Data analytics and digital solutions company ExlService Holdings (NASDAQ:EXLS) beat Wall Street’s revenue expectations in Q1 CY2025, with sales up 14.8% year on year to $501 million. The company expects the full year’s revenue to be around $2.05 billion, close to analysts’ estimates. Its non-GAAP profit of $0.48 per share was 8.9% above analysts’ consensus estimates.
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EXL (EXLS) Q1 CY2025 Highlights:
- Revenue: $501 million vs analyst estimates of $491.2 million (14.8% year-on-year growth, 2% beat)
- Adjusted EPS: $0.48 vs analyst estimates of $0.44 (8.9% beat)
- Adjusted EBITDA: $111.2 million vs analyst estimates of $105.6 million (22.2% margin, 5.2% beat)
- The company slightly lifted its revenue guidance for the full year to $2.05 billion at the midpoint from $2.04 billion
- Management reiterated its full-year Adjusted EPS guidance of $1.86 at the midpoint
- Operating Margin: 15.7%, up from 14.1% in the same quarter last year
- Free Cash Flow was -$9.6 million compared to -$33.08 million in the same quarter last year
- Market Capitalization: $7.62 billion
StockStory’s Take
ExlService Holdings’ first quarter results reflected notable momentum in its data and AI-led solutions, with CEO Rohit Kapoor highlighting the impact of robust demand across the company’s four newly defined segments. Management attributed much of the quarter’s performance to expansion with existing clients—especially in healthcare, life sciences, and insurance—as well as the rapid adoption of new AI-driven workflows. Kapoor cited the launch of excelerate.ai, EXL’s agentic AI platform, as a key step forward in embedding AI into client operations and delivering higher-value business outcomes.
Looking ahead, management raised its full-year revenue guidance while reiterating its profit outlook, underpinned by a strong sales pipeline and continued investment in data and AI capabilities. Kapoor emphasized that EXL’s balanced vertical mix, high proportion of annuity-like revenue, and focus on cost savings for clients provide resilience amid economic uncertainty. CFO Maurizio Nicolelli noted that 87% of projected full-year revenue is already contractually committed, reinforcing management’s confidence in achieving its growth targets for 2025.
Key Insights from Management’s Remarks
EXL’s management focused on the evolution of its business mix and the growing relevance of AI in driving both top-line growth and operational efficiency. Key takeaways from the call included:
- Data and AI-Led Revenue Expansion: Management reported that data and AI-powered solutions now account for 53% of total revenue, growing 16% year-over-year. These offerings span all segments and are increasingly embedded in client workflows to unlock productivity and efficiency gains.
- Segment Realignment and Growth: The company’s new reporting structure—insurance, healthcare and life sciences, banking/capital markets/diversified industries, and international growth markets—helped clarify performance drivers. Healthcare and life sciences showed especially strong growth, fueled by higher payment services volumes and expanded relationships.
- Client Demand for Cost Savings: Kapoor highlighted that clients are seeking to lower costs in order to fund technology investments, positioning EXL’s services as critical for both efficiency and transformation. This dual focus was cited as a key reason for the company’s resilience during periods of economic volatility.
- Agentic AI Platform Launch: The introduction of excelerate.ai, an agentic AI platform with over 15 proprietary agents, was described as a differentiator for EXL. Early client adoption across insurance, energy, healthcare, and banking was noted, with management expecting this platform to support faster, lower-cost AI integration in client operations.
- Sales Pipeline and Client Activity: The sales pipeline grew both sequentially and year-over-year. While the number of new client wins was lower than last year, management stressed the higher quality and larger size of these contracts, as well as ongoing expansion with existing clients.
Drivers of Future Performance
Management’s outlook for the rest of 2025 is shaped by continued investment in AI-related capabilities and a focus on driving higher-margin, outcome-based solutions, while balancing economic uncertainty and client cost pressures.
- AI Investment and Adoption: Management plans to increase investment in data and AI talent and solutions, aiming to maintain its first-mover advantage as clients transition from digital to AI-powered operations. Sustained growth in this area is expected to support margin improvement over time.
- Segment Diversification: The company’s mix of annuity-like and mission-critical services across diversified industry verticals is seen as a buffer against potential macroeconomic slowdowns. Healthcare and life sciences remain a particular focus for expansion.
- Outcome-Based Revenue Growth: There is a strategic shift toward outcome-based contracts, especially in healthcare and life sciences, which typically carry higher margins. Management expects this model to gradually expand to other segments over the next several years.
Top Analyst Questions
- Bryan Bergin (TD Cowen): Asked for details on the contractual revenue base and visibility for 2025. CFO Maurizio Nicolelli stated that 87% of annual revenue is committed, with 95% overall visibility at the midpoint of guidance.
- Bryan Bergin (TD Cowen): Inquired about the impact of AI adoption on labor needs and revenue per employee. CEO Rohit Kapoor said AI will be adopted with “human in the loop,” leading to higher revenue per headcount and slower staff growth.
- Surinder Thind (Jefferies): Questioned sustainability of EXL’s AI leadership. Kapoor pointed to multi-year investments in domain expertise, analytics, and data science as supporting its advantage, but said continued investment is required to maintain this position.
- Puneet Jain (JPMorgan): Probed on exposure to discretionary client spending in a downturn. Kapoor responded that EXL’s services are largely mission-critical, producing immediate return on investment and offering resilience should discretionary spending decline.
- David Grossman (Stifel Europe): Sought clarity on slower insurance segment growth. Kapoor attributed the lower Q1 growth rate to timing, expressing confidence that insurance will grow in line with the company for the full year.
Catalysts in Upcoming Quarters
Over the coming quarters, the StockStory team will be watching (1) the pace of adoption and measurable impact of the excelerate.ai platform and other AI-driven solutions, (2) the mix shift toward outcome-based contracts—especially outside healthcare and life sciences, and (3) any changes in client spending patterns tied to macroeconomic conditions. Updates on client expansion, particularly in international growth markets, and the company’s ability to maintain its margin trajectory will also be important indicators of execution.
EXL currently trades at a forward P/E ratio of 24.3×. At this valuation, is it a buy or sell post earnings? Find out in our free research report.
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