Release Date: July 29, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- ExlService Holdings Inc EXLS reported strong second quarter results with revenues of $595 million, up 16% year over year, and adjusted earnings per share increased by 22%.
- The company experienced broad-based growth across all segments, with data and AI-led services and solutions representing 61% of revenue.
- Insurance and healthcare segments showed significant growth, with insurance growing 15% and healthcare growing 22% year over year.
- The acquisition of iMerit is expected to enhance EXLS's AI capabilities and expand its addressable market in high-growth AI tech sectors.
- EXLS raised its full-year revenue guidance to a range of $2.39 billion to $2.415 billion, representing 14% to 16% growth, and increased its adjusted diluted EPS guidance to a range of $2.25 to $2.29.
Negative Points
- Digital operations revenue declined by approximately 1.5% year over year, reflecting a shift in business mix as AI is embedded into operations.
- SG&A expenses increased by 170 basis points year over year, primarily due to higher investments in front-end sales and support.
- The macroeconomic environment remains unsettled, posing potential risks to business growth.
- The integration of the iMerit acquisition and building new capabilities may require significant focus and resources.
- Despite strong performance, the guidance implies a deceleration in growth in the second half of the year, which may concern investors.
Q & A Highlights
Q: Can you elaborate on the strength and durability of the data and AI-led business, which showed over 30% growth in the quarter? How much of this growth is from new AI-native programs versus traditional operations?
A: Rohit Kapoor, CEO: The growth in our data and AI-led business is due to strong performance across all service lines, including payment integrity and data management. It's a mix of stable business in payment integrity and analytics, along with rapid growth in newer areas like data management and AI services. We expect this area to remain a high-growth driver, supported by our strategic client engagements.
Q: How are you approaching token optimization, and is this an area where you're developing proprietary IP?
A: Rohit Kapoor, CEO: Token economics is crucial for AI modernization, and we are leveraging our deep industry knowledge to help clients reduce costs associated with token consumption. We are building capabilities to provide advanced insights into token usage, which will be a significant area of spend for clients. This positions us well to deliver value in this complex and expanding area.
Q: Can you discuss the dynamics in international growth markets and the potential for continued growth?
A: Rohit Kapoor, CEO: International growth markets present a significant opportunity as AI adoption is keeping pace with the U.S. We are investing in talent and solutions to better serve these markets, which remain a strategic focus area. We see untapped demand and potential for significant revenue growth in these regions.
Q: Are you seeing changes in client conversations regarding outsourcing due to AI complexity and ROI challenges?
A: Rohit Kapoor, CEO: Clients are moving from pilot phases to production deployment of AI, focusing on building foundational AI capabilities. The effort required for AI enablement is substantial, presenting a significant opportunity for us. We are well-positioned to assist clients with our capabilities and expertise in navigating this complex transition.
Q: How are you balancing margin improvements with investments in growth, particularly in data and AI capabilities?
A: Maurizio Nicolelli, CFO: We aim to drive gross margin improvements by embedding more data and AI into client workflows. While we will invest in front-end sales and AI capabilities to drive top-line growth, our overall margin for 2026 is expected to be comparable to 2025. We continue to focus on long-term growth while managing short-term margin fluctuations.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This stock alert was generated using automated technology and GuruFocus financial data to provide readers with timely and accurate market reporting. This content was reviewed by GuruFocus editorial team prior to publication. Please send any questions or comments about this story to [email protected].
