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    Globant (GLOB)

    Q2 2024 Earnings Summary

    Reported on Mar 4, 2025 (After Market Close)
    Pre-Earnings Price$194.37Last close (Aug 15, 2024)
    Post-Earnings Price$205.00Open (Aug 16, 2024)
    Price Change
    $10.63(+5.47%)
    • Globant is outpacing industry growth, with a projected 15.9% constant currency revenue growth for the year, gaining market share in a stagnant industry.
    • Despite challenging market conditions, Globant achieved 9% year-over-year growth in revenue per head, demonstrating strong pricing power and increasing value delivered to clients.
    • The company is expanding into new markets such as the Middle East, Oceania, and Asia, and is experiencing strong growth in key verticals like travel and hospitality and media and entertainment, providing additional drivers for future growth.
    • The company acknowledges a tough market environment with pressure on pricing and competitive dynamics, which could impact growth and profitability. Juan Urthiague stated, "It's tough these days," when discussing pricing power.
    • One of Globant's top five customers in the professional services sector is experiencing softness, leading to sequential underperformance in that cohort. This could affect future revenues if key clients reduce spending.
    • The actual impact of generative AI on engineering productivity is less than initially anticipated, suggesting that expected efficiency gains may not materialize as much as hoped. Diego Tartara mentioned that "the impact is a lot less than what it's been communicated at the very beginning."
    1. Financial Outlook and Margins
      Q: How confident are you in your guidance and what's driving margin increases?
      A: We are reiterating our constant currency growth at 15.9%. In dollar terms, it's 15.2% due to currency depreciation in Colombia, Mexico, and a bit in Brazil. This depreciation impacts revenue guidance but benefits our cost side, leading to higher operating and gross margins in the second half. Part of the margin increase comes from FX and a better-than-expected revenue per head, which has grown nicely this quarter. Our pipeline remains strong, and bookings too, so we are confident in the guidance provided.

    2. AI Projects and Growth
      Q: How are generative AI projects scaling and impacting your business?
      A: We've seen 130% year-over-year growth in AI-related projects. Many clients are still analyzing use cases and building labs around AI. Implementing AI projects for demos is easy, but enterprise-class implementations are more complex, requiring data projects, supervision, and curation. These processes are long by definition, but we're starting to see some clients ramp up plans for longer-term investments. We are implementing live and productive projects in both generative AI and traditional AI, including streamlining operations and using AI agents.

    3. Top Customer Performance
      Q: What are you seeing in your top customer cohort?
      A: Our top customer, Disney, showed strong performance with sequential growth and 11% year-over-year growth. We expect a strong second half of the year with them. In the 2 to 5 customer cohort, there's one customer in the professional services sector impacting results, as that sector has lagged. Beyond that, we're seeing better numbers in the 6 to 10 and 11 onwards cohorts.

    4. Revenue per Head and Pricing Power
      Q: Is pricing power strong, and how is revenue per head trending?
      A: Despite a tough market, we've achieved low single-digit pricing growth. Combined with a different service mix, including growth in our GUT creative network with higher revenue per head, and increased on-site presence in Europe, we've achieved almost 9% year-over-year revenue per head growth. We're still able to get positive pricing in some customers and relationships.

    5. Headcount Growth and Regions
      Q: Do you expect growth in billable headcount, and any regional call-outs?
      A: We're expecting to continue sequential growth in headcount. In Q2, IT professionals grew by about 200 net additions. We expect positive net additions for the rest of the year. In terms of regions, we're seeing growth in Argentina, Colombia, and India. In the U.S., headcount varies by quarter out of a small base, but nothing in particular to call out.

    6. Market Outlook and Industry Growth
      Q: How do you view industry growth rates improving, and why is Globant outperforming?
      A: The main reason we're growing while the industry is around 0–5% is due to decisions we've made in the past. Our vision to leverage relationships and expand what we sell to customers is powerful when taken long term. We're expanding into new markets like the Middle East, Oceania, and Asia, providing additional growth fuel. We're gaining market share and seeing healthy organic growth from our largest customers. Our increasing revenue per head testifies to the value we're delivering.

    7. Bookings Growth vs. Revenue Growth
      Q: With bookings growth faster than revenue growth, should we expect acceleration next year?
      A: It's still early to talk about 2025 in detail, given global uncertainties like elections and rates. We're seeing sequential growth into Q3 and Q4, and we need to focus on strengthening our service offerings and expanding globally. This will help us continue delivering industry-leading growth.

    8. Attrition Rate and Utilization
      Q: Could there be an increase in attrition rates or developer demand?
      A: Our attrition rates are currently pretty low, having risen slightly from last quarter but still at very low levels. Demand remains very high for us. We're continuing to hire in countries like Latin America and India. Our culture is appealing to new generations, and people are staying and are very happy, as seen in polls and interviews. We expect these numbers to remain stable.

    9. Travel and Hospitality Vertical Growth
      Q: How is the travel and hospitality segment transitioning?
      A: Travel and hospitality is one of the fastest-growing verticals for us. We've closed a big transformational deal with a large airline in Europe. Our Airline Studio is solid in the segment. Additionally, our Connected Experiences AI Reinvention Studio is contributing, with significant business in the MENA region from the hospitality vertical.

    10. Productivity Improvements from AI Tools
      Q: What productivity improvements are you seeing from AI tools?
      A: For developers, tools like Copilot offer improvements, but in productive environments, the impact is less than publicly communicated. We've seen significant improvements in junior developers, while senior developers rely less on these tools. For tasks like unit testing, we've seen up to 40% improvement. Overall, tooling gives an improvement that's actually lower than 15% for code generation. We can confirm what we discussed a few quarters back.

    11. Generative AI Project Cycles
      Q: How do you envision the cycle for generative AI projects?
      A: Clients are spending time finding and validating use cases. Once validated, implementing enterprise-grade AI solutions takes longer than expected, often requiring data projects and maturing processes. This might take 1 to 2 years. We believe this cycle will be shorter than previous ones, but it's still unclear when large-scale adoption will happen. We're helping clients by identifying industry solutions and addressing industry pains with AI.

    12. Direct-to-Consumer Streaming Trend
      Q: Is there a second investment wave in direct-to-consumer streaming?
      A: Direct-to-consumer is a trend within media and entertainment. Companies like Disney are doing this, even while consolidating channels. In sports, organizations like FIFA and Formula 1 (both our clients) are exploring DTC streaming. Demand is looking for consolidation, and we'll see how these factors play together.

    Research analysts covering Globant.