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ExlService Holdings, Inc. (EXLS)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered solid top-line and non-GAAP EPS growth: revenue $529.6M (+12.2% YoY, +2.9% QoQ) and adjusted diluted EPS $0.48 (+10.8% YoY); GAAP diluted EPS was $0.36 .
  • EXLS raised FY25 guidance: revenue to $2.07–$2.08B and adjusted diluted EPS to $1.88–$1.92; call added FX gain $2–$3M, net interest income ~$1M, ETR 22–23%, capex $50–$55M .
  • Data & AI-led revenue grew 18% YoY to 56% of total, supported by launch of EXLdata.ai and strong client adoption; digital operations grew 6% YoY .
  • Results beat S&P Global consensus: Q3 revenue $529.6M vs $522.5M* and EPS $0.48 vs $0.465*; Q1–Q2 also beat on both metrics* (beats are a near-term sentiment catalyst) .

Values retrieved from S&P Global*

What Went Well and What Went Wrong

What Went Well

  • AI-led mix shift and product momentum: “data and AI-led revenue grew 18% year over year, reaching 56% of total revenue” .
  • Segment breadth: Healthcare & Life Sciences grew 21.6% YoY to $135.3M; Insurance +8.5% to $180.5M; Banking/Capital Markets & Diversified +11.8% to $121.0M; International Growth Markets +8.4% to $92.8M .
  • New client wins and EXLdata.ai launch: 21 new clients; EXLdata.ai (agentic AI data suite) launched with Databricks as partner, targeting data readiness for AI .

What Went Wrong

  • Margin compression: GAAP operating margin declined to 14.4% (Q3) vs 15.8% (Q2) and 15.7% (Q1); adjusted operating margin 19.4% (Q3) vs 19.6% (Q2) and 20.1% (Q1), reflecting investments in front-end sales and new solutions .
  • GAAP EPS sequential dip: $0.36 (Q3) vs $0.40 (Q2/Q1), partly due to the margin cadence and lower operating income vs Q2 .
  • SG&A intensity: SG&A rose 120 bps YoY to 21.3% of revenue given sales/marketing investments, pressuring adjusted margins near term .

Financial Results

Summary P&L and Margins (USD, chronological: Q1 → Q2 → Q3)

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$501.0 $514.5 $529.6
YoY Growth (%)14.8% 14.7% 12.2%
QoQ Growth (%)4.1% 2.7% 2.9%
Gross Margin (%)38.6% 37.7% 38.5%
Operating Margin (GAAP, %)15.7% 15.8% 14.4%
Operating Margin (Adj, %)20.1% 19.6% 19.4%
Diluted EPS (GAAP)$0.40 $0.40 $0.36
Adjusted Diluted EPS$0.48 $0.49 $0.48

Segment Revenue and Segment Gross Margin

SegmentQ1 2025 Revenue ($M)Q2 2025 Revenue ($M)Q3 2025 Revenue ($M)
Insurance$172.0 $172.2 $180.5
Healthcare & Life Sciences$125.6 $129.5 $135.3
Banking, Capital Markets & Diversified Industries$117.7 $121.1 $121.0
International Growth Markets$85.7 $91.7 $92.8
Total$501.0 $514.5 $529.6
Segment Gross Margin (%)Q1 2025Q2 2025Q3 2025
Insurance36.6% 34.8% 36.6%
Healthcare & Life Sciences43.9% 43.5% 43.0%
Banking, Capital Markets & Diversified Industries37.3% 37.8% 38.3%
International Growth Markets36.6% 35.1% 35.8%
Total38.6% 37.7% 38.5%

Q3 vs S&P Global Consensus

MetricActual Q3 2025Consensus Q3 2025*Surprise
Revenue ($USD Millions)$529.6 $522.5*+$7.1M, +1.4% (Beat)
Adjusted Diluted EPS ($)$0.48 $0.465*+$0.015, +3.2% (Beat)

Values retrieved from S&P Global*

KPIs and Balance Sheet Highlights

KPIQ3 2025
Data & AI-led revenue (% of total)56%
Data & AI-led YoY growth18%
Digital Operations YoY growth6%
New clients won21
Recurring/annuity revenue>75%
Cash incl. short & long-term investments$393M (as of 9/30/25)
Revolver debt$355M (as of 9/30/25)
Net cash$38M (as of 9/30/25)
Cash from operations (9M)$233M
Capex (9M)$42M
Share repurchase (9M)~$183M; ASR $125M announced July 29

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2025$2.050–$2.070B $2.07–$2.08B Raised (midpoint +$15M)
Adjusted Diluted EPSFY 2025$1.86–$1.90 $1.88–$1.92 Raised
FX GainFY 2025N/A~$2–$3M New detail
Net Interest IncomeFY 2025N/A~$1M New detail
Effective Tax RateFY 2025N/A22%–23% New detail
Capital ExpendituresFY 2025N/A$50–$55M New detail

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2025)Previous Mentions (Q2 2025)Current Period (Q3 2025)Trend
AI/technology initiativesNew segment structure; strong non-GAAP margin start Code Harbor awards; AWS GenAI competency; Databricks migration expansion EXLdata.ai launched with Databricks; data readiness focus; 65+ AI agents; 56% revenue mix AI-led Accelerating adoption and productization
Demand/macroPrudent outlook; raised revenue guidance Raised revenue/EPS guidance; pipeline expanding TAM expanding; POCs moving to production at enterprise scale Strengthening
Digital operationsSolid; margins >20% adj Growth with AI enabling; net shift to AI-led category 6% YoY growth; revenue moving to AI-led bucket Stable-to-improving after mix shift
Healthcare/Life SciencesGrowth; domain operations traction Payment integrity leadership; strong volumes Fastest segment at +21.6% YoY; pipeline large Strong, early-stage runway
Regional trendsIntl growth (IGM) early IGM up; partnerships and recognitions IGM +8.4% YoY; building local partnerships and talent Building base
Go-to-market & partnershipsN/A in PRMicrosoft, AWS, Databricks partnerships recognized Deeper joint GTM with Databricks, Snowflake, Palantir; PE partners; CIO/CDO/CEO buying centers Broadening reach

Management Commentary

  • “Data and AI-led revenue grew 18% year over year, reaching 56% of total revenue… This is the third consecutive quarter we have accelerated our data and AI-led revenue growth” – Rohit Kapoor .
  • “We unveiled EXLdata.ai, the first-of-its-kind Agentic AI suite… more than 65 AI agents autonomously manage data modernization, governance, quality, lineage, and data accessibility” – Prepared remarks .
  • Use cases: UK insurer underwriting workflow (processing reduced from a week to hours; +7% code conversion), large US healthcare data platform, and UK energy/home services client (35% transactions AI-enabled; ~30% productivity improvement) .
  • Margin cadence and investment: “SGA increased by 120 bps YoY to 21.3%, driven by investments in front-end sales and marketing… adjusted operating margin 19.4%, down 50 bps YoY” – Maurizio Nicolelli .

Q&A Highlights

  • Demand shift and sustainability: TAM expanding; AI moving from POCs to production; AI-led business alone can support double-digit company growth .
  • Digital operations growth and mix: Net growth 6% YoY with significant revenue shifting to AI-led as EXL embeds AI into workflows .
  • Revenue-per-employee: Upward trend expected over several years as mix shifts to higher-value AI work; headcount growth to trail revenue growth .
  • Healthcare runway: Market is enormous, data-rich, adopting AI; payment integrity and domain ops growing, significant headroom remains .
  • Margin outlook: Expect ~10–20 bps annual improvement, with Q1 a better reflection of annual margin, more balanced cadence next year .
  • EXLdata.ai positioning: Differentiates by using AI to make data AI-ready across lineage, governance, MDM, and unstructured data; first-of-its-kind per management .
  • International strategy: Investing in senior talent, local partnerships; applying US solutions into international geographies .

Estimates Context

PeriodRevenue Consensus* ($M)Revenue Actual ($M)SurpriseEPS Consensus* ($)EPS Actual ($)Surprise
Q1 2025490.3*501.0 +$10.7M (Beat)0.441*0.48 +$0.039 (Beat)
Q2 2025507.2*514.5 +$7.3M (Beat)0.453*0.49 +$0.037 (Beat)
Q3 2025522.5*529.6 +$7.1M (Beat)0.465*0.48 +$0.015 (Beat)
FY 20252,077.8*Guidance: $2.07–$2.08B In-line1.917*Guidance: $1.88–$1.92 In-line

Values retrieved from S&P Global*

Key Takeaways for Investors

  • Beat-and-raise quarter: EXLS delivered revenue and EPS beats vs S&P consensus and raised FY25 guidance, a constructive setup for estimate revisions and near-term sentiment .
  • Structural mix shift to AI: 56% of revenue now AI/data-led with 18% YoY growth; EXLdata.ai should deepen moat around data readiness—a key bottleneck for enterprise AI adoption .
  • Margin cadence reflects investment: Near-term adjusted margin compression driven by sales/capability build; management reiterates 10–20 bps annual improvement path, implying medium-term EPS leverage .
  • Healthcare is a growth engine: Sustained >20% growth with large TAM and data-driven opportunities; pipeline supports medium-term durability .
  • Digital ops resilient despite AI deflation concerns: Client productivity gains offset by scope expansions; revenue maintained or grows as EXL captures more work and new AI use cases .
  • Capital returns and balance sheet: Strong 9M operating cash flow ($233M), continuing buybacks (ASR $125M), and net cash position ($38M) offer optionality for investment and returns .
  • Trading lens: Near term, the guidance raise and AI momentum are catalysts; watch margin trajectory in Q4/Q1 and execution on EXLdata.ai deployments to sustain premium narrative .