ExlService Holdings, Inc. Q1 FY2026 earnings call

Rohit Kapoor mentioned that ExlService entered 2026 with strong momentum. The company's recognized industry expertise and leadership in helping clients adopt AI is fueling growth. They hosted the annual AI in Action flagship event. ExlService was named Advanced Technology Partner of the Year by NVIDIA, Best New Partner of the Year by Genesys, and AI and Machine Learning Market Disruptor of the Year by AWS. Maurizio Nicolelli provided details on financial performance, noting revenue of $570.4 million, up 13.8% year over year on a reported basis and 13.4% on a constant currency basis. SG&A expenses as a percentage of revenue increased, but adjusted operating margin was up. Balance sheet remains strong with cash and debt details.

In the first quarter, ExlService Holdings, Inc. generated revenue of $570 million, up 14% year over year. Adjusted earnings were $0.58 per share, an increase of 20% year over year. Data and AI-led revenues grew 28% year over year in Q1, representing 60% of the company total. Total operations grew 10% year over year. Insurance segment grew 13% year over year, representing over a third of revenues. Healthcare and Life Sciences grew 21% year over year, representing over a quarter of revenues. Banking, capital markets and diversified industries grew 8% year over year and represented a quarter of revenue. International growth markets grew 13% year over year.

For full year 2026, revenue guidance is increased to a range of $2.3 billion to $2.33 billion, representing 10% to 12% constant currency organic growth. Adjusted diluted EPS is increased to $2.18 to $2.23, representing 12% to 14% year-over-year growth. Anticipate increased investments in data and AI capabilities, foreign exchange gain of approximately $2 million to $3 million, net interest expense of approximately $6 million to $8 million, full-year effective tax rate in the range of 21% to 22%, and capital expenditures in the range of $50 million to $55 million.

Known and unknown risks and uncertainties could cause actual results to differ materially from forward-looking statements. Such risks include those set forth in the press release and SEC filings. Also, geopolitical uncertainties are factors to consider.

Q: Asked on growth guide, key assumptions for data and AI-led versus digital ops growth and industry impact, and if outlook is prudent.

A: Rohit said growth outlook increased due to strong first quarter and pipeline, data and AI-led growing nicely, digital ops growth slightly below average. Maurizio said guidance is prudent considering macro and geopolitical uncertainties.

Q: Asked on margin, change in adjusted operating margin expectation.

A: Maurizio said Q1 adjusted operating margin 20.5%, up 40 basis points, and expects rest of year margin in 19% range.

Q: Asked on clients pushing for price due to AI savings.

A: Rohit said clients switching to AI in production, commercial model changing to fixed-fee, milestone-based, and outcome-based, not seeing price reductions.

Q: Asked on International segment uncertainty due to conflict.

A: Rohit said International Growth Markets highly underpenetrated, little exposure to Middle East, healthy adoption in other geographies, will continue to invest.

Q: Asked on net revenue retention at large accounts.

A: Rohit said net revenue retention strong as clients outsource more end-to-end processes with AI.

Q: Asked on partnerships progress, partner-sourced pipeline, co-selling metrics.

A: Rohit said partnerships progressing well, go-to-market easier with partners.

Q: Asked on step-down in digital ops segment.

A: Rohit said shift towards data and AI-led operations, digital ops likely to continue deceleration, but overall business growth confident.

Q: Asked on headcount and revenue-per-headcount.

A: Rohit said headcount increase lower than revenue increase, will continue, depends on service mix.

Q: Asked on strong traction in AI and data services.

A: Rohit said broad-based traction across multiple service lines in data and AI-led.

Q: Asked on clients embracing next milestone in AI-driven automation.

A: Rohit said AI adoption requires correct data foundation, iterating models, context knowledge, semantic layer.

Q: Asked on NRR trend, comparison with IT services, backlog.

A: Rohit said NRR strong due to clients outsourcing end-to-end processes, takes time to reach steady state.

Q: Asked on margins despite favorable mix shift.

A: Maurizio said gross margins increasing, offset by continued investment in R&D.

Q: Asked on portion of new AI deals with outcome-based pricing.

A: Rohit said some AI deals have outcome-based pricing, particularly for end-to-end process transformation.

Q: Asked on acquisition pipeline.

A: Rohit said strong acquisition pipeline, looking to add AI enablement capability sets, but timing not commented on.