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GL

Genpact LTD (G)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 net revenues were $1.254B, up 6.6% YoY; diluted EPS $0.75 and adjusted diluted EPS $0.88. Management raised full-year 2025 guidance for revenue and adjusted EPS, citing accelerating Advanced Technology Solutions (ATS) growth (+17.3% YoY) and strong Data‑Tech‑AI momentum (+9.7% YoY) .
  • Genpact beat Wall Street consensus on Q2 revenue and Primary EPS, while EBITDA was below consensus; management highlighted margin expansion and ongoing investments to drive long-term growth . Consensus values marked with * retrieved from S&P Global.
  • Q3 2025 guidance: net revenues $1.258–$1.270B, adjusted diluted EPS $0.89–$0.90; FY 2025 guidance raised to net revenues $4.958–$5.053B and adjusted diluted EPS $3.51–$3.58 (gross margin ~36%, AOI margin ~17.4%) .
  • Call tone: confident on AI-led strategy (GenpactNext), strong pipeline and large-deal closures (four signed in Q2), with caution on tariff/macro-sensitive end-markets; non-FTE/pricing trends supportive of margins .

What Went Well and What Went Wrong

What Went Well

  • ATS revenue accelerated +17.3% YoY to $293M, with data & AI driving deployments and >2x revenue per headcount vs company average; Data‑Tech‑AI revenue reached $599M (+9.7% YoY) .
  • Margins expanded YoY: gross margin 35.9% (+50 bps), adjusted operating margin 17.3% (+40 bps), with diluted EPS $0.75 (+11.9% YoY) and adjusted diluted EPS $0.88 (+11.4% YoY) .
  • Management raised FY revenue and EPS guidance; BK Kalra: “our strategy…positions Genpact as a clear partner of choice for AI-driven transformation” .

What Went Wrong

  • Operating cash flow declined YoY in Q2 to $177M (vs $209M in Q2 2024), and DSOs increased to 91 days, reflecting working capital dynamics amid growth and investments .
  • EBITDA came in below S&P consensus despite AOI strength, indicating heavier investment/SG&A burden while building ATS capabilities (SG&A was 21.2% of revenue) . Consensus values marked with * retrieved from S&P Global.
  • Macro-related caution persists: some large deals in tariff/supply-chain-sensitive sectors were delayed earlier in the year; while several closed, management remains prudent on sequential guide cadence .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Net Revenues ($USD Billions)$1.249 $1.215 $1.254
Diluted EPS ($)$0.79 $0.73 $0.75
Adjusted Diluted EPS ($)$0.91 $0.84 $0.88
Gross Margin %35.7% 35.3% 35.9%
Income from Operations Margin %15.2% 15.1% 14.3%
Adjusted Income from Operations Margin %17.7% 17.3% 17.3%
Net Income Margin %11.4% 10.8% 10.6%
Q2 2025 Actual vs ConsensusConsensus (S&P Global)*ActualSurprise
Revenue ($USD Billions)$1.232*$1.254 Beat by ~$0.022B
Primary EPS ($)$0.854*$0.88 Beat by ~$0.03
EBITDA ($USD Millions)$228.6*$207.3*Miss by ~$21.3M

Consensus values marked with * retrieved from S&P Global.

Segment Breakdown

Segment Net Revenues ($USD Millions)Q2 2024Q1 2025Q2 2025
Advanced Technology Solutions (ATS)$249.5 $277.6 $292.7
Core Business Services$926.8 $937.3 $961.8
Segment Net Revenues ($USD Millions)Q1 2025Q2 2025
Data‑Tech‑AI$582 $599
Digital Operations$633 $655

KPIs

KPIQ1 2025Q2 2025
DSOs (days)88 91
Cash from Operations ($USD Millions)$40 $177
Share Repurchases ($USD Millions)$63 $30
Dividend per Share ($)$0.17 (Q1 declared) $0.17 (Q3 payable Sept 25)
Cash & Equivalents ($USD Millions)$562 $663

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Revenues ($USD Billions)FY 2025$4.862–$5.005 $4.958–$5.053 Raised
Adjusted Diluted EPS ($)FY 2025$3.41–$3.52 $3.51–$3.58 Raised
Adjusted AOI Margin %FY 2025~17.3% ~17.4% Raised
Gross Margin %FY 2025~36.0% ~36.0% Maintained
Data‑Tech‑AI Growth (as reported)FY 2025~5.1% mid-point ~7.4% Raised
Digital Operations Growth (as reported)FY 2025~2.0% mid-point ~2.9% Raised
Net Revenues ($USD Billions)Q3 2025N/A$1.258–$1.270 New
Adjusted Diluted EPS ($)Q3 2025N/A$0.89–$0.90 New
Gross Margin %Q3 2025N/A~36.0% New
Adjusted AOI Margin %Q3 2025N/A~17.5% New

Earnings Call Themes & Trends

TopicQ4 2024 (Prior-2)Q1 2025 (Prior-1)Q2 2025 (Current)Trend
AI/Technology InitiativesLaunched agentic AP; AI Gigafactory and AI Value Studio; Data‑Tech‑AI accelerating GenAI solutions in production; strong partner revenue; large deals with DTA concentration ATS +17%; 270+ GenAI solutions in production; AI Gigafactory live across verticals; AgenTik AP suite GA Accelerating
PartnershipsBuilding hyperscaler/startup partnerships; bookings up Partner revenue up ~80% YoY; ~10% of revenue; record pipeline Partner revenues +70% YoY; top-tier status with AWS/Salesforce/ServiceNow Strengthening
Tariffs/MacroOutlook assumes similar macro to 2024 Large-deal delays in tariff/supply-chain-sensitive end markets; widened FY range Macro more “muted” but improving from early-year paralysis; prudent guide Cautious but improving
Pricing/Commercial ModelsShift to outcome/consumption-based deals Outcome/consumption deals 22%; no cancellations; prudent on DTA short-cycle Non-FTE ~46%; no irrational pricing; clients focus on value Favorable
Vertical TrendsBroad-based growth; C&H +11%, HT&M +9%, FS +6% HT&M +11%, FS +7%, C&H +4% HT&M +13%, FS +6%, C&H +1% (macro-sensitive clients) Mixed; HT&M leading
Large Deals/Bookings14 large deals in 2024; bookings +15% Record pipeline; several very large deals delayed (no cancellations) 4 large deals closed in Q2; previously delayed deal closed; others active Executing

Management Commentary

  • Strategy and positioning: “Our simple yet powerful strategy – to integrate Advanced Technology Solutions and strengthen our last mile advantage – positions Genpact as a clear partner of choice for AI-driven transformation” .
  • ATS economics: “Our advanced technology solutions deliver more than 2x the revenue per headcount compared to the company average, and are growing at more than twice the rate of Genpact's overall revenue… ~70% amortized, and ~70% comes from non FTE commercial terms” .
  • Pipeline and conversion: “We closed four large deals in the second quarter… pipeline remains strong… ATS pipeline up nearly 1.5x YoY” .
  • Guidance philosophy: “We are raising our full year outlook… adjusted diluted EPS… projected to grow faster than revenue” .
  • Macro/pricing: “We haven't seen any irrational pricing behavior… delivery from FTE legacy models is now shifting… to non FTE or outcome-based models” .

Q&A Highlights

  • Large deals and macro sensitivity: Delays were timing-related in tariff/supply-chain-sensitive sectors; no cancellations; several large deals closed with ATS concentration; remaining deals expected to come to fruition within the year .
  • GenAI impact and revenue model: Sharing productivity gains with clients while generating incremental revenue from expanded scope, volumes, and new logos; shift to non‑FTE/outcome-based contracts supportive of margins .
  • Segment/vertical trends: HT&M leading growth; consumer/healthcare seeing macro-sensitive client concentration; pipeline healthy across cohorts (size, vertical, geo) .
  • Pricing environment: No irrational pricing; clients focused on value; consumption-based pricing gaining traction .
  • Medium-term outlook: Confidence in at least ~7% mid-term growth (2026–2027) supported by pipeline and investment cadence .

Estimates Context

  • Q2 2025: Revenue beat ($1.254B vs ~$1.232B*), Primary EPS beat ($0.88 vs $0.854*), while EBITDA missed ($207M vs ~$229M*) . Consensus values marked with * retrieved from S&P Global.
  • Outlook vs Street: Raised FY revenue/EPS and ATS/DO growth should bias Street estimates higher; margin guide maintained/improved (gross ~36%, AOI ~17.4%) provides visibility to EPS growing faster than revenue .
  • Near-term (Q3): Guide implies mid single-digit growth and stable margins; Street may adjust for slight sequential moderation ahead of a stronger Q4 cadence (per CFO build to FY midpoint) .

Key Takeaways for Investors

  • ATS momentum (+17.3% YoY) and expanding AI deployments underpin raised FY revenue/EPS guidance—supports a premium narrative on AI-led transformation exposure .
  • Non-FTE/outcome-based models and partnerships (AWS/Salesforce/ServiceNow) are structurally margin-accretive and de-risk earnings quality over time .
  • Q2 delivered clean beats on revenue and Primary EPS vs consensus; EBITDA softness reflects investment load—watch SG&A discipline and ATS mix for incremental margin lift . Consensus values marked with * retrieved from S&P Global.
  • Macro caution remains (tariffs/supply-chain-sensitive verticals), but pipeline conversion and large-deal closures reduce execution risk into H2 .
  • Q3 guide is prudent; FY raise signals confidence—setup favors estimate revisions and potential multiple support on AI narrative continuity .
  • Working capital: DSOs at 91 days and lower YoY OCF in Q2 warrant monitoring; balance sheet liquidity remains solid ($663M cash) .
  • Capital returns steady: $30M buybacks in Q2 and $0.17 dividend declared (Q3 payable Sept 25) sustain TSR while funding strategic investments .

Consensus values marked with * retrieved from S&P Global.