ExlService Holdings, Inc. Q3 FY2026 earnings call

• Broad-Based Momentum: Every operating segment grew more than 15%, demonstrating that growth is not dependent on a single vertical or client cohort. Organic growth accelerated to 17%.
• Agentic AI Mainstreaming: Management highlighted the shift from AI experimentation to scaled implementation, specifically noting the rise of agentic AI. Notable wins include a UK bank engagement with Google Cloud and enhanced agentic suites for finance, life/annuities, and payment integrity.
• iMerit Integration: The acquisition of iMerit closed in July, contributing $15.3 million in revenue over two months. It allows EXL to operate across the full AI stack (data foundation, model training/fine-tuning, and workflow embedding). The 'iMerit Scholars' platform launched to support AI model validation.
• Leadership Changes: Vivek Jetley stepped down as President of Insurance, Healthcare, and Life Sciences. Bhupinder Singh expanded his role to include Insurance leadership, while Nikhil Dhingra now leads Healthcare and Life Sciences directly reporting to the CEO.
• Pipeline Health: Pipeline creation grew double digits, driven by clients committing to larger integrated deals and expanding relationships. Decision-making cycles are shortening, improving deal velocity.
• International Expansion: International Growth Markets saw acceleration (21% YoY), driven by banking, energy, and utilities. Management noted deliberate investments and potential future acquisitions in this region to capture untapped opportunities.

Total revenue was $634 million, up 19.7% year-over-year (YoY) on a reported basis and 17% on an organic constant currency basis. Data and AI-led revenue grew 31.7% organically, representing approximately 62% of total revenue.

• Insurance Segment: Revenue was $208.5 million, growing 15.5% YoY (5.4% sequentially). This segment contributed approximately 32.9% of total revenue.
• Healthcare and Life Sciences Segment: Revenue was $160.4 million, growing 18.6% YoY (17.2% organic). This segment contributed approximately 25.3% of total revenue.
• Banking, Capital Markets, and Diversified Industries Segment: Revenue was $153.5 million, growing 27% YoY (16.8% organic, 5.5% sequentially). This segment contributed approximately 24.2% of total revenue.
• International Growth Markets Segment: Revenue was $111.6 million, growing 21.1% YoY (20% organic, 6.3% sequentially). This segment contributed approximately 17.6% of total revenue.
• Digital Operations: Reported a decline of 1.7% YoY, which management attributes to the strategic migration of work into the higher-value Data and AI-led category.

• Revenue Guidance Raised: Full-year 2026 revenue guidance increased to $2.43 billion–$2.44 billion, representing 16%–17% reported growth and 15% organic constant currency growth. This is an upward revision from the prior range of $2.39 billion–$2.415 billion.
• EPS Guidance Raised: Adjusted diluted EPS guidance increased to $2.34–$2.36, representing 20%–21% YoY growth. This is an upward revision from the prior range of $2.25–$2.29.
• Key Assumptions: Outlook assumes foreign exchange gains of ~$5 million, net interest expense of $13–$15 million, an effective tax rate of 21%–21.5%, and capital expenditures of $58–$62 million.

• Margin Pressure from Investments: Adjusted operating margin decreased slightly due to investments in future ramp-ups, infrastructure, and technology costs associated with Data and AI services. Employee cost leverage was offset by these increases.
• Commercial Construct Lag: The transition of commercial constructs from traditional operations to outcome-based AI models is slower than the embedding of AI technologies, creating uncertainty in margin profiles during the transition.
• Macroeconomic Uncertainty: Management acknowledged monitoring the evolving macroeconomic environment, though current momentum provides confidence.
• Integration Risks: While iMerit integration has been positive, it is still early; success depends on effectively combining capabilities and realizing long-term synergies across the full AI stack.

Q: Brian Burgin asked about the sustainability of growth momentum compared to last year and whether international markets will become a primary growth driver. / A: Rohit Kapoor stated that growth is sustained by accelerating pipeline creation and shorter decision-making cycles in the Data and AI-led business. He confirmed that International Growth Markets represent a huge untapped opportunity and will continue to be a significant growth driver, with management actively considering acquisitions to accelerate talent and geographic expansion in those regions.

Q: Puneet Jain asked if recent outperformance was driven by broad-based enterprise AI adoption or specific company drivers like international growth, and sought details on the iMerit acquisition's impact on enterprise clients and Frontier AI Labs. / A: Kapoor emphasized that growth is broad-based across all four segments, but the primary outperformance stems from the Data and AI portfolio, where a >90% success rate and short sales cycles drive momentum. Regarding iMerit, he explained it strategically enables EXL to own the full AI stack (data to model layer), allowing deeper contextual knowledge in agentic systems. While early in integration, it resonates with market trends and enhances differentiation through joint capability development with Frontier AI Labs.

Q: Maggie Nolan inquired about the margin impact of intentionally migrating clients from traditional operations to data/AI-led offerings and the sustainability of payment integrity growth. / A: Kapoor noted that while AI embeds rapidly, commercial construct shifts are slower, keeping margins unclear in the near term, though the long-term goal is lower delivery costs and net-positive value for both parties. Regarding payment integrity, he highlighted that owning the full stack allows EXL to expand from post-payment to pre-payment analysis (touching 100% of claims) and combat rising fraud, making it a high-growth, AI-heavy area with tremendous opportunity.

Q: Vincent Colicchio asked how declining AI model costs will affect margins versus passing savings to clients, and why gross margins declined in the Banking segment. / A: Kapoor explained that while token costs fall, expenses for guardrails and agentic harnesses rise, so EXL is focused on maintaining margins while investing and delivering value. Maurizio Nicolelli clarified that the Banking segment margin decline was due to heavy investment in future hiring and analytics/AI service ramp-ups to support incoming engagements, indicating temporary pressure rather than persistent structural issues.