Q4 2024 Earnings Summary
- Globant is experiencing strong demand and a robust pipeline in key markets like the U.S. and Europe, with AI-related projects contributing over $350 million to revenue, up 110% year-over-year. This growth in AI projects positions the company well in the rapidly evolving technology landscape.
- The company's expansion into new markets, particularly the Middle East, is driving growth with large contracts in industries such as amusement parks, hospitality, finance, and airlines. This positions Globant for strong growth in the next two years.
- Globant is increasing its large client base, with the number of clients generating over $20 million annually rising from 16 to 20. The company is reinforcing its '100-squared' strategy by focusing on strategic accounts and putting the best talent into the most significant accounts to drive future growth.
- Underperformance among top clients excluding Disney, particularly in the professional services sector which has not been posting growth throughout this year, may negatively impact Globant's revenue growth. Two accounts in the top five are professional services companies, and their underperformance is affecting the overall growth in that segment.
- Revenue from the top client, Disney, is expected to decline slightly in Q1, following a very strong investment phase in H2 2024. This anticipated decline may affect Globant's overall revenue growth for the quarter.
- The shift towards shorter contracts and per mandate projects introduces gaps and uncertainty, leading to increased volatility in revenue recognition. This may hinder Globant's ability to realize its full growth potential despite a strong pipeline, as conversion rates need to accelerate to meet growth expectations.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenues | Q1 2025 | no prior guidance | $618 million to $628 million, representing an 8.2% to 10% YOY increase, or 10.2% to 12% increase in constant currency, with approximately 200 basis points of FX headwind | no prior guidance |
Adjusted Operating Margin | Q1 2025 | no prior guidance | 15.5% to 16.5% | no prior guidance |
IFRS Effective Income Tax Rate | Q1 2025 | no prior guidance | 20% to 22% | no prior guidance |
Adjusted EPS | Q1 2025 | no prior guidance | $1.55 to $1.63, assuming an average of 45.3 million diluted shares | no prior guidance |
Revenue | FY 2025 | no prior guidance | $2.635 billion to $2.75 billion, representing a 9.1% to 12% YOY increase, or 10.6% to 13.5% increase in constant currency, with approximately 150 basis points of FX headwind | no prior guidance |
Adjusted Operating Margin | FY 2025 | no prior guidance | 15.5% to 16.5% | no prior guidance |
IFRS Effective Income Tax Rate | FY 2025 | no prior guidance | 20% to 22% | no prior guidance |
Adjusted EPS | FY 2025 | no prior guidance | $6.80 to $7.20, assuming an average of 45.5 million diluted shares | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
AI Adoption | Consistently cited across Q1–Q3 as a key driver with strong revenue growth and increased AI-related revenues | Emphasized in Q4 with development of an enterprise AI platform and higher enterprise integration to drive revenue | Continued bullish focus with enhanced strategic emphasis on enterprise AI tools. |
Global Expansion | Highlighted in Q1–Q3 with steady expansion in Middle East, Asia, and Oceania and solid organic growth | Q4 shows record-high sequential revenue growth from emerging markets, with large contracts in the Middle East | Consistent presence with accelerating momentum and deeper market penetration. |
Key Client Performance | Regularly discussed across Q1–Q3, notably with Disney’s steady growth and diversification of top client cohorts | Q4 emphasized Disney’s strong performance (23.7% YoY) alongside cautions for Q1 2025 and further diversification | Persistent focus with robust performance from marquee clients while managing concentration risk. |
Margin and Profitability | Mentioned in Q1–Q3: FX pressures and workforce utilization were challenges, with gradual margin improvements from operational efficiencies | Q4 reports continued FX headwinds and a slight decline in workforce utilization but improved adjusted margins and operating metrics | Ongoing pressures are being managed effectively, with margins improving despite external challenges. |
Shorter Contracts | Not mentioned in Q1–Q3 earnings discussions | Q4 introduces the emerging shift towards per-mandate, shorter contracts causing revenue recognition volatility | New risk factor noted, potentially impacting predictability and revenue forecasting going forward. |
Professional Services Sector | Q1 showed stability; Q2 and Q3 noted underperformance and softness in top customer accounts in this sector | Q4 explicitly flags persistent underperformance within professional services, affecting key account growth | A recurring concern with negative sentiment intensifying in recent reports. |
Generative AI Impact | Q1 was optimistic about AI’s productivity boost, and Q2 discussed mixed sentiment (e.g. Copilot’s limited gains) | Q4 emphasizes robust evolution in AI tools that decouple headcount from revenue, reaffirming AI’s positive long‐term impact | Mixed views remain, but overall sentiment is cautiously optimistic about long-term gains. |
Macroeconomic & FX Uncertainties | Q1 cited persistent FX pressures and a challenging macro environment; Q2 acknowledged heightened FX headwinds; Q3 noted macro stabilization | Q4 highlights renewed uncertainty with 200 bp FX headwinds for Q1 2025 and ongoing regional volatility, especially in Latin America | Sentiment shifted from relative optimism to increased caution as external uncertainties reemerge. |
Sector-Specific Vertical Growth | Q1–Q3 consistently detailed robust performance in travel, hospitality, media, BFSI, airlines, and amusement parks | Q4 continues to show strong, even record, growth in these verticals, with notable momentum in airlines and amusement park contracts | Steady strong performance, with subtle shifts favoring sectors like airlines and entertainment. |
Investment in Sports & Innovative Platforms | Earlier periods (Q1–Q2) highlighted investments in sports along with digital and innovation partnerships | Q4 reports project roll-offs in sports and a reduced emphasis, while shifting focus to broader AI and innovative platforms | A strategic rebalancing from sports to a wider innovation agenda, impacting future project mixes. |
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Demand Outlook and Pipeline
Q: How is the overall demand environment across regions?
A: The demand picture looks quite good, with strong pipelines in the U.S. and Europe. In Europe, we're working with massive customers like a big airline in the U.K. and a big bank in Ireland, and things are moving fast. In the Middle East, we're seeing significant growth as we expand into amusement parks, hospitality, financial companies, and airlines. Latin America was rocky in 2024 due to political turmoil in Brazil and Colombia, but the situation is stabilizing with a healthier pipeline. -
AI-Related Growth
Q: How is AI impacting your business?
A: Our AI-related work is growing extremely fast, with 110% growth. AI is impacting 100% of what we do with our developers in front of our customers. We're evolving into AI agent orchestration, leveraging our decade-long investments in this space. -
2025 Organic Growth Guidance
Q: What are your organic growth expectations for 2025?
A: For 2025, we're guiding for overall growth at the midpoint of 10.5% in dollars or 12% in constant currency. The organic constant currency growth we're estimating is 9.5%, similar to 2024. -
Headwinds from Disney and Latin America
Q: What headwinds have recently emerged affecting your outlook?
A: Two things we weren't expecting were Disney ending up much stronger than anticipated, which impacts Q1 deals by around $5 million. The second is our business in Latin America, which faced political noise in Q4. -
Pricing Trends and Margins
Q: What pricing trends are you seeing, and are you able to get price increases?
A: The pricing market is still challenging. We've been able to get some price increases in projects focused on selling more or creating incremental revenues for our customers. In cost-saving type projects, it's more complicated due to competition. On average, we expect another year of neutral to low single-digit price increases. -
Impact of AI and Automation
Q: How is automation affecting headcount versus revenue?
A: As we evolve our AI productivity tools and software development life cycle agents, we're helping our people become more productive. We're starting to decouple revenue growth from headcount by leveraging AI tools. This allows us to charge more based on performance rather than just effort. -
Top Customers' Performance
Q: What is happening with the top 5 customer cohort excluding Disney?
A: The issue in the 2 to 5 top customers is concentrated in a few names, particularly in professional services companies where growth has been flat. However, our top accounts overall are performing well, with accounts over $20 million increasing from 16 to 20, and accounts over $10 million from 34 to 44. -
Visibility into Full-Year Outlook
Q: What level of visibility do you have in your full-year outlook?
A: Visibility is similar to last year. The size of the pipeline has improved significantly; we need conversion to accelerate. The guidance includes assumptions of potential impacts in Latin America and anticipates an acceleration in the U.S. market and AI deals. -
Client Demand for AI Solutions
Q: How are clients thinking about AI implementation amid macroeconomic uncertainties?
A: Clients are more inclined toward enterprise services focused on efficiency and cost-saving rather than top-line growth. AI adoption is heavier on enterprise workflows and efficiencies. This shift affects the type of demand we're seeing, with shorter contracts and per-mandate engagements. -
Growth in the Middle East
Q: How should we think about ramp timing on new Middle East accounts?
A: We are ramping up as we speak. Growth will be stronger during this year and much stronger in 2026. The next two years will be very strong coming from the Middle East.
Research analysts covering Globant.