Globant, along with Accenture and Cognizant, is priced at four and a half times or less of our estimate of normal earnings due to fears that AI will erode demand for outsourced technology work. We believe the market has overreacted, and a more likely outcome is that these firms will adapt and become enablers of AI adoption rather than victims. The IT services industry has historically proven resilient, and Globant's deep client relationships and domain expertise position it well to thrive in this evolving landscape.

Globant (GLOB) has faced significant challenges as the market has de-rated IT consultants amid fears that AI will displace their business. The company, which specializes in bespoke software development, saw its stock price decline as corporates delayed IT projects to reassess their needs under AI. Despite a history of beating expectations, Globant's recent earnings preview did not meet market expectations, contributing to a further decline in its valuation. The stock remains below our intrinsic value estimate, but we are cautious given the ongoing regulatory changes in the UK and the potential for bureaucratic red tape affecting outsourcing.

Globant, a US listed digital services group that originated in Argentina, has evolved into a global challenger in enabling digitalization and increasingly AI-based services for clients. The manager believes that the opportunity presented by the roll-out of AI across non-technology corporations is currently underestimated by investors. Furthermore, the cyclical slowdown of the past two years offers an excellent entry point for investment over the fund's horizon.

We’ve fully exited our position in Globant following the company’s weaker-than-expected Q1 2025 earnings report and disappointing FY25 revenue guidance. While the company has managed to maintain outsized revenue growth relative to its IT services peers for several quarters, recent guidance projecting low single-digit revenue growth for FY25 brings its outlook roughly in line with the peer group. This outcome speaks to the more protracted IT services spending weakness that may continue, and the potentially more discretionary nature of Globant’s business model.

Globant SA declined -45.1% during the quarter, ending with a weight of 2.5%. Globant is the second-largest pure-play digital software engineering vendor with a focus on front-end, custom-designed software engineering applications that are mission critical to its customers. The primary drivers of the guidance shortfall were foreign exchange headwinds from a stronger U.S. dollar, weak macroeconomic conditions in Brazil and Mexico, and slower spending by its largest customer (Disney). While Globant has benefited from increased spending on AI applications, which represented approximately 15% of total revenues in 2024, momentum in AI is tempered by a weakening demand outlook in Latin America (~20% of revenue) and more broadly.

Globant SA declined -45.1% during the quarter, ending with a weight of 2.5%. The company is the second-largest pure-play digital software engineering vendor, focusing on front-end, custom-designed software applications that are mission critical to its customers. Despite reporting an overall in-line quarter, Globant provided guidance below consensus due to foreign exchange headwinds from a stronger U.S. dollar, weak macroeconomic conditions in Brazil and Mexico, and slower spending by its largest customer, Disney. While Globant has benefited from increased spending on AI applications, which represented approximately 15% of total revenues in 2024, the demand outlook in Latin America is weakening.

Globant SA declined -45.1% during the quarter, ending with a weight of 2.5%. The company is the second-largest pure-play digital software engineering vendor, focusing on front-end, custom-designed software applications that are mission critical to its customers. Despite reporting an overall in-line quarter, Globant provided guidance below consensus due to foreign exchange headwinds from a stronger U.S. dollar, weak macroeconomic conditions in Brazil and Mexico, and slower spending by its largest customer, Disney. While Globant has benefited from increased spending on AI applications, which represented approximately 15% of total revenues in 2024, the demand outlook in Latin America is weakening.

We have also taken a holding in a digital and software service consultancy called Globant. Globant helps companies to design and build new tools. Now, the emergence of artificial intelligence is obviously a great opportunity for companies to do new things and also improve their efficiency. But we have to remember that there are many businesses worldwide that just don't have the necessary skill sets to even know what they can do with these potential future tools. And so what Globant is offering is some hand-holding to help you to both design new tools to decide what you could use some tools for, but also then help companies in the creation of those tools.

We have also taken a holding in a digital and software service consultancy called Globant. Globant helps companies to design and build new tools. Now, the emergence of artificial intelligence is obviously a great opportunity for companies to do new things and also improve their efficiency. But we have to remember that there are many businesses worldwide that just don't have the necessary skill sets to even know what they can do with these potential future tools. And so what Globant is offering is some hand-holding to help you to both design new tools to decide what you could use some tools for, but also then help companies in the creation of those tools.

We have also taken a holding in a digital and software service consultancy called Globant. Globant helps companies to design and build new tools. Now, the emergence of artificial intelligence is obviously a great opportunity for companies to do new things and also improve their efficiency. But we have to remember that there are many businesses worldwide that just don't have the necessary skill sets to even know what they can do with these potential future tools. And so what Globant is offering is some hand-holding to help you to both design new tools to decide what you could use some tools for, but also then help companies in the creation of those tools.