Genpact Limited (G) Q4 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call summary and Q&A reflect a strong positive sentiment, driven by raised revenue and EPS guidance, robust growth in Advanced Technology Solutions, and strategic investments in AI talent and partnerships. The company is confident in its growth trajectory, with a focus on margin expansion and recurring revenue streams. While management was vague on long-term margin specifics, the overall sentiment is optimistic, suggesting a positive stock price movement.

Key Financial Performance

Total Revenue $5.08 billion, up 6.6% year-over-year. The increase was driven by focused execution, accelerating innovation, and broad-based demand.

Advanced Technology Solutions Revenue $1.2 billion, up 17% year-over-year. This growth was attributed to increasing demand for data and AI expertise and investments in advanced technology solutions.

Gross Margin 36%, expanded by 60 basis points year-over-year. The improvement was due to rigorous operational discipline and a strategic focus on higher-value revenue streams.

Adjusted Operating Income Margin 17.5%, improved by 40 basis points year-over-year. This was achieved despite significant investments for long-term growth.

Adjusted Diluted EPS $3.65, up 11.3% year-over-year. The growth was faster than revenue for the fifth consecutive year, driven by operational efficiencies and higher-value revenue streams.

New Bookings Over $5.5 billion, with healthy growth in Advanced Technology Solutions, which now account for more than 1/3 of total bookings. This reflects strong demand and strategic alignment.

Cash and Cash Equivalents $854 million, up $207 million from the previous year. This increase was supported by strong operating cash flow.

Operating Cash Flow $813 million, including $170 million from a client prepayment. Excluding this, cash flow from operations increased 5% year-over-year.

Core Business Services Revenue $3.876 billion, up 3.7% year-over-year. Growth was driven by continued client trust and demand for domain and industry expertise.

Data Tech and AI Revenue $2.442 billion, up 9.3% year-over-year. This growth was driven by increasing demand for data and AI solutions.

Digital Operations Revenue $2.638 billion, up 4.1% year-over-year. Growth was attributed to strong client relationships and demand for digital operations.

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Operating Highlights

AP Capture and AP Suite: Launched AP Capture in February and expanded with AP Advance, Trace, and Assist by June. Closed over $200 million in total contract value for AP agentic solutions, with 40% of awarded contract value from new clients.

AI Maestro: Introduced a software platform to embed AI into last-mile business processes, accelerating deployment.

AI Gigafactory: Scaled to over 400 gen AI solutions in market, nearly tripling from last year.

Advanced Technology Solutions: Revenue grew 17% to $1.2 billion, now accounting for 24% of total revenue. Bookings exceeded $5.5 billion, with over one-third from Advanced Technology Solutions.

Client Expansion: Expanded partnerships with companies like Humana and WESCO, showcasing AI-led transformations and operational improvements.

Margin Expansion: Gross margin expanded by 60 basis points, and adjusted operating income margin improved by 40 basis points.

Revenue Growth: Total revenue reached $5.08 billion, up 6.6% year-over-year.

Non-FTE Revenue: Represented 48% of Q4 revenue, reflecting a strategic shift to fixed fee, consumption, and outcome-based deals.

Agentic Operations: Pioneering a new operating model combining AI agents and human expertise, focusing on domain-specific agents and responsible AI.

GenpactNext Strategy: Expanding capabilities in data, AI, and agentic solutions, with a focus on transforming client operations and driving sustainable growth.

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Risk or Challenges

Market Conditions: The company faces economic uncertainties and market conditions that could impact demand for its services, particularly in the Advanced Technology Solutions segment.

Competitive Pressures: Genpact operates in a highly competitive market, especially in the areas of AI and advanced technology solutions, which could pressure margins and market share.

Regulatory Hurdles: The company acknowledges risks related to regulatory compliance, as highlighted in their 10-K and 10-Q filings.

Supply Chain Disruptions: No explicit mention of supply chain disruptions was made in the transcript.

Economic Uncertainties: Economic uncertainties could impact client budgets and spending on transformation projects, potentially affecting revenue growth.

Strategic Execution Risks: The company is heavily investing in AI and advanced technology solutions, which carry risks related to execution, scalability, and client adoption.

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Guidance & Outlook

Revenue Growth for 2026: Expected to deliver at least 7% growth year-over-year, driven by Advanced Technology Solutions and Core Business Services.

Advanced Technology Solutions Growth: Revenue expected to grow at least in the high teens for 2026, driven by demand for data and AI, strengthening partnerships, and momentum in agentic solutions.

Core Business Services Growth: Expected to continue growing while helping clients accelerate AI-led transformations through Agentic Operations.

Gross Margin Expansion: Full year gross margin expected to expand by 50 basis points to 36.5%.

Adjusted Operating Income Margin: Expected to increase by 25 basis points to 17.7%, reflecting self-funded investments for growth.

Adjusted Diluted EPS Growth: Expected to grow approximately 10%, faster than revenue growth.

Capital Allocation Strategy: Approximately 50% of operating cash flows to be returned to shareholders through share repurchases and dividends, with flexibility for strategic investments.

First Quarter 2026 Revenue: Expected to deliver between $1.282 billion and $1.294 billion, representing 6% growth at the midpoint.

First Quarter 2026 Advanced Technology Solutions Growth: Expected to accelerate to high teens growth year-over-year.

First Quarter 2026 Adjusted Diluted EPS: Expected to be between $0.92 and $0.93.

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Shareholder Return Plan

Dividend increase: The Board of Directors has approved a 10% increase in the regular quarterly dividend to $0.1875 per quarter, amounting to $0.75 on an annual basis.

Total dividends returned in 2025: $118 million in dividends were returned to shareholders in 2025.

Share repurchases in Q4 2025: $100 million in share repurchases were conducted in the fourth quarter of 2025.

Total share repurchases in 2025: $283 million in share repurchases were conducted throughout 2025.

Capital allocation strategy for 2026: The company aims to return approximately 50% of operating cash flows to shareholders through share repurchases and dividends.

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Key Q&A

Q:Has anything changed in contracting conversations due to announcements from Anthropic and others?

A:The CEO stated that the developments in Silicon Valley are accelerating their pivot and helping drive outcomes for clients faster. They see this as a tailwind, with increased relevance in task-oriented AI and Agentic Operations, which integrate AI into complex business processes. The company is excited about the opportunities and sees their pivot accelerating.

Q:What factors are driving confidence in ATS growth, and is there a migration of work from CBS to ATS?

A:The CEO mentioned that they are entering more conversations, including large and mega deals, where they were not previously invited. They see healthy demand in Core Business Services and significant growth in agentic contracts, with 40% of bookings from new clients. The CFO added that ATS growth is driven by agentic ramp-up, with $200 million in bookings, and the new commercial model is creating recurring annual revenue streams.

Q:Are there patterns in who is adopting the AP suite, and how is the addressable market growing?

A:The CEO noted that 40% of TCV for the AP suite came from new clients, up from 30% last quarter. The adoption includes enterprise clients, mid-market clients, and existing clients not previously using their finance stack. This expansion is significantly increasing the total addressable market.

Q:Have there been improvements in sales cycle or ramp times, particularly in large deals?

A:The CEO stated that large deals have varying timelines, with some moving quickly and others taking longer. The pipeline for large deals is at record levels. The CFO added that the company is confident in their 7% full-year growth guidance, supported by a strong backlog and committed revenue in line with historical averages.

Q:What are the levers for gross margin expansion, and can this trajectory continue in the future?

A:The CEO attributed gross margin expansion to the shift to Advanced Technology Solutions, which provide higher value to clients and Genpact. The CFO added that the mix shift to ATS and internal efficiencies from AI and technology are driving margin growth. They are confident in continued margin expansion but did not speculate on 2027-2028.

Q:How is the company balancing investments in strategic areas with margin expansion?

A:The CFO explained that they run a disciplined process to evaluate investments, focusing on ROI and strategic implications. They are investing in partnerships, talent, product engineering, and sales while maintaining margin expansion. The CEO emphasized that the business is changing rapidly, with significant investments in Agentic Operations and other strategic areas.

Q:Are clients coming with greater expectations for efficiency gains, and how is pricing being managed?

A:The CEO acknowledged that client aspirations for efficiency gains are high, but the company offsets productivity improvements with cost efficiencies, leading to gross margin growth. They are creating higher-value solutions and leveraging partner ecosystems for additional benefits. The CFO noted that productivity asks are consistent with the past, and gross margin expansion reflects their ability to navigate these dynamics.

Q:Who do clients turn to first when starting their AI journey, and is Genpact being invited to more discussions?

A:The CEO stated that Genpact is increasingly being invited to discussions where they were not previously included, as they bring expertise in process, technology, data, and mission-critical operations. This has accelerated their pipeline and growth in Advanced Technology Solutions.

Q:Who are the decision-makers for adopting Agentic AI solutions within client organizations?

A:The CEO explained that decision-making involves both business managers and CIOs/CDIOs, as the solutions intersect with technology and operational roadmaps. The company is engaging with CIOs and CDIOs to integrate Agentic Operations into clients' systems.

Q:What is driving the increase in large deals, and do they involve rebadging or AI-led components?

A:The CEO noted that talent transfer is a standard part of their model, but the increase in large deals is driven by clients recognizing the value of Agentic Operations in mission-critical processes. This includes AI-led components and opening up demand for Genpact's expertise.

Q:What is the long-term durability of demand for solutions like AP agentic solutions?

A:The CEO emphasized that these solutions are building recurring annual revenues and are shaping the business in a significantly different way. They see long-term demand for Agentic Operations in finance, supply chain, claims, and other areas, as clients focus on gaining market share and operational efficiency.

Q:Review of Unclear Management Responses

A:Management avoided providing specific details on the potential for margin expansion in 2027-2028, stating only that the trajectory is clear. Additionally, they did not elaborate on the exact balance between mix shift benefits and delivery footprint efficiencies in margin growth, using general terms like 'both things' to describe the drivers.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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Genpact Limited (G) Q4 2025 Earnings Call Transcript

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Frequently Asked Questions

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