Barrett Business Services delivered a Q2 FY2026 that looked soft on the surface and got softer underneath. Revenue rose 4% to $319.3 million and gross billings grew 3% to $2.29 billion, but diluted earnings per share fell 26% to $0.52, gross margin compressed 350 basis points to 20.3% of revenue, and net income dropped 30% to $12.9 million. The headline reads "growth at the cost of profitability," but that framing is incomplete. Workers' compensation expense - the line that drove the entire margin compression - moved from 15.6% to 17.8% of revenue because the year-ago quarter absorbed $8.8 million of favorable prior-year claims adjustments while the current quarter absorbed only $2.0 million. Strip that swing, and the underlying gross-margin story is the workers' compensation pricing cycle management has been telegraphing for three quarters: cumulative price increases are still flowing through, prior-year reserve releases are moderating, and management explicitly called 2026 "the low point for margin." A separate $11.6 million one-time tax charge - recorded in Q1 and unrelated to operations - drove a first-half GAAP net loss. The quarter is the margin reset the company has been warning about, not a structural break. The question is whether the pricing actions already taken and the workers' comp cycle already firming produce the margin recovery management is forecasting into the second half.