened to approximately $8.0 million, equivalent to $0.23 per diluted share, compared with a loss of $2.4 million, or $0.07 per share, in the prior-year quarter.
The deterioration reflected the combined impact of lower business volumes and reduced operating efficiency as demand for consulting and temporary professional services remained subdued.
Looking ahead, Resources Connection forecast second-quarter revenue of between $95 million and $100 million, below the previous Wall Street consensus estimate of approximately $105.6 million.
The guidance suggested that challenging market conditions could persist into the next reporting period, with limited evidence of a near-term recovery in client spending or project activity.
The company is also navigating a leadership transition following the departure of Chief Financial Officer Jennifer Y. Ryu, effective 2 October.
The executive change comes as Resources Connection faces pressure to stabilise revenue, improve consultant utilisation and restore profitability.
Broader market weakness added to the negative sentiment surrounding the shares. The S&P 500 declined 0.3%, the Dow Jones Industrial Average fell 0.6%, and the Nasdaq slipped 0.4%, reflecting reduced investor appetite for risk-sensitive equities.
Resources Connection’s exposure to discretionary corporate spending makes its performance particularly sensitive to changes in business confidence and economic conditions.
Following the pre-market decline, the shares were trading close to the lower end of their 52-week range of $3.06 to $5.37.
The weaker quarterly results, declining margins and below-consensus revenue guidance have increased investor scrutiny of the company’s ability to reverse its revenue contraction and improve financial performance in the coming quarters.