ExlService Q2 Earnings Call Highlights

ExlService (NASDAQ:EXLS) reported second-quarter 2026 revenue of $594.8 million, up 15.6% year over year on a reported basis and 15.9% on a constant-currency basis, as growth accelerated across each of its operating segments. Adjusted diluted earnings per share rose 22.3% from a year earlier to $0.59.

Chairman and Chief Executive Officer Rohit Kapoor said the company entered 2026 with positive momentum that strengthened through the first half, supported by enterprise demand for data, AI engineering and AI-enabled operations. He said clients are increasingly moving from AI proof-of-concept projects toward production deployments, while also investing in the data, governance, security and infrastructure needed to support AI across their organizations.

“The effort that is required to enable AI for any enterprise is massive,” Kapoor said during the earnings call. “Clients are really struggling with this change, and we are in a great position to actually help them with this.”

Data and AI-Led Revenue Accelerates

Data and AI-led services and solutions accounted for 61% of ExlService’s revenue in the quarter and increased 30% year over year. Kapoor noted that growth in the category has accelerated for four consecutive quarters, from 18% in the third quarter of 2025 to 30% in the latest period.

The company said its reported digital operations revenue declined about 1.5% year over year, but management characterized that decline as a planned consequence of changing revenue mix. As AI becomes embedded into operations engagements, ExlService classifies that work as data and AI-led revenue because it is more intellectual-property-led and higher value, Kapoor said.

ExlService said total operations revenue, which includes both digital operations and AI-led operations, rose 10% year over year. Kapoor said the company is introducing agentic AI into client processes such as insurance claims and underwriting, combining deterministic models designed to follow policies and regulations with probabilistic models used for judgment and decision-making.

The work requires substantial customization by client, business line and geography, he said, even where the company can reuse common tools and components. Kapoor said ExlService’s existing operational relationships, workflow knowledge and familiarity with clients’ data give it an advantage in deploying those solutions.

The company also highlighted token optimization as an emerging opportunity. Kapoor said ExlService has reduced token consumption for certain clients by as much as 80% through workflow-specific design and engineering, helping lower the costs associated with deploying AI models at scale.

Segment Performance Broadly Positive

• Insurance: Revenue was $197.8 million, up 14.9% year over year, driven by expansion and higher volumes in existing client relationships.
• Healthcare and life sciences: Revenue was $158 million, up 22% year over year, supported by Payment Integrity services, client expansions and new wins.
• Banking, capital markets and diversified industries: Revenue was $133.9 million, up 10.7% year over year, reflecting new client wins and expanded existing relationships.
• International growth markets: Revenue was $105.1 million, up 16.3% year over year and 8.9% sequentially, aided by client ramp-ups, higher volumes and new wins.

Kapoor said international markets represent a major long-term opportunity. During the quarter, ExlService appointed Bhupender Singh as president and head of international growth markets. Kapoor said the company has historically had a limited international presence and is investing in talent, solutions and go-to-market capabilities across EMEA and APAC.

He also said cross-selling services to international operations of U.S.-based clients is an area where ExlService needs to improve. Singh is expected to focus on that opportunity, according to Kapoor.

iMerit Acquisition Expected to Close July 31

ExlService announced the acquisition of iMerit, a provider of AI model training, evaluation and reinforcement learning services, which it expects to close on July 31. Kapoor described the transaction as a “transformational pivot” that will add relationships with foundation-model companies, expand the company’s AI capabilities and extend its addressable market into AI technology sectors.

Management said iMerit’s revenue is expected to be concentrated primarily in diversified industries, including work with frontier and foundational model companies, with healthcare and life sciences also representing a meaningful area. The acquisition is not expected to materially affect international growth markets.

ExlService expects iMerit to contribute approximately $28 million to $32 million of revenue over the final five months of 2026. The acquisition is expected to have a marginally dilutive impact of $0.01 on adjusted EPS for the year.

Guidance Raised, With Additional Investment Planned

The company raised its full-year 2026 revenue outlook to $2.39 billion to $2.415 billion, representing reported growth of 14% to 16%. The forecast implies organic constant-currency growth of 13% to 14% and includes the anticipated iMerit contribution. At the midpoint, the updated revenue range is $88 million above ExlService’s prior guidance.

ExlService also increased its adjusted diluted EPS outlook to $2.25 to $2.29, from prior guidance of $2.18 to $2.23. The new range represents projected year-over-year growth of approximately 16% to 18%.

Chief Financial Officer Maurizio Nicolelli said the company plans to increase investment during the second half in front-end sales, data management, AI capabilities and solutions. As a result, adjusted operating margin is expected to be lower in the second half than in the first half, though full-year margin is expected to be comparable with 2025.

For the first half, ExlService generated $1.17 billion in revenue, up 14.7% year over year, while adjusted operating margin increased 20 basis points to 20.1%. The company reported $284 million in cash and short- and long-term investments at June 30, against $381 million in revolver debt.

During the first half, ExlService repurchased 5.8 million shares for $179 million at an average price of $30.90 per share. Nicolelli said the company expects to continue repurchases during the second half, though likely at a slower pace than in the first half.

About ExlService (NASDAQ:EXLS)

ExlService Holdings, Inc (NASDAQ: EXLS) is a global operations management and analytics company that partners with clients in insurance, healthcare, banking, and financial services to drive digital transformation and operational excellence. The firm delivers analytics-driven solutions and business process outsourcing services, including claims adjudication, finance and accounting, data management, and customer service support. ExlService combines domain expertise with advanced analytics, artificial intelligence, and automation technologies to help organizations optimize processes, enhance customer experiences, and manage risk.

Founded in 1999 and headquartered in New York City, ExlService has grown through a mix of organic expansion and strategic acquisitions, earning recognition for its data analytics capabilities and industry-specific knowledge.

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