TaskUs, Inc. (TASK) Earnings

Management highlights

- Overall Financial and Portfolio Health * Q2 2026 delivered $57.7 million in adjusted EBITDA (18.7% margin), outperforming guidance by 70 basis points, and $36.4 million in adjusted free cash flow * Ended the quarter with $180 million in cash, a net leverage ratio below 1.3x, providing a strong balance sheet for AI and growth investments * Revenue concentration from the largest client fell to 20% from 26% year-over-year; excluding the largest client, the rest of the business grew 15% year-over-year, an acceleration from Q1 2026's 13% growth * 50%+ of new signings came from existing clients in Q2, with broad based strength across most verticals - Three Pillars of AI Strategy 1. Differentiated AI Services Solutions for physical AI, autonomous vehicles, and robotics: Opened a new robotics and physical AI training lab in Noida, India, expanded capabilities to collect and annotate real world spatial and egocentric data for autonomous home robots and humanoid robotics, and aggressively recruited specialized domain talent to solidify TaskUs' position as a critical operational partner for emerging AI leaders 2. AI Consulting and Agentic Solutions: Deployed production-ready agentic solutions that deliver high contact containment rates while maintaining strong customer satisfaction. Achieved over 70% containment for a streaming client (4.7/5 CSAT), and 30% improvement in first attempt resolution for a regulated industry scheduling client, with plans to expand to email and voice channels 3. Internal Process Automation for Margin Expansion: Launched Maestro, a proprietary AI powered platform for frontline team leads that automates administrative work, surfaces performance insights, and enables personalized coaching, to improve spans of control and elevate delivery quality - Operational Updates * Geographic revenue mix: 51% from the Philippines, 15% from the U.S., 12% from India, 22% from the rest of the world, with strong year-over-year growth in the U.S., Egypt, and Mexico * Headcount ended at 63,200 global teammates, a reduction of 1,200 from Q1 end driven by reduced scope for the largest client in the Philippines

Guidance

- Full year 2026 guidance was upwardly revised: revenue is now guided to $1.22 billion to $1.24 billion (up from prior range), with an expected adjusted EBITDA margin of ~19% at the $1.23 billion midpoint - Full year 2026 adjusted free cash flow guidance was upwardly revised 5% to a range of $110 million to $120 million ($115 million midpoint) - Capital expenditure guidance for 2026 was lowered to ~$47 million, a $13 million reduction from the initial outlook - Q3 2026 revenue is guided to $300 million to $302 million, representing ~1% year-over-year growth at the midpoint; adjusted EBITDA margin is expected to hold flat sequentially at ~18.7% - AI services growth is expected to remain at roughly the Q2 26% rate in Q3, then accelerate to over 30% year-over-year in Q4 2026 - TaskUs expects to increase investment in AI transformation and growth initiatives in 2027, which will continue to impact near-term margins

Segment performance

TaskUs reported total Q2 2026 revenue of $309 million, a 5% year-over-year increase. By segment: 1. Digital Customer Experience (DCX): Generated $175.7 million in revenue, representing 56.9% of total revenue, with 6.4% year-over-year growth. Growth was driven by performance across mobility, logistics, travel, new technology, and healthcare clients, partially offset by declines in existing financial services client revenue. 2. Trust and Safety: Generated $67.1 million in revenue, representing 21.7% of total revenue, with a 12.3% year-over-year decline. The decline was primarily driven by reduced revenue from social media and retail/ecommerce clients (especially the firm's largest client), partially offset by growth in technology, professional services, and financial services clients. 3. AI Services: Generated $66.1 million in revenue, representing 21.4% of total revenue, with 26% year-over-year growth (the firm's fastest growing segment for 7 consecutive quarters). Growth was led by expansion with autonomous vehicle, autonomous delivery, and robotics clients in the mobility, logistics, and travel vertical, partially offset by reduced revenue from ended automation projects at the largest client and other social media clients.

Risks & headwinds

- Continued revenue headwinds from the firm's largest client are expected through the end of 2026, driven by the client's automation and cost optimization efforts, with potential for some downward pressure to continue into 2027 - A shift in delivery mix to lower-margin U.S. onshore work for AI services creates ongoing margin pressure - Ongoing competitive pricing environment and annual personnel cost inflation increase cost pressures - Weakening of the U.S. dollar would put downward pressure on margin performance, per current guidance - Project-based AI services work can experience more frequent project scaling up/down than recurring customer service contracts, leading to quarterly growth volatility

Analyst Q&A

• Q: AI services growth decelerated to 26% in Q2 after six quarters above 30% growth. How much of this deceleration comes from base effects versus customer dynamics, and what should be expected for growth in the second half and 2027? /

  A: The Q2 deceleration is driven primarily by project-based dynamics: two social media clients completed specific AI automation projects, leading to temporary revenue declines that created tougher year-over-year comparisons. AI services growth will hold near the 26% Q2 rate in Q3, then accelerate back above 30% year-over-year in Q4. Recurring growth from autonomous vehicle and autonomous delivery contracts will support sustained AI services growth into 2027 and beyond.

• Q: When will vendor consolidation at the largest client offset automation-driven revenue declines, and could that new consolidated work also face automation? /

  A: Downward revenue pressure from the largest client's automation and cost optimization will continue through 2026, with some potential pressure extending into 2027. Vendor consolidation benefits are expected to begin in 2027, with revenue expected to stabilize and potentially return to growth over the medium term, as TaskUs is positioned as one of a small set of preferred vendors to support the client's AI growth initiatives. Any remaining work after automation will be more complex, underpinned by mutual AI investments.

• Q: How large is the current opportunity from new AI-based unicorn clients, and how does it compare to prior growth cycles like social media or crypto? /

  A: The opportunity from new AI clients is as large as it has ever been, even at the early stage of this cycle. Contrary to expectations that AI startups would be far less labor-intensive, TaskUs has already grown annual contracts with foundational AI model developers and robotics clients into the tens of millions of dollars, matching or exceeding the size of opportunities seen in prior cycles. The opportunity requires developing new specialized AI service capabilities, but demand is strong.

• Q: How persistent is the recent shift to U.S. onshore delivery for AI services, and can offshore growth offset the associated margin pressure over time? /

  A: Strong demand for U.S. delivery for AI services is expected to continue through the rest of 2026, driving continued growth in onshore revenue. Over the medium term, a portion of this work is expected to migrate to higher-margin offshore locations in the Philippines and India. TaskUs is focused on growing AI and DCX revenue in offshore locations to offset ongoing margin pressure from onshore work, while meeting current client delivery location requirements.