• Q4 Revenue: $1.25 billion, up 9% year over year.
• Data-Tech-AI Revenue: $595 million, up 12% year over year.
• Digital Operations Revenue: $654 million, up 6% year over year.
• Gross Margin: 35.7%, expanded by 10 basis points year over year.
• Adjusted Operating Income Margin: 17.7%.
• Net Income: $142 million for Q4.
• Adjusted Diluted EPS: $0.91, up 11.1% year over year.
• Full Year Revenue: $4.77 billion, up 6.5% year over year.
• Operating Cash Flow: $615 million, up 25% year over year.
• Annual Bookings: $5.7 billion, up 15% year over year.
• Cash and Cash Equivalents: $648 million at year-end.
• 2025 Revenue Guidance: $5.029 billion to $5.125 billion, growth of 5.5% to 7.7%.
• 2025 Adjusted Diluted EPS Guidance: $3.52 to $3.59, 9% growth at the midpoint.
• 2025 Gross Margin Guidance: Expected to expand to 36%.

• Warning! GuruFocus has detected 2 Warning Sign with VREX.

Release Date: February 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Genpact Ltd (NYSE:G) reported a strong Q4 with revenue reaching $1.25 billion, a 9% year-over-year increase.
• Data-Tech-AI segment showed significant growth, up 12% year over year, indicating strong demand for data and technology solutions.
• Operating cash flow grew by 25% year over year, demonstrating improved financial health.
• The company closed 14 large deals with a 10% higher booking in aggregate compared to the previous year.
• Genpact Ltd (NYSE:G) announced the launch of innovative solutions like the AI value studio and Genpact gigafactory, positioning itself as a leader in AI-driven transformation.

Negative Points

• The guidance for Data-Tech-AI suggests a potential slowdown beyond Q1 due to tougher comparisons and less visibility into non-annuitized business.
• The shift to outcome and consumption-based deals, while strategic, may introduce variability in revenue recognition.
• Content moderation and similar processes represent less than 10% of revenue, indicating limited diversification in this area.
• The company anticipates a need for more technical talent, which could increase costs and impact margins.
• Generative AI projects in 2024 were primarily funded by shifting existing budgets rather than new incremental spending, which may limit growth opportunities.

Q & A Highlights

Q: Can you explain the expected slowdown in Data-Tech-AI growth beyond Q1 and the acceleration in Digital Operations growth? A: Michael Weiner, CFO, explained that about 75% of their business is annuitized, meaning they have good visibility into it. The remaining 25% requires conversion from pipeline to bookings, which affects visibility as the year progresses. The guidance reflects a prudent approach considering both annuitized and non-annuitized business, with tougher comps in the second half of the year.

Q: Are you seeing an increase in contract sizes for GenAI solutions? A: Balkrishan Kalra, CEO, noted that as they implement GenAI solutions, they are seeing follow-on contracts and conversations with both existing and new customers. The GenAI solutions are enhancing their total addressable market, as evidenced by their pipeline and revenue growth.

Q: What pace of hiring should be expected with the rollout of Agentic Solutions? A: Kalra mentioned that while there won't be a massive shift quarter-on-quarter, they are focusing on hiring data, technology, and AI skills. They are also rearchitecting their current skill base through internal programs to meet future needs.

Q: How is GenAI affecting the trust and safety business, specifically content moderation? A: Kalra stated that content moderation represents less than 10% of Genpact's revenue. They maintain close relationships with clients and do not see any significant threats. There is an opportunity to use AI to combat malicious content, and they are part of the solution with large technology players.

Q: How do you view the balance between horizontal and domain-specific solutions with emerging technology? A: Kalra explained that their business combines horizontal and vertical domain-specific solutions. They are increasing their posture in various industries, such as insurance and banking, while also focusing on horizontal solutions like accounts payable.

Q: How is Genpact addressing the need for more technical talent as innovation accelerates? A: Kalra emphasized that Genpact is a solutions firm that combines services and software to solve business problems at scale. They are hiring talent in data, technology, and AI, offering a unique value proposition by providing a sandbox environment for talent to work on real-world applications.

Q: Is M&A being considered to bring in additional capabilities or accelerate development? A: Kalra stated that their capital allocation principles remain the same, and they are constantly evaluating M&A opportunities. They will consider M&A when they cannot build capabilities organically at the required speed.

Q: Is generative AI being funded with net new dollars or at the expense of legacy projects? A: Kalra observed that in 2024, it was more about shifting dollars rather than net new incremental dollars. Clients are experimenting with AI, and successful journeys are building confidence to continue investing in AI solutions.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.