AI Licensing And Usage Metrics Will Reshape Long-Term Research Content Infrastructure

Catalysts

About Research Solutions

Research Solutions provides SaaS and AI powered tools that help enterprises and academic institutions discover, license and use scientific content more efficiently and in a copyright compliant way.

What are the underlying business or industry changes driving this perspective?

• Growing enterprise demand to apply AI directly on proprietary and licensed research content, paired with the new RightsDel AI rights offering, is expected to support higher platform seat adoption, cross sells and recurring revenue and average selling prices over time.
• Publishers accelerating their shift to AI licensing and needing a scalable AI gateway creates a structural role for Scite and Article Galaxy as infrastructure partners, supporting ARR growth and expanding high margin revenue share streams.
• The emergence of AI specific usage metrics on top of traditional download based reporting positions the company as a standard setter for measuring AI driven research activity, which can underpin premium analytics tiers and support higher gross margins.
• Continued mix shift from lower margin transaction revenue to the 88 percent margin platforms business, enabled by B2B ARR wins and higher ASPs, is expected to expand blended gross margin and support growth in operating income and earnings.
• Improved B2C product velocity and the funnel of individual users converting into enterprise opportunities, with pipeline from this channel rising from fifty thousand dollars to over one million dollars year over year, can support logo growth and upsell driven ARR and ultimately support net margin expansion.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Research Solutions's revenue will grow by 5.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 2.7% today to 17.6% in 3 years time.
• Analysts expect earnings to reach $10.1 million (and earnings per share of $0.25) by about December 2028, up from $1.3 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $13.5 million in earnings, and the most bearish expecting $6.4 million.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 23.4x on those 2028 earnings, down from 69.1x today. This future PE is lower than the current PE for the US IT industry at 29.3x.
• Analysts expect the number of shares outstanding to grow by 2.85% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.9%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Ongoing weakness in the transaction or DocDel business, driven by reduced spending from large corporate customers and churned accounts, could persist beyond the first half of fiscal 2026 and fail to return even to flat growth. This would limit total revenue expansion and constrain gross profit improvement.
• Intensifying competition in AI powered research tools, particularly in the B2C market where conversion from trial to paid users has already deteriorated despite product enhancements, may cap pricing power and slow new logo growth. This could pressure long term ARR growth and earnings scalability.
• If attach rates for new AI rights products like RightsDel and the Scite based AI gateway remain uncertain or materially below management’s aspirations, the expected uplift in average selling prices and high margin recurring revenue from AI monetization could fall short. This would reduce future gross margin expansion and net margin improvement.
• Publisher and enterprise adoption of AI usage tracking standards and AI licensing frameworks may progress more slowly than anticipated, delaying Research Solutions’ ability to become core AI infrastructure in the ecosystem and postponing the realization of higher margin revenue share streams. This would weigh on long term operating leverage and earnings growth.
• Sales productivity gains from recent investments in B2B sales teams and process overhauls may prove difficult to sustain across cycles, particularly if macroeconomic conditions or shifting research priorities cause further large customer budget cuts. This would increase churn risk and dampen ARR growth, cash flow generation and overall profitability.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of $5.33 for Research Solutions based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $6.0, and the most bearish reporting a price target of just $5.0.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be $57.0 million, earnings will come to $10.1 million, and it would be trading on a PE ratio of 23.4x, assuming you use a discount rate of 8.9%.
  
• Given the current share price of $2.96, the analyst price target of $5.33 is 44.5% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.