GENPACT LIMITED 2026 Q2 Earnings Call

Please proceed. Good afternoon, everyone, welcome to Genpact's Q2 2026 earnings conference call.

We hope you've had a chance to read our earnings press release posted on the investor relations section of our website, genpact.com. Today, we have with us Balkrishan Kalra, President and CEO, and Mike Weiner, Chief Financial Officer. BK will start with an overview of our results. Then Mike will cover our financial performance in greater detail before we take your questions. Please note that during this call, we will make forward-looking statements, including statements about our business outlook, strategies, and long-term goals. These comments are based on our plans, predictions, and expectations as of today, which may change over time. Actual results could differ materially due to a number of important risks and uncertainties, including the risk factors in our 10-K and 10-Q filings with the SEC.

During this call, we will discuss certain non-GAAP financial measures. We have reconciled those to the most directly comparable GAAP financial measures in our earnings press release. These non-GAAP measures are not intended to be a substitute for our GAAP results. Supplemental investor information can also be found in our earnings press release, fact sheet, and investor presentation posted to our investor relations website. Finally, this call in its entirety is being webcast from our website. An audio replay and transcript will be available shortly after the call. With that, I'd like to turn it over to BK.

Thank you, Kyle. Hello, everyone, thank you for joining us today. Q2 was another strong quarter for Genpact. We delivered $1.343 billion in total revenue, up 7.1% year-over-year. Advanced Technology Solutions revenue grew 24.1% year-over-year, demonstrating that our flywheel is firing on all cylinders. We expanded gross margin for yet another quarter, providing continued leverage for significant investments to drive future growth. Adjusted diluted EPS again grew double digits, faster than revenue, up 13.6% year-over-year. Non-FTE revenue surpassed 50% of total revenue for the first time. Last quarter, I spoke about something rare: a moment when a structural shift in the market, a differentiated capability set, and the right strategic positioning all converge at the same time. I want to build on that today. First, at the macro level, demand continues to remain very strong even as AI is redrawing markets.

Enterprises want autonomous workflows that do the work, not just support it. Every function now has a mandate to leverage AI with clear ROI. This is opening new buying centers with new sets of requirements and complexities. At the same time, one universal truth has not changed. There is no artificial intelligence without process intelligence. Yes, frontier models are getting better by the week, but they are also beginning to converge on interchangeability, with switching costs getting lower. Models do not know how a global enterprise actually runs. The exceptions, the controls, the handoffs, and the actual flow of work. The last mile. This is where the outcome is actually won or lost. This is where the actual differentiation sits. Among enterprise clients, we continue to observe that readiness is low, even if aspiration remains very high.

The foundational work, the data harmonization work, the process intelligence work still has to happen first to get ROI from investments in AI. That is why AI has not scaled for most companies, it is precisely why clients are looking to Genpact and our differentiated IP solutions. I said earlier, when such a rare structural shift is presented and a company can sharpen its differentiation and has the courage and discipline to act, the resulting advantage compounds in ways that are difficult to replicate. This is our moment. We are intentionally disrupting ourselves to be the leader in Agentic Operations. Genpact is not the company you knew. We are entering a new category with expanding TAM, building a higher quality, more durable, and structurally more valuable business.

At Investor Day last June, when we first outlined our ambition for the year, we expected to deliver revenue growth of 7% with Advanced Technology Solutions growing mid-teens. Since then, our conviction in the opportunity ahead has only strengthened. The momentum we are seeing makes it clear that the shape of our business is changing for the better, the strategic pivot is taking hold much faster. As a result, we are leaning in and embracing this moment to further accelerate durable long-term growth, we are allocating our capital against this opportunity. Most importantly, we are doubling down in areas where we see the greatest long-term opportunity and the strongest returns. We are known for running mission-critical client operations at scale. We are moving from running business operations to running Agentic Operations. Therefore, we are codifying this process intelligence into a stronger mode and allocating even more capital here.

We are investing behind the flywheel that is already accelerating with an even greater focus on Advanced Technology Solutions, where we believe growth is durable, margins are attractive, client demand continues to build with expanding TAM. This momentum also gives us the opportunity to review components in Core Business Services that are not aligned with our Agentic Operations strategy. We apply the test across our book of business with three simple questions. One: does combining our process intelligence with frontier models create durable value and an advantage that clients cannot easily replicate? Two: does it provide a compelling ROI for both the client and Genpact? Three: is it aligned with expanding TAM? Where the answers are yes, we are agentifying at speed.

This is vast majority of our book across finance, supply chain, insurance, banking, and many other mission-critical workloads, this has expanding new TAM, which we have begun to capture already. Where the answers are no across the board, we are working with clients to transition work back and redeploying investments. These are very small parts of our business, like certain areas of content management and commoditized parts of contact centers. This clarity is at the heart of becoming the Agentic Operations company. Even with this intentional disruption, we still have line of sight to deliver at least 7% year-over-year revenue growth in 2026. On a full year basis, we expect the transition away from this work not aligned with our Agentic Operations strategy will have nearly two points of impact to total revenue growth. Despite this, Core Business Services revenue is still expected to grow for 2026.

At the same time, we now expect Advanced Technology Solutions revenue to accelerate, growing at least 25% for 2026. This acceleration underscores the rapid pace of adoption and how our investments are paying off. While timing will be a factor for both 2026 and 2027, for 2027, we currently expect the dollar impact to be slightly larger, though offset by continued momentum in areas aligned with our strategy. Our deliberate focus and prioritization continue to show up in top and bottom line growth and in our demand signals. Demand for our deep domain and industry expertise is healthy and growing, as evidenced by our booking, backlog, and pipeline all increasing across both core and advanced tech. This quarter marked our largest ever quarterly bookings. We signed another six large deals with a large pipeline of other transformational deals, setting us up for a healthy close to the year.

Our revenue retention continues to be strong. The mix of our business continues to move towards higher value Advanced Tech offerings as we make meaningful progress against the 2x, 70/70 metric frame. Advanced Technology Solutions deliver more than 2x the revenue per headcount and more than 2x the revenue growth of the total company, with more than 70% annualized revenue and more than 70% for non-FTE commercial models. As we fundamentally change how we contract and deliver, we are creating a robust, durable base to build on that is no longer tied to headcount. This includes more multi-year recurring annual revenue streams and margin leverage from agentic and AI driving more meaningful scale. Over the past few years, we have systematically expanded our advanced technology capabilities in areas of our core strength. This has effectively created a powerful flywheel that is fueling Agentic Operations.

The flywheel starts with our core: expert operators, decades of client trust, clear domains, last-mile knowledge. In essence, process intelligence you cannot buy off a shelf. The flywheel turns with the expanded capabilities in data and AI and through our partner ecosystem that power the Advanced Technology Solutions of today. That enriches process intelligence further, which earns trust to deliver the Agentic mandate. The mandate expands our scope, which deepens our intelligence. Deeper intelligence makes the next solution better. This flywheel compounds building Agentic Operations at scale, making our success hard to replicate. We are actively moving from human-processed and human-validated to machine-processed and human-validated, all wrapped in responsible AI. Driving compounding advantages from autonomous agents with the context, governance, and oversight that only last-mile experts like Genpact can provide.

All of this is further accelerating Advanced Technology Solutions, that's playing out with the significant momentum we are seeing. Advanced Technology Solutions revenue grew another 24% in quarter two, now accounting for 27% of total revenue. This quarter, Advanced Technology Solutions represented nearly 40% of our bookings, our pipeline increased meaningfully across all capabilities quarter-over-quarter, highlighting the significant demand our flywheel is driving. We are not adding a fast line to the past. We are changing what the whole business is and moving to a new category. This is where it all comes together. Clients do not come to us to buy Core or Advanced Tech. They come to us with a vision for the future and a reality of where they are today. We are enabling the journey to Agentic-led autonomy that enterprises can trust. We call it Agentic Operations.