Business transformation services company Genpact (NYSE:G) met Wall Street’s revenue expectations in Q1 CY2025, with sales up 7.4% year on year to $1.21 billion. On the other hand, next quarter’s revenue guidance of $1.22 billion was less impressive, coming in 2.3% below analysts’ estimates. Its non-GAAP profit of $0.84 per share was 5.8% above analysts’ consensus estimates.
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Genpact (G) Q1 CY2025 Highlights:
- Revenue: $1.21 billion vs analyst estimates of $1.21 billion (7.4% year-on-year growth, in line)
- Adjusted EPS: $0.84 vs analyst estimates of $0.79 (5.8% beat)
- Adjusted EBITDA: $230.9 million vs analyst estimates of $218.9 million (19% margin, 5.5% beat)
- The company dropped its revenue guidance for the full year to $4.93 billion at the midpoint from $5.08 billion, a 2.8% decrease
- Management lowered its full-year Adjusted EPS guidance to $3.47 at the midpoint, a 2.5% decrease
- Operating Margin: 15.1%, in line with the same quarter last year
- Constant Currency Revenue rose 8.3% year on year (4.3% in the same quarter last year)
- Market Capitalization: $7.63 billion
StockStory’s Take
Genpact’s first quarter results were shaped by the continued adoption of its Data-Tech-AI offerings and expansion of annuitized revenue streams. CEO BK Kalra emphasized the company’s ability to sign two large, multi-year deals in the quarter, both heavily weighted toward Data-Tech-AI, as a sign of growing client demand for advanced technology solutions. Early traction with Genpact’s Agentic Solutions—including accounts payable automation—contributed to productivity gains and increased client engagement. Kalra cited ongoing simplification efforts and internal AI-driven efficiencies, such as reduced headcount in IT and HR, as additional contributors to margin stability and improved cost structure. Management noted that strong partner-related revenue and an expanding AI “Gigafactory” initiative also played key roles in driving growth this quarter.
Looking ahead, Genpact’s revised guidance reflects increased caution due to delayed large deals, particularly in Digital Operations, and shifting client decision timelines amid global trade uncertainties. CFO Mike Weiner explained, “The vast majority of the reduction is really driven by the delay in these large deals,” clarifying that none have been canceled, only postponed. Management expects near-term revenue growth to slow, as the timing of these multi-year contracts—often tied to supply chain and tariff-sensitive industries—remains uncertain. However, Kalra highlighted a record pipeline and ongoing demand for AI-driven transformation, stating, “Our pipeline for large deals is 80% higher year-over-year.” The company’s focus remains on disciplined execution, cost management, and leveraging AI capabilities to deepen client relationships and differentiate in a competitive market.
Key Insights from Management’s Remarks
Management attributed the quarter’s results to the momentum in Data-Tech-AI solutions, strong partnerships, and efficiency gains from AI-driven internal initiatives. However, delayed large deals in tariff-sensitive sectors led to a more cautious outlook for the year.
- Data-Tech-AI momentum: Genpact saw 12% year-over-year constant currency growth in its Data-Tech-AI segment, with more than 215 generative AI solutions now in production and revenues from these offerings nearly doubling from the prior quarter.
- Large deal delays: Several significant deals—each valued at over $50 million and concentrated in supply chain-heavy sectors such as manufacturing and consumer goods—were pushed out due to client hesitation stemming from global trade and tariff uncertainty.
- Partner channel expansion: Revenue generated through partnerships rose sharply, now comprising 10% of total sales as Genpact emphasizes channel diversification; management sees potential for further growth as partner contributions at technology peers often reach 20-50% of revenue.
- AI productivity and Client Zero: Internal deployment of AI tools, particularly through the “Client Zero” initiative, led to headcount reductions in IT and HR and has become an effective sales demonstration for clients interested in AI-led transformation.
- Balanced segment growth: Growth was broad-based across core verticals, led by high tech and manufacturing, but end markets exposed to supply chain and trade disruptions experienced more pronounced deal delays, impacting Digital Operations performance.
Drivers of Future Performance
Genpact’s full-year outlook is now driven by the timing of large deal signings, macroeconomic uncertainty in global trade, and disciplined cost management to maintain profitability.
- Delayed deal impact: Postponed large contracts, especially those tied to supply chain services in manufacturing and consumer goods, have led to reduced revenue expectations for Digital Operations; management does not expect these delays to result in cancellations but acknowledges that late-year signings will contribute less to current-year results.
- AI adoption and pipeline strength: Ongoing client demand for generative AI and automation is sustaining growth in Data-Tech-AI, but management is taking a conservative approach to forecasting, citing uncertainty in discretionary spending and extended decision cycles. The pipeline remains at record levels, indicating potential for recovery if macro conditions stabilize.
- Margin discipline: Genpact reaffirmed its margin guidance, supported by ongoing internal cost reductions and operating leverage. The absence of new, lower-margin large deals in the first half of the year is expected to help sustain or improve gross margins, even as revenue growth moderates.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will watch for (1) closure and timing of the delayed large deals in supply chain and manufacturing, (2) sustained growth and client adoption in Data-Tech-AI and generative AI solutions, and (3) Genpact’s ability to maintain margin discipline amid slower revenue growth. Progress in leveraging the Client Zero initiative as a differentiator and successful expansion of partner-driven revenue will also be important markers of execution.
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