GLOBANT S.A. 2026 Q2 Earnings Call

Welcome to Globant's second quarter 2026 earnings conference call. I am Arturo Langa, Investor Relations Officer at Globant. All participants on this call will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded and streamed live on YouTube. By now, you should have received a copy of the earnings release. If you have not, a copy is available on our website, investors.globant.com. We will begin with remarks by our Chief Executive Officer, Martín Migoya, our Chief Technology Officer, Diego Tartara, and our Chief Financial Officer, Juan Urthiague, followed by a Q&A where they will be joined by our Chief Revenue Officer, Fernando Matzkin. Before we begin, I would like to remind you that some of the comments on our call today may be deemed forward-looking statements.

This includes our business and financial outlook and the answers to some of your questions. Such statements are subject to the risks and uncertainties as described in the company's earnings release and other filings with the SEC. Please note that we follow IFRS accounting rules in our financial statements. During our call today, we will report non-IFRS or adjusted measures, which is how we track performance internally and the easiest way to compare Globant to our peers in the industry. You will find a reconciliation of IFRS and non-IFRS measures at the end of the press release we published on our investor relations website announcing this quarter's results. I will now turn the call over to Martín Migoya.

Good afternoon, everyone, and thank you for joining us. Today, I want to talk about a change we are leading, a new way of creating value for our customers, delivering our work, a way of pricing it, which is already starting to compound. For more than 20 years, we have engineered the digital reinvention of the world's leading organizations, building the software, products, and platforms that run their businesses, delivered by dedicated high-performing teams and priced through on fixed-scope engagements or time and materials. That work remains the backbone of Globant. One year ago, I introduced you to AI Pods, a new AI-native revenue stream built on that foundation, but priced on the actual output and value we deliver or on consumption rather than on the hours we bill.

As AI Pods deliver more work at higher margin for a similar price, our top line can understate the progress underneath it. As this grows, it will be relevant to assess annual recurring revenue per head, AI Pod margins, and client penetration alongside the total revenue line. Before I go further, let me be precise about two names you will hear all call. Glob.AI is the platform we opened to the market last week. AI Pods are the service units that live on it, run by AI agent workflows, and supervised by our experts. The revenue they create, I will call Glob.AI ARR. Hold those three together, the platform, the pods, and the number. This quarter's revenues grew roughly 60% to $52.8 million. We estimate that Glob.AI's ARR will surpass $110 million by year-end.

Let me walk you through it in that order: the model, the number that measures it, where the growth is coming from, how to read our reported revenue while both models run side by side, and where it already shows results. The technology services industry as a whole is growing at roughly flat rates right now. But flat is an average, and averages hide the real story. Inside that flat industry, we have found a growth runway, AI native services, and it is growing because it expresses what enterprises want from AI better than a traditional hours-based approach does. Clients can tell the difference, and a growing number are moving budgets accordingly, and more are choosing to work with us with this new model. As enterprises abstract away layer after layer of complexity, infrastructure, platform, software, some are now beginning to abstract away business services themselves.

We think of this as service as software. Just like how the cloud transformed software infrastructure and provided predictable and recurring revenue, Glob.AI does for professional services. You turn on the outcome and pay for what you consume with Globant's experts built in. It opens budgets we have not had access to before. Annual spending of the global professional services industry is estimated at more than $6 trillion, roughly four times the size of the IT services market that Globant has been evaluated in. We are taking this deliberate decision to respect our current market while expanding our offering to a larger total addressable market. We are steering clients toward the new model. Our AI native delivery system of AI Pods has now been adopted by 45 of our clients in many of their projects. Today, practically everything we deliver carries AI.

We do not count that as Glob.AI ARR, which only captures the revenue that is delivered and charged differently on the output, value, or consumption our clients receive, not on the hours behind it. It is a strict measure, and that is deliberate. When this number grows, it is not AI being bolted onto existing work. It is the business model itself changing. Glob.AI ARR reached $52.8 million as of June, up from $32.8 million in March, roughly 60% growth in a single quarter. We have seen +30% more productivity than with a typical engineer plus AI approach. Pipeline stands at $436.8 million, up from $352 million in Q1. Adoption has reached 45% of our top 20 accounts. Gross margins on this model run close to 10 percentage points above our traditional delivery. We now expect to exit 2026 at no less than $110 million in Glob.AI ARR.

That is the yardstick AI-native revenue becoming core to how we believe the market should value Globant, measured quarter after quarter. These changes have affected Globant as a whole as well. Globant's revenue per head reached $95,800 on a run rate basis, up 9.7% year-over-year. We are delivering more value with the same talent and capturing it. Glob.AI ARR captures three of the biggest waves of demand in our industry. They are core modernization, experience debt, and agentic process transformation. We have shared them with you on previous earnings calls. What changed is that all three now convert increasingly through AI Pods. Let me go through each one with you. One, core modernization. There is a technical debt backlog between $1.5 trillion and $2 trillion across the world's 2,000 largest public companies. It used to mean a large team billing hours over months.

We can now deliver it as an outcome in less time. That is why clients are moving to the new model here first. Two, experience debt. Every customer-facing surface that has to be rebuilt for an AI-first world. Our Vercel and Claude-powered AI Pods are turning multi-month rebuilds into same-week releases. Three, agentic process transformation. The largest opportunity, redesigning how a business runs around agents. The value is in the transformed process, not the hours, so this is where outcome pricing fits best. Now, a word on our current position and how to interpret the top line while this shift is underway. For Q2, revenue was $614.4 million, within our guided range, up 1.2% sequentially and back to slight year-over-year growth. AI Pod revenue makes up roughly 2% of our total revenue today, and we expect it to reach 4% by the end of the year.

We keep seeing the pocket of growth I mentioned earlier, demand for AI Pods. We are choosing to accelerate these migrations, even if it means a short-term impact on revenue. Because over time, it creates more value for the client with predictable outcome-based consumption and more value for Globant with higher margins and access to more sophisticated projects. This quarter, 96% of our revenue came from repeat customers, and we grew our top 20 and top 50 clients by 6.6% and 6.9% year-over-year, respectively. This is concentrated where Glob.AI and AI Pod penetration is highest. Our data and AI studio is now our second-largest studio by revenue, close to 11% of sales and growing close to 35% year-over-year. Our AI studios are increasingly selling AI-native services alongside traditional staff augmentation and providing their depth.

Since that top 50 growth is a sign they understand these clients' industries well. Our core business is acting as the distribution engine that carries Glob.AI and the AI Pods that run on it into large enterprises on relationships built over two decades. Pipeline and bookings are at a healthy level. Its composition is shifting toward AI, data, cloud, and integration work. Having said all this, we are operating in a tougher environment this quarter. Geopolitical pressure in our new markets, volatile oil prices weighing on travel, and longer decision cycles in North America. Juan Urthiague will take you through a revised outlook for the full year. Last week, we launched Glob.AI, and with that, we are opening this same model to any enterprise through a single self-service platform.

AI-native services priced on output and value or on consumption become available to more of the market, not just our largest accounts. Here is what that looks like in practice. Glob.AI is a single destination where an enterprise can find, deploy, and start consuming an AI Pod without a months-long discovery process and a long ramp-up time. A client can log in, explain their technological opportunity in plain language, and the platform draws on Globant's entire network of technological solutions, partnerships, recommends AI Pods, and enables clients to start building the same day. It bridges the gap between mental throughput and making sound business decisions. Clients keep sovereignty over which models they use and where they run. These Pods are built in cooperation with the companies defining this technology.

Specific AI Pods are engineered with name partners, secure code review with Anthropic, digital twin engineering on NVIDIA Omniverse, prototype to product with Vercel, and enterprise integration with Salesforce and MuleSoft. The platform runs across the broader model ecosystem as well, Anthropic, OpenAI, Google, Azure, AWS, NVIDIA, Meta, among others. I am glad to announce that Saurabh Narang is joining us as Glob.AI's CEO. Saurabh is an accomplished AI and technology executive with more than 23 years of experience. He joins us from ServiceNow, where he led the commercialization of its AI business and previously held senior AI leadership roles at AWS, where he helped build and scale AI platforms, including Amazon SageMaker and Amazon Bedrock. Earlier in his career, he built KPMG's AI and machine learning practice. None of what I have discussed so far works without the right partners.

In June, we announced a multi-year alliance with Anthropic, becoming a preferred services partner in the Claude Partner Network. Since signing, we have moved quickly. Several Claude-powered AI Pods are already in production. They were showcased at our Globant Tech Summit in July. We are training thousands of Globers on Anthropic tools, and we have an active joint pipeline with several large financial institutions, airlines, and e-commerce companies. One year after our initial partnership, OpenAI has named Globant a selected partner in its new partner network. With Vercel, clients can ship AI-built applications natively in a single click, turning multi-month projects into same-week deliveries. Together, we launched Vercel-powered AI Pods, agentic units that design, develop, and modernize enterprise digital products on Next.js. FIFA is using AI Pods powered by Glob.AI to scale its digital ecosystem into a continuous, personalized experience for football fans worldwide.