Genpact LTD (G)·Q4 2024 Earnings Summary

Executive Summary

• Q4 delivered accelerating topline and solid margin execution: revenue $1.25B (+8.9% YoY), gross margin 35.7% (+10 bps), adjusted operating margin 17.7% (+0 bps), adj. EPS $0.91 (+11% YoY). GAAP EPS fell 50% YoY due to a non‑recurring $170M tax benefit in Q4’23; underlying profitability improved .
• Mix tailwinds: Data‑Tech‑AI (DTA) grew 11.9% to $595M (48% of revenue); Digital Operations (DO) grew 6.4% to $654M (52%). Outcome/consumption-based deals rose to 21% of Q4 revenue, supporting margin quality .
• FY24 bookings hit a record $5.7B (+15%) with GenAI bookings accelerating to ~$100M in Q4; operating cash flow rose 25% to $615M. Board raised the quarterly dividend 11% to $0.17 and expanded buyback authorization by $500M, signaling confidence and ongoing capital return .
• 2025 guide implies continued balanced growth and margin expansion: revenue $5.03–$5.13B (+5.5%–7.5% as‑reported), GM ~36.0%, adj. operating margin ~17.3%, adj. EPS $3.52–$3.59 (+~9% at mid). Q1’25 guide: revenue $1.202–$1.213B, GM ~35.0%, AOI ~16.5%, adj. EPS $0.79–$0.80 .

What Went Well and What Went Wrong

• What Went Well

  • DTA momentum: Q4 DTA +11.9% YoY to $595M with revenue growth accelerating for the fourth straight quarter; 145+ GenAI solutions in production and ~$100M GenAI bookings in Q4 underscore traction .
  • Margin and cash execution: Q4 gross margin 35.7% (+10 bps YoY), AOI margin 17.7%; FY24 operating cash flow $615M (+25%) with DSOs improving to 86 days, reflecting simplification and collections progress .
  • Commercial mix shift: Outcome/consumption‑based deals reached 21% of Q4 revenue and 20% for FY24; management highlights higher‑margin profile of these structures, supportive of durable profitability .

• What Went Wrong

  • Optical EPS decline on GAAP: Q4 GAAP EPS $0.79 (‑50% YoY) and FY24 GAAP EPS $2.85 (‑16% YoY) due to lapping a $170M one‑time tax benefit in 2023; underlying adjusted EPS rose 11% in Q4 and 10% in FY24 .
  • Visibility prudence in DTA: Management guided for robust Q1 DTA growth (~9.8% YoY) but acknowledged potential deceleration later in 2025 given tougher 2H comps and inherently lower visibility in the 25% non‑annuitized revenue base .
  • Content moderation scrutiny: While <10% of revenue, investor focus persists on trust & safety; management sees no material impact and is engaging clients, with opportunities to apply AI defensively as well .

Financial Results

Headline P&L and Margins (chronological: Q2 → Q3 → Q4)

Segment Mix and Growth

Vertical Growth (YoY, qualitative KPI evolution)

Additional KPIs

Non‑GAAP reconciliation and drivers: Q4 adj. EPS excludes stock‑based comp and amortization; YoY GAAP EPS decline reflects lapping the $170M IP transfer tax benefit in Q4’23 (excluded from adjusted metrics) .

Guidance Changes

Note: Q3’24 provided FY24 guidance (since achieved); FY25/Q1’25 guidance is newly issued in Q4 materials .

Earnings Call Themes & Trends

Management Commentary

• “Q4 revenue grew 9% with Data‑Tech‑AI up 12%, driving accelerating revenue growth… We also delivered record new bookings of $5.7 billion, up 15%.” — BK Kalra, CEO .
• “We now have more than 145 GenAI solutions in production… GenAI bookings accelerating to $100 million just in Q4.” — BK Kalra .
• “Outcome and consumption‑based deals… accounted for 21% of fourth quarter revenue. Our strategic shift… positions us well to capture higher‑margin opportunities.” — CFO Mike Weiner .
• “2025 will be a year of accelerated innovation… we expect gross margin and AOI margins of 36% and 17.3%… EPS growth of 9% at the midpoint.” — BK Kalra .
• “Content moderation… represents less than 10% of Genpact revenue… we don’t see any threat.” — BK Kalra .

Q&A Highlights

• DTA vs DO trajectory: Guidance implies strong Q1 DTA then prudent deceleration given lower visibility in non‑annuitized 25% revenue and tougher 2H comps; DO expected to accelerate beyond Q1 .
• GenAI funding source: 2024 largely represented “shift of dollars” rather than net new budgets; 2025 could evolve but management remains prudent .
• Hiring and talent: Emphasis on data/tech/AI skills with internal upskilling and selective hiring; cost structure embedded in guide .
• Bookings definition: Shift to uncapped (>5‑year) bookings aligns with industry; FY24 +15% growth with explanation of ACV dynamics across longer‑tenor deals .
• Trust & safety exposure: <10% of revenue and no fact‑check work; opportunities to apply AI defensively in moderation workflows .

Estimates Context

• Street consensus from S&P Global (Capital IQ) was unavailable at the time of query due to request‑limit constraints; therefore, we cannot present reliable consensus comparisons for Q4 revenue/EPS and refrain from labeling beats/misses relative to estimates. We attempted to fetch “Primary EPS Consensus Mean” and “Revenue Consensus Mean” for the latest quarter but received an SPGI daily request‑limit error.

Key Takeaways for Investors

• DTA is the structural growth engine: sustained multi‑quarter acceleration, rising GenAI bookings, and expanding partnership ecosystem point to durable mid‑single to high‑single‑digit growth with operating leverage .
• Mix shift supports margins: outcome/consumption‑based commercial models are scaling (21% of Q4 revenue) and carry above‑average margins; FY25 guide embeds modest expansion to ~17.3% AOI margin .
• Cash return is rising: dividend hiked 11% and repurchase capacity expanded by $500M, underpinned by $615M FY24 operating cash flow and improving DSOs—supportive for TSR even in a prudent macro .
• 2025 guide is balanced: ~6.5% revenue growth at mid with higher GM and AOI; management remains prudent on non‑annuitized DTA visibility and tougher 2H comps—updates each quarter will be catalysts .
• Innovation narrative is tangible: AI Gigafactory and Agentic Solutions are concrete delivery changes aimed at scaling AI outcomes; watch for pipeline conversion and attach‑rates in DO to sustain growth .
• Vertical breadth improving: CHC and HT&M lead growth; steady FS supports resilience; broad‑based performance reduces concentration risk .
• Near‑term trading: Quarterly cadence versus the prudent FY25 outlook—particularly Q1 delivery on DTA growth and AOI—will shape estimate revisions and stock reaction .

Supporting Press Releases (Q4 Context)

• Genpact Reports Full Year and Fourth Quarter 2024 Results (press release mirroring 8‑K) .
• Launches Service‑as‑Agentic‑Solutions (Agentic Solutions) .
• Launches AI Gigafactory (AI accelerator to scale solutions) .