Are clients pushing for price reductions, given their focus on AI-driven savings, or is this primarily a demand tailwind?

Clients are not just asking for price reductions; the commercial model is shifting towards fixed-fee, milestone-based, and outcome-based models alongside transformation. Negotiations focus on deterministic benefits and value creation, allowing EXL to maintain respectable margins. “The price reduction is alongside the transformation and alongside with the value creation for them.”

The international segment accelerated nicely despite geopolitical uncertainties. Do you expect deceleration, and what are the potential impacts?

The international growth market is underpenetrated with enormous opportunity. EXL has limited exposure to the Middle East, with most revenue from the U.K., Europe, Australia, and New Zealand, where AI adoption is healthy. No direct impact from conflict is observed, and the company expects to grow this segment at or above the company average. “We are not really seeing any direct impact due to the conflict as such. ...we think we should be able to grow our international growth markets business quite nicely, and it should grow at the same level or if not higher, than the company average growth rate.”

Can you provide perspective on net revenue retention at large accounts, specifically regarding volume versus work migration between offerings?

Net revenue retention is strong and positive because AI adoption allows clients to outsource larger, end-to-end processes, expanding EXL's landscape. While AI reduces manual effort, clients are adding new feature sets and service lines, leading to overall revenue growth despite productivity benefits. “on a net basis, we are seeing a much wider landscape to play in, and we're seeing the revenue size and the size of the operation actually increased despite providing them with a benefit associated with the manual work -- manual portion of the work that was being done previously.”

EXLS

ExlService Holdings (EXLS) Q1 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q1 FY26)· Information Technology· Apr 29, 2026

Source: earnings call transcript

Executive summary

ExlService Holdings, Inc. Q1 FY26 — Strong AI-led Growth and Raised Full-Year Guidance

ExlService Holdings commenced FY26 with robust performance, driven by strong demand for its data and AI-led solutions, which now constitute a significant majority of its revenue. The company's strategy of embedding AI into core client workflows is yielding measurable productivity gains and fostering high renewal rates. Management raised full-year guidance, reflecting confidence in its pipeline and competitive positioning, despite macroeconomic and geopolitical uncertainties.

Highlights

Revenue grew 14% year-over-year to $570 million, demonstrating strong execution.
Adjusted EPS increased 20% year-over-year to $0.58 per share.
Data and AI-led revenues grew 28% year-over-year, now representing 60% of total company revenue.
Full-year 2026 revenue guidance raised to $2.3 billion to $2.33 billion, representing 10% to 12% constant currency organic growth.
Full-year 2026 adjusted diluted EPS guidance raised to $2.18 to $2.23, representing 12% to 14% year-over-year growth.

Concerns

Digital operations revenue was down 2% year-on-year due to migration to data and AI-led services.
SG&A expenses as a percentage of revenue increased 20 basis points year-over-year to 20.4% due to investments.

Guidance & targets

Category	Target	Timeline	Confidence
Full-year 2026 Revenue	$2.3B to $2.33B high materiality	FY26	High
Full-year 2026 Constant Currency Organic Revenue Growth	10% to 12% high materiality	FY26	High
Full-year 2026 Adjusted Diluted EPS	$2.18 to $2.23 high materiality	FY26	High
Full-year 2026 Adjusted Diluted EPS Growth	12% to 14% high materiality	FY26	High
Full-year 2026 Foreign Exchange Gain	$2M to $3M low materiality	FY26	Medium
Full-year 2026 Net Interest Expense	$6M to $8M low materiality	FY26	Medium
Full-year 2026 Effective Tax Rate	21% to 22% low materiality	FY26	Medium
Full-year 2026 Capital Expenditures	$50M to $55M medium materiality	FY26	Medium
Digital Operations Growth	Slightly below company average medium materiality	FY26	Medium
Adjusted Operating Margin	Mid-19% range medium materiality	FY26	Medium

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Insurance Growth driven by expansion and higher volumes in existing client relationships and new wins. Returned to double-digit growth.	$193.9M	12.6%	4.4%	—
Healthcare and Life Sciences Growth driven by higher volumes in Payment Services business and expansion in existing client relationships with other healthcare services.	$151.9M	21%	6.8%	—
Banking, Capital Markets and Diversified Industries Growth driven by new client wins and expansion of existing client relationships.	$127.4M	8.1%	4%	—
International Growth Markets Growth driven by ramp-ups and higher volumes with existing clients and new wins across banking, capital markets and diversified industries and insurance.	$97.1M	10.9%	5.4%	—
Insurance (including International Growth Markets) Combined view of Insurance vertical.	$226.1M	12.2%	—	—
Healthcare and Life Sciences (including International Growth Markets) Combined view of Healthcare and Life Sciences vertical.	$152.1M	20.9%	—	—
Banking, Capital Markets and Diversified Industry (including International Growth Markets) Combined view of Banking, Capital Markets and Diversified Industry vertical.	$192.2M	9.4%	—	—

Risks & headwinds

Macroeconomic Climate and Geopolitical Uncertainties Remainder of 2026

Not quantified, but factored into prudent guidance.

Mitigation:Adaptive and resilient business model; limited direct exposure to Middle East conflict; continued investment in capabilities.

Talent Acquisition for Data Management Ongoing

Challenge to hire talent quick enough to fulfill demand.

Mitigation:Continued investment in talent and partnerships.

What to watch in Q2 FY26

Digital Operations Revenue Growth

Next quarter and remainder of FY26

Current -2% YoY

Target Continued deceleration below company average

Why it matters

This metric indicates the pace of the strategic shift from traditional digital operations to higher-value data and AI-led services, impacting overall revenue mix and profitability.

Going forward, for the remainder of this year, digital operations will likely continue to have the same kind of deceleration of growth that has happened in the first quarter. But the shift towards data and AI-led operations, that's the critical piece -- and that's something that is positioning the company to be a future forward company for our clients.

Find out whether EXLS delivers this. Inve re-checks your case every morning.

Q&A highlights

Can you elaborate on the assumptions for data and AI-led versus digital operations growth within the raised guidance, and confirm if the outlook remains prudent despite strong commentary?

Data and AI-led will power overall growth, while digital operations will grow slightly below the company average due to intentional migration. The guidance is prudent, accounting for macroeconomic and geopolitical uncertainties, and was raised by more than the Q1 beat, including an FX headwind.

“Our digital operations will grow slightly below the company average. And our data and AI-led piece will be powering the growth of the overall company. ...our guidance is going to be a bit prudent and take into account what's happening in the current macro environment also the geopolitical uncertainties that are out there.”

asked by Bryan Bergin · answered by Rohit Kapoor

2 min read 6 chapters

Detailed narrative

AI-Led Strategy and Market Resonance

EXL's data and AI strategy is strongly resonating with the market, fueling growth with both new and existing clients. Demand is driven by scaled deployments of AI within core client workflows, where EXL delivers measurable productivity, increased effectiveness, and superior risk-based outcomes. The company's unique combination of domain, data, and AI expertise, built over two decades, differentiates its offerings, particularly in complex regulated industries.

Shift to Data and AI-Led Operations

Data and AI-led revenues grew 28% year-over-year in Q1, now comprising 60% of total company revenue. This growth is fueled by increased AI adoption, data for AI design, and business process reimagination. The company is intentionally shifting revenue from digital operations to data and AI-led, as embedding AI into existing workflows makes engagements more intelligent and IP-led.

Total operations grew 10% year-over-year, indicating overall expansion despite the digital operations category being down 2% year-on-year due to this migration.

Strong Segment Performance

All four operating segments showed strong performance. Insurance returned to double-digit growth at 13% year-over-year, driven by AI adoption for underwriting and claims. Healthcare and Life Sciences grew 21% year-over-year, with Payment Integrity being a significant driver. Banking, Capital Markets, and Diversified Industries grew 8% year-over-year with high deal activity.

International Growth Markets expanded 13% year-over-year, reflecting successful AI-led expansions and continued investment in talent and partnerships.

Partnerships and Industry Recognition

EXL's partnerships are progressing well, with the company being recognized as Advanced Technology Partner of the Year by NVIDIA, best new partner of the year by Genesis, and AI and machine learning market disruptor of the year by AWS. These partnerships enable differentiated solutions and contribute significantly to go-to-market strategies and pipeline generation.

The company's ability to combine domain knowledge with partner technologies creates substantial value for clients.

Commercial Model Evolution and Client Engagement

The commercial model is evolving towards fixed-fee, milestone-based, and outcome-based payments, especially for AI adoption projects. This allows EXL to manage pricing and margins while adding value. Clients are increasingly comfortable outsourcing end-to-end process journeys, rather than just tasks, to leverage AI for transformation. This shift is expanding EXL's total addressable market and driving net revenue retention above 100%.

Investment in AI Capabilities and Profitability

The company continues to invest heavily in data and AI capabilities and solutions to expand its competitive advantage and drive top-line revenue growth. Adjusted operating margin for the quarter was 20.5%, up 40 basis points year-over-year, driven by improved gross margins. However, full-year adjusted operating margin is expected to be in the mid-19% range due to these ongoing investments, particularly in R&D.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.