Genpact Limited Q2 FY2026 earnings call

Strategic Pivot to Agentic Operations

• Management identifies a structural market shift driven by enterprise demand for AI-powered autonomous workflows. They note that frontier AI models are largely interchangeable, but lack the process intelligence (knowledge of enterprise exceptions, controls, and actual work flow) required to deliver ROI, creating a unique competitive advantage for GenPact.
• GenPact is repositioning as a leader in agentic operations, a new category with an expanded total addressable market (TAM), building a higher-quality, more durable business.
• A three-part test is used to evaluate all existing business: 1) Does combining process intelligence with frontier AI create non-replicable durable client value? 2) Does it deliver compelling ROI for both clients and GenPact? 3) Is it aligned with expanding TAM? The vast majority of GenPact's business passes this test; non-aligned work (small portions like commoditized contact center services and certain content management) is being transitioned back to clients, with capital reallocated to strategic priorities.

Operational and Commercial Momentum

• Q2 2026 delivered record quarterly bookings, with 12 large deals (>$50 million TCV) year-to-date, double the volume in the same period last year. Net revenue retention remains strong, and backlog and pipeline are at record levels.
• Agentic solutions (GenPact's IP-powered, productized AI offerings for enterprise-scale mission-critical processes) are on track to hit over $1 billion in TCV in 2026, five times 2025 levels. Over 50% of cumulative agentic TCV comes from new clients, with existing clients rotating to agentic delivery delivering over 3% net revenue growth and 300 bps of gross margin expansion.
• Two new agentic modules launched in Q2: GenPact Transaction Monitoring Analyst for banks, and GenPact Deduction Recovery Solution for consumer goods companies, adding to an existing portfolio covering accounts payable, source-to-pay, record-to-report, and insurance processes. Notable new client wins include Lumen and expanded partnership with Mondelez International.
• The company's flywheel growth model leverages core domain expertise and process intelligence to build better AI/agentic solutions, which in turn deepens client trust and expands scope, creating a compounding, hard-to-replicate advantage.
• Partnership ecosystem is a core strategic priority: GenPact achieved Databricks Brick Builder specialization for manufacturing, transportation, and energy, was named a leader in the 2026 ServiceNow ecosystem by ISG, a rising star in ISG's Databricks ecosystem report, and a leader in all six Nelson Hall 2026 F&A transformation market segments including agentic AI.
• Revenue growth is decoupling from headcount growth as ATS (which has double the revenue per employee of core business) grows as a share of total revenue, driving operating efficiency and margin expansion.

Total Q2 2026 revenue was $1.343 billion, growing 7.1% year-over-year.

• Advanced Technology Solutions (ATS): Revenue was $363 million, growing 24% year-over-year, accounting for 27% of total revenue, and representing nearly 40% of quarterly bookings.
• Core Business Services: Revenue was $980 million, growing 1.9% year-over-year. By industry vertical:
• Consumer and Healthcare: 9.5% year-over-year revenue growth
• High-Tech and Manufacturing: 7.6% year-over-year revenue growth
• Financial Services: 3.3% year-over-year revenue growth Profitability metrics:
• Gross margin expanded 60 bps year-over-year to 36.5% (13th consecutive quarter of expansion)
• SG&A as a percentage of revenue was 21.9%
• Adjusted operating income was $234 million, up 7.5% year-over-year, with an adjusted operating margin of 17.4%
• Adjusted diluted EPS grew 13.6% year-over-year to $1 per share
• Non-FTE revenue surpassed 50% of total revenue for the first time

• Full year 2026 as-reported total revenue growth is expected to be at least 7%, even after a 2 percentage point negative impact from transitioning non-strategic work. Core business services revenue is still expected to grow full-year 2026 despite this impact.
• ATS full year 2026 revenue growth guidance was raised from the prior mid-teens expectation to at least 25%, reflecting faster-than-expected adoption and payoff from prior investments.
• Full year 2026 gross margin is expected to expand 50 bps to 36.5%, adjusted operating income margin is expected to increase ~25 bps to 17.7%, and adjusted diluted EPS is expected to grow at least 12%.
• The negative impact from non-strategic work transition will be concentrated in the second half of 2026, with a total 4 to 6 quarter transition timeline. For 2027, the dollar impact of the transition is expected to be slightly larger, but will be offset by continued growth momentum in strategic aligned business.
• Q3 2026 guidance:
  • Total revenue expected between $1.369 billion and $1.382 billion, representing 6.5% year-over-year growth at the midpoint
  • ATS year-over-year revenue growth expected to accelerate to at least 25%
  • Core business services expected to be flat to slightly down, with a 3 percentage point negative impact from non-strategic transition
  • Gross margin expected to expand to 36.6%, adjusted operating income margin expected to increase to 17.8%
  • Adjusted diluted EPS expected between $1.04 and $1.05

• Forward-looking statements are subject to material risks, including those disclosed in GenPact's SEC 10-K and 10-Q filings, which could cause actual results to differ materially from management expectations.
• The full impact of non-strategic work transition will unfold over 4 to 6 quarters, with the exact magnitude of impact on 2027 results still subject to execution uncertainty.
• Volatility in AI token pricing and compute costs could pressure margins if not managed effectively, though management notes they have built in model flexibility and strong token cost FinOps practices to mitigate this risk.

Q: After the current strategic business transition (with a 2 percentage point 2026 growth headwind and similar headwind possible in 2027), what does the target growth profile look like post-transition, and how much visibility does current record bookings provide for 2027 growth? / A: Management states that demand is exceptionally strong across both ATS and core business services, driven by the company's flywheel model that connects core domain expertise to ATS and agentic operations. They confirm that the ongoing transition is shaping the business into a far higher-growth, more durable, higher-margin operation. Management declines to give specific 2027 guidance but notes that first half 2026 large deal volumes are double last year's, with a very strong pipeline, giving good line of sight to continued strength into 2027.

Q: What are the margin characteristics of the non-strategic work being transitioned, and how does rising AI token pricing impact agentic solution pricing and margins? / A: The non-strategic work being transitioned is a very small portion of the overall business that failed the three-part strategic test (undifferentiated, low ROI, not aligned with expanding TAM) and does not change management's expected trajectory for overall margins. For agentic solutions, they are standardized product offerings (not bespoke) with annuitized recurring revenue and minimum volume commitments. Structurally, margins benefit from declining technology costs over time and reduced labor input as agents handle most workflow volume, and the company's model-agnostic architecture and strong token cost management practices mitigate token price volatility.

Q: Why has ATS growth accelerated faster than original management expectations, and is GenPact gaining win rate/share against peers? / A: The positive surprise has been stronger-than-expected traction with new clients (more than half of agentic TCV is new clients) and faster capture of new TAM, as the agentic operations value proposition resonates better than anticipated. The combination of prior investments in data/AI, the exponential AI acquisition, and partner ecosystem development have all come together faster than expected. The company's key differentiator is deep process intelligence and context from decades running mission-critical operations, which has led to higher win rates, reflected in doubled first half large deal volumes and consistent gross margin progress.