Genpact Limited

Good day ladies and gentlemen and welcome to the 2026 Second Quarter GEMPACT Limited Earnings Conference Call. My name is Carmen and I will be your conference moderator for today. At this time all participants are in a listen-only mode. We will conduct a question and answer session towards the end of this conference call. As a reminder, this call is being recorded for replay purposes. The replay of the call will be archived and made available on the IR section of GenPact's website. I would now like to turn the call over to Kyle Vickstrom, Head of Investor Relations at GenPact. Please proceed.

Good afternoon, everyone, and welcome to GenPact's Q2 2026 Earnings Conference Call. We hope you've had a chance to read our earnings press release posted on the Investor Relations section of our website, genpact.com. Today we have with us BK Kalra, President and CEO, and Mike Weiner, Chief Financial Officer. BK will start with an overview of our results, and then Mike will cover our financial performance in greater detail before we take your questions. Please note that during this call, we will make forward-looking statements, including statements about our business outlook, strategies, and long-term goals. These comments are based on our plans, predictions, and expectations as of today, which may change over time. Actual results could differ materially due to a number of important risks and uncertainties including the risk factors in our 10-K and 10-Q filings with the SEC. During this call, we will discuss certain non-GAAP financial measures. We have reconciled those to the most directly comparable GAAP financial measures in our earnings press release.

These non-GAAP measures are not intended to be a substitute for our GAAP results.

Supplemental investor information can also be found in our earnings press release Thank you, Kyle. Hello, everyone, and thank you for joining us today. Q2 was another strong quarter for GenPact. We delivered

Thank you for joining us. providing continued leverage for significant investments to drive future growth. Adjusted diluted EPS again grew double digits, faster than revenue, up 13.6% year over year. And non-FTE revenue surpassed 50% of total revenue for the first time. Last quarter, I spoke about something rare, a moment when a structural shift in the market Our differentiated capability set and the right strategic positioning all converge at the same time. I want to build on that today. First, at the macro level. Demand continues to remain very strong even as AI is redrawing markets. Enterprises want autonomous workflows that do the work, not just support it. Every function now has a mandate to leverage AI with clear ROI. This is opening new buying centers with new sets of requirements and complexities. At the same time, one universal truth has not changed. There is no artificial intelligence without process intelligence. And yes, frontier models are getting better by the week. But they are also beginning to converge on interchangeability with switching costs getting lower. But models do not know how a global enterprise actually runs. The exceptions, the controls, the handoffs, and the actual flow of work. The last mile. This is where the outcome is actually won or lost. This is where the actual differentiation sits. and among enterprise clients, we continue to observe that readiness is low even if aspiration remains very high. The foundational work, the data harmonization work, the process intelligence work still has to happen first to get ROI from investments in AI. That is why AI has not scaled for most companies and it is precisely why clients are looking to Genpact and our differentiated IP solutions. I said earlier, when such a rare structural shift is presented and a company can sharpen its differentiation and has the courage and discipline to act, the resulting advantage compounds in ways that are difficult to replicate. This is our moment. We are intentionally disrupting ourselves to be the leader in agentic operations. Genpact is not the company you knew. We are entering a new category with expanding TAM, building a higher quality, more durable, and structurally more valuable business. At Investor Day last June, when we first outlined our ambition for the year, We expected to deliver revenue growth of 7% with advanced technology solutions growing mid-teens. Since then, our conviction in the opportunity ahead has only strengthened. The momentum we are seeing makes it clear that the shape of our business is changing for the better and the strategic pivot is taking hold much faster. As a result, We are leaning in and embracing this moment to further accelerate durable long-term growth. And we are allocating our capital against this opportunity. Most importantly, we are doubling down in areas where we see the greatest long-term opportunity and the strongest returns. We are known for running mission-critical client operations at scale. We are moving from running business operations to running agentic operations. Therefore, we are codifying this process intelligence into a stronger mode and allocating even more capital here. We are investing behind the flywheel that is already accelerating with an even greater focus on advanced technology solutions where we believe growth is durable, margins are attractive, and client demand continues to build with expanding TAM. This momentum also gives us the opportunity to review components in core business services that are not aligned with our agentic operations strategy. We apply the test across our book of business with three simple questions. One, does combining our process intelligence with frontier models create durable value and an advantage that clients cannot easily replicate. Two, does it provide a compelling ROI for both the client and GenPact? And three, is it aligned with expanding TAM? Where the answers are yes, we are identifying at speed. This is vast majority of our book across finance, supply chain, insurance, banking, and many other mission-critical workloads. And this has expanding new TAM which we have begun to capture already. And where the answers are no across the board, we are working with clients to transition work back and redeploying investments. These are very small parts of our business, like certain areas of content management and commoditized parts of contact centers. This clarity is at heart of becoming the agentic operations company. Even with this intentional disruption, we still have line of sight to deliver at least 7% year-over-year revenue growth in 2026. On a full year basis, we expect the transition away from this work, not aligned with our agentic operations strategy, will have nearly two points of impact to total revenue growth. Despite this, Core business services revenue is still expected to grow for 2026. At the same time, we now expect advanced technology solutions revenue to accelerate, growing at least 25% for 2026. This acceleration underscores the rapid pace of adoption and how our investments are paying off. While timing will be a factor for both 2026 and 2027, For 2027, we currently expect the dollar impact to be slightly larger, though offset by continued momentum in areas aligned with our strategy. Our deliberate focus and prioritization continue to show up in top and bottom line growth and in our demand signals. Demand for our deep domain and industry expertise is healthy and growing, as evidenced by our booking, backlog, and Pipeline all increasing across both core and advanced tech. This quarter marked our largest ever quarterly bookings. We signed another six large deals with a large pipeline of other transformational deals setting us up for a healthy close to the year. And our revenue retention continues to be strong. The mix of our business continues to move towards and many more. As we fundamentally change how we contract and deliver, we are creating a robust, durable base to build on that is no longer tied to headcount. This includes more multi-year recurring annual revenue streams and margin leverage from agentic and AI driving more meaningful scale. Over the past few years, we have systematically expanded our advanced technology capabilities in areas of our core strength. This has effectively created a powerful flywheel that is fueling agentic operations. The flywheel starts with our core. Expert operators, decades of client trust, clear domains, last mile knowledge. In essence, process intelligence you cannot buy off a shelf. Then the flywheel turns with the expanded capabilities in data and AI and through our partner ecosystem that power the advanced technology solutions of today. And that enriches process intelligence further, which earns trust to deliver the agentic mandate. The mandate expands our scope, which deepens our intelligence and deeper intelligence makes the next solution better. This flywheel compounds, building agentic operations at scale, making our success hard to replicate. We are actively moving from human processed and human validated to machine processed and human validated, all wrapped in responsible AI. Driving compounding advantages from autonomous agents with the context, governance, and oversight that only last mile experts like Genpak can provide. All of this is further accelerating advanced technology solutions and that's playing out with the significant momentum we are seeing. Advanced technology solutions revenue grew another 24% in quarter two, now accounting for 27% of total revenue. This quarter, advanced technology solutions represented nearly 40% of our bookings and our pipeline increased meaningfully across all capabilities quarter over quarter, highlighting the significant demand our flywheel is driving. We are not adding a fast line to the past. We are changing what the whole business is and moving to a new category. This is where it all comes together. Clients do not come to us to buy core or advanced tech. They come to us with a vision for the future and a reality of where they are today. We are enabling the journey to agentic-led autonomy that enterprises can trust. We call it agentic operations. Domain experts and AI agents working side-by-side through reimagined processes to execute transactions. Model agnostics Thank you for watching. and Adjentic Washing. This represents just our productized AI offerings built with Genpact IP to run mission-critical business processes at enterprise scale. And it is delivered with multi-year annuitized recurring revenues through a commercial model that is not tied to headcount. Looking at Adjentic booking to date, More than half has come from new clients, proving the additional time we are capturing at speed. And from the clients who rotate, we have seen more than 3% net revenue growth and more than 300 basis points of gross margin expansion. More clients, bigger wallets, a larger market, and richer margins all at once. and we are quickly building our robust roadmap that aligns where our clients are going with what we can uniquely deliver. We recently announced Genpak Transaction Monitoring Analyst, the first module of our new Genpak Banking Analyst Suite to help banks complete routine investigations faster and more consistently with full auditability and human oversight built in. We also recently launched the Genpak Reduction Recovery Solution, our agentic offering designed to help consumer good companies recover millions in lost revenue by automating the identification, validation, and resolution of disputed deductions with faster cycle times and enhanced compliance. Adding to our existing agentic portfolio, which includes accounts payable, record to report, source to pay, and insurance, These are just two additional examples of how we are actively delivering the outcomes clients need to reshape their operations. As clients see the compounding effects of our flywheel and expanding agentic operations, they are choosing Genpak over legacy and new competitors to work across even more workflows and the additional parts of their transformation. As a case in point, we recently embarked on a journey with Lumen A global networking and technology company to agentify their accounts payable operations. And Mondelez International, one of the world's largest snacking companies, expanded our relationship to build an enterprise-wide agentic operating model across their source-to-pay processes, spanning procurement through accounts payable. These are just a couple of examples. Partners also continue to be an important part of our strategy. In quarter two, our partner-related revenue growth accelerated as we continue to deepen relationship with partners core to our clients' infrastructures. This quarter, we achieved the Databricks brick builder specialization for manufacturing, transportation, and energy. ISG recognized Genpak as a leader in the ServiceNow ecosystem partners for 2026. and as a rising star in their Databricks ecosystem report for AI ML and managed data optimization. And earlier this week, Nelson Hall identified Genpak as a leader in all six of their F&A transformation NEET market segments for 2026, including agentic AI, procure to pay, record to report, order to cash, CFO advisory and finance transformation overall. These are just a few recent examples that highlight how focus in our strategic areas is having a clear impact. In closing, this quarter is a significant proof point for Genpact as we shape what comes next as a leader in agentic operations. We are changing our business in ways that matter. Building a new Genpact in a fundamentally different category. Doubling down on our most strategic priorities to accelerate the flywheel for agentic operations Building high quality, durable revenue that compounds and is harder to replicate Driving structurally richer margins and ultimately opening daylight between Genpact and the market around us With that, let me turn the call over to Mike

Good afternoon, everyone, and thank you for joining us today. We delivered a strong second quarter, highlighting how our focus and investments are strengthening our position in agentic operations. Total revenue grew 7.1% year over year to $1.343 billion as momentum in advanced technology solutions continues to build. Advanced technology solutions revenue, which includes data and AI, Digital Technologies, Advisory, and Agentic reached $363 million, growing again over 24% year-over-year, with broad-based strength across our flywheel. Demand for our advanced technology solutions is scaling quickly, and our strategic investments are delivering results. Our advanced technology capabilities are compounding, with Agentic and AI-led innovation showing up across a growing set of offerings. We are focused on exponentially expanding our total addressable market, delivering more value for clients across end-to-end workflows, and driving higher value, more durable revenue for Genpak. As BK mentioned, we're doubling down on our most strategic priorities to accelerate the flywheel for agentic operations. And we can start seeing the payoff. In the second quarter, our agentic bookings grew significantly quarter over quarter. For 2026, we are tracking to deliver over a billion dollars in agentic TCV, five times more than 2025. And as BK noted, our agentic business continues to capture a broader TAM and wallet share with meaningful traction across both new and existing clients. To date, more than 50% of our cumulative awarded contract value is coming from new clients. For existing accounts that are rotating from traditional to agentic delivery, Both net revenue growth and gross margin expansion continue to be above what we reported at Investor Day in June of last year, as we continue to drive higher volumes, increased scope, or both within our existing clients. This momentum is compounding into what we believe is a more durable revenue base with higher gross margins that continue to improve with scale. Core business services revenue, which includes digital operations, decision support services, and Technology Services grew 1.9% to $980 million in the second quarter. We continue to see strong demand for our deep domain and industry experience built from decades of client trust as we help clients navigate through the different stages of their transformational journeys. Our sales team continued to execute well. with strong demand for our core and advanced technology capabilities across new and existing clients. Net revenue retention remains accretive and we continue to feel good about our pricing as we deliver incremental value for our client base. In 2Q, our large deal momentum also continued. We signed six large deals compared to three in the same period last year. This brings us to 12 large deals year-to-date, double of what we did in the same period last year. As a reminder, Large deals are $50 million or greater in total contract value. Our bookings performance in the quarter was also the largest ever, with nearly 40% coming from advanced technology solutions. And we continue to have a strong pipeline of additional large deals. With the record backlog in pipeline, we're in a very strong position for the second half of the year. This quarter, non-FTE revenues surpassed 50% of total revenue. Reflecting our discipline focus on shifting to fixed fee, consumption, and outcome-based models. And we are building a meaningful recurring annual revenue base that is decoupled from FTEs. At a segment level, consumer and healthcare grew 9.5%, followed by high-tech and manufacturing growth of 7.6%, and financial services growth of 3.3%. Turning to profitability, gross margin expanded for the 13th consecutive quarter to 36.5%, up approximately 60 basis points year over year. Our margin profile reflects our continued operating and pricing discipline, as well as revenue contribution from our high-value advanced technology solutions. Notably, we are also seeing revenue growth decoupled from headcount as we embed these solutions in our own operations and delivery. Moving down to the P&O, SG&A expense as percentage of revenue was 21.9%. Adjusted operating income was $234 million, up 7.5% year over year, faster than our revenue growth. Adjusted operating income margin was 17.4% as we continue to self-fund our strategic investments. Our effective tax in the second quarter was 23.7%, net income was $146 million, and diluted EPS was 86 cents. Adjusted diluted EPS increased 13.6% to $1 per share, growing significantly faster than revenue for yet another quarter. Shifting to cash, we generated $72 million of cash from operations. ending the second quarter with $517 million in cash and cash equivalents. This was impacted by timing of collections as well as prepayments made in 2025. Credit quality remains high. In the quarter, we returned $82 million to shareholders, $50 million in share repurchases, and $32 million in dividends. Turning to the outlook, as BK noted, the momentum we're seeing in advanced technology solutions is significant. As a result, we're doubling down behind the flywheel that is already accelerating, focusing resources on where we can drive durable value and demand over the long term. With a strong backlog, pipeline, and demand for our differentiated capabilities, we have line of sight to deliver at least 7% revenue growth on an as-reported basis in 2026. Even with nearly two points of impact, from our transition away from work not aligned with our agentic operation strategy. Given the exceptional demand, we now expect advanced technology solutions revenue growth to accelerate in the second half of the year, increasing at least 25% for the full year. In core business services, we still expect 2026 to grow, even after roughly two points of impact from the transition noted earlier. From a timing perspective, the impact of the transition will be concentrated in the second half numbers. On margins, we continue to expect full-year gross margin to expand to 50 basis points to 36.5%, with adjusted operating income margin expected to increase approximately 25 basis points to 17.7%, reflecting our continued commitment to self-fund investments for growth. and we now expect adjusted diluted EPS to grow at least 12%. Turning to the third quarter on an as reported basis, we expect to deliver total revenue between $1.369 billion and $1.382 billion or 6.5% growth at the midpoint. We expect advanced technology solutions revenue growth to accelerate to at least 25% year over year. We expect core business services to be flat to slightly down. even after about three points of impact from the transition away from work not aligned with our agentic operation strategy. We expect gross margin to expand to 36.6% and adjusted operating income margin to increase to 17.8%. Finally, we expect adjusted diluted EPS of $1.04 to $1.05 for the third quarter. In closing, as BK made it clear, a new gen pack is taking shape. To capture this enormous opportunity, we are reshaping how businesses operate, leveraging our unique strengths rooted in domain and industry expertise with significant advancements in our advanced technology solutions. We are focused on differentiating our position in the market, expanding our TAM dramatically, accelerating high-quality revenue growth, and consistently expanding margins, all of which will allow us to continue to deliver double-digit growth and adjusted diluted EPS and long-term client value. With that said, let me turn the call back over to Kyle.

Thank you, Mike. Operator, we're ready to go ahead and take questions.

Thank you so much. And as a reminder, to ask a question, press star 11 on your telephone and wait for your name to be announced. To withdraw your question, simply press star 11 again. Our first question is from Brian Bergen with TD Cowen.

Hey, good afternoon. Thank you. So on the strategic prioritization that you're taking here, maybe the segment dynamics, just based on this conscious disruption of the business with the two-point DBS headwind this year and what sounds like a similar headwind next year, what does the target growth model kind of look on the other side of these changes? If I adjust for the 2% that's second half weighted, it seems like you're still We feel exceptionally good about how we are ramping the business.

Not just in advanced tech but also core business services because this is how the flywheel is delivering which starts from core and data and AI advisory partner solutions and landing and agentic operations which we are building and delivering on a new category. So if I see the demand signals, demand signals are obviously exceptionally high in advanced tech, continue to be very, very strong in core. Our backlog is really building up very strongly. We mentioned highest ever quarterly booking just previous quarter and pipeline continues to be strong. So fundamentally, you know, we are shaping the business to become a far higher growth and more durable, richer business as we cycle through 26, 27. Mike?

Yeah, so the only thing I'd add to that, first of all, let's level it up the discussion a little bit. Our clients don't really come to us to buy core business services or ATS related. These are just revenue classifications of the services and the products that we offer, right? They come to us to solve problems and run critical operations. We're working aggressively to identify those operations as BK just spoke about. So when you think about it, you know, we still continue to feel very, very good about the guide we put forward through this year. and our long-term guide, which we articulated at our investor day, arguably, I guess I was in June of last year.

Okay, understood. And my follow-up, maybe on bookings and backlog visibility. So you highlighted here record bookings, backlog growth and obviously strong pipeline still. Just at this juncture, how much visibility is that base providing you into 2027 growth?

Yeah, so I'm not going to really talk about 2027 specifically. Let me just We had 12 large deals in the first half. That's double what we had in the first half of last year, right? Add on to that an incredibly strong pipeline which we're working hard to execute on. So we're seeing continued strength in demand across both core and ATS. With regard to the work that we're transitioning back to our clients, correct, that will manifest itself over the next four to six quarters with two points being affected full year this year. And I would also just continue to think through how the business continues to roll out and execute. So again, we feel very good about where we are. We have good line of sight to driving these results for this year and then through into next year.

And I think if I was to add, there is a strong momentum building up in advanced tech. And advanced tech is also a new type of business. And therefore, the flywheel from core to advanced tech, which lands into agentic operations, is creating a pretty strong momentum. and Durable Richer Revenues.

One moment for our next question. Comes from Maggie Nolan with William Blair. Please proceed.

Hi, thank you. Another one maybe on the non-strategic work. Can you help us understand where those fall in terms of margins versus other and Anil Nanduru.

that momentum is not changing so I think we are shaping the business as I mentioned with more durable and more richer revenues and therefore margin profile we are expecting be it cross margin or AOI continue with the trajectory that we are talking about and I think just more specifically this is again a very small portion of our business that didn't stood the test of the three tests that we talked about. How do we create a durable value that can be easily replicated? Or does it provide a strong ROI both for GenPact and obviously for our clients? And is it aligned with large, fast-growing market and expanding TAM? And these are, again, a very small portion of our business as I mentioned small portions of content management or some of the commoditized contact center play which is which is what we are walking away from.

Understood and then as we get comfortable with sort of you know the the new Genpact with new pricing models and I'm wondering if you can help us better understand on the agentic workflows, what happens to pricing and margins as token prices increase and how that impacts your ability to drive margin expansion.

Yeah, so maybe I'll quickly take that again. Agentic solutions, you know, one, we are leveraging the scale and these are not bespoke agents that we build. And I think that's a very, very important distinction versus what you see elsewhere. and because there's a component of a compounding learning within the solution set and the scale from an economic perspective as well. And these are annuitized recurring revenues with minimum volume commit. So there's a floor on the revenue we earn and then upside as client expands use cases or ad agentic workflows. And obviously, very high retention, multi-year and far more sticky relationship. And again, from a margin standpoint, You know, structurally we expect to gain from both sides of the equation. Technology costs decline over time, you know, as compute advances. We own this stack, so efficiency gains flow to us. And then labor costs decrease as agents handle more of the workflow. So, and humans are brought only for high judgment situation and not for volume processing. As far as token economics is concerned, it is also how we are building the architecture that allows dynamic switching, model flexibility without any client disruption. And I think there is a strong, I will say, token FinOps that we have. So we procure well, you know, there isn't over or under provisioning or what have you. So feel really good about as to where we are taking the company.

Very thorough. Thank you, BK.

Thanks, Megan.

Our next question is from Surinder Thind with Jefferies. Please proceed.

Thank you. BK, when we think about the advanced technology solution segment and the acceleration that we've seen there in the work or the revenue growth, Can you maybe talk about like when I think about the agentic solutions that are available, how much of that is being driven by just more products that you have, more services that tie into that business line item versus what I would call just accelerating demand for an existing product set of services. I'm just trying to understand that as you build and create more agentic solutions, Should we expect to see advanced technology solutions continue to maybe accelerate in growth rate or how do we characterize or understand or put context from what the current growth rate is and maybe the sustainability of it?

Yeah. Short answer, yes, you should expect it to accelerate. And I think it is the flywheel effect that we are talking about. and the flywheel builds actually from the strength of our core, the deep process intelligence, domain expertise, decades of operational excellence and then that brings in process, data, enterprise technology, all of that together in a room and then we own the driving chain management at the client end as well. It also opens up new workloads for us and we are moving from just running Client Operations to getting to own the entire part of transformation for them, be it the foundational work or the data modernization, enterprise architecture as I mentioned, and therefore building these scale agentic solutions that will create the exponential effect as we go along. So yes, you should expect that this Acceleration will continue and it is firing across all the components.

I can just add one thing to that, BK. You know, when you talked about advanced technology solutions revenue in the quarter to 24%, right? That's about $360-ish million. Very little of that is agentic-related revenue, right? We talk a lot about the bookings. So that's going to just support the growth, particularly on a go-forward basis. We're very pleased with the agentic bookings and we laid out, we're looking forward to that, you know, getting to about a billion dollars this year.

That's helpful. And then, BK, over the last couple of years, you know, the partnerships, partnership, you know, sourcing revenues have been an important part of this strategy. Can you maybe provide a bit more color there maybe in terms of, there was some commentary in the prepared comments. When you think about the bookings that you're realizing now, how much of that is coming through your partners, and maybe how does that compare over the past year, and how we should think about it on a go-forward basis?

Partners are an integral part of the flywheel, and I constantly believe that you could be anybody, but all solutions don't exist in just any four walls even if you are a coolest model company and therefore the tech and partner ecosystem is integral to how you bring value to clients and we have invested heavily here and I think I'll say we are in the early stages of the journey and there's a significant opportunity ahead and if I give you a very quick example of in a recent case for a supply chain where we partnered with ServiceNow. This is for a leading energy equipment manufacturer. And they wanted to transition heavily customized legacy platform into a new domain-specific platform that is supported by ServiceNow. And they chose GenSpec to drive that transformation where we built the data model standardization, governance, workflows, almost 100 fragmented workflows got integrated and a lot of customizations that we resolved and then built a future ready platform. Now all of this was combination of our supply chain domain expertise and a strong relationship with ServiceNow. And all of this is showing up in our results and actually hopefully in their results too.

Thank you.

Our next question is from Sean Kennedy with Mizuho. Please proceed.

Hi, everyone. Congrats on the results and for taking my questions. I wanted to ask if you're seeing any incremental pressure from customer insourcing trends or crowding out due to AI token infrastructure spend as some of your peers are experiencing. Thank you.

Thanks, Sean. Look, I think overall, All of this is rooted into the strategy as to what we are driving and how we are wanting to shape the future of this company. If I think about where our clients are prioritizing their engineering resources, it is more of the harder problems that is hard to their company's strategy. As an example, for a pharmaceutical company that is sitting in a How do they develop a new molecule or a food or a beverage company? It is kind of what is the next best drink or the next best brand that they can bring to the market. And for running mission-critical operations, finance, HR, supply chain, procurement, which is core to GenPact, that's where we are taking the company. That's where we are bringing in all of these agentic solutions that our clients are taking in a significant way.

That's great to hear. And then, you know, for those agentic bookings, are you seeing particular success with any specific type of customer?

I would say it is actually across the board, including new, and we are capturing the new time. You know, as we mentioned that we expect greater than a billion dollar of booking just in agentic and with no agentic washing sold as and Newtai's Reckoning Revenues. Greater than 50% of it is from newer clients and also we are rotating our existing clients and that's based on the domain and industry specific expertise that we have. You know that we are bringing our new and existing clients and capturing the time. So core gives us this right to win and that is the reason we have built the strategy that we talked about. and it is therefore building a very long runway in clear chosen areas of our domain industry expertise and the client trust is building further. Great, thanks so much.

One moment for our next question. It comes from Puneet Jain with JP Morgan. Please proceed.

Hey, thanks for taking my question. I also wanted to follow up on this non-strategic portfolio. So are these contracts typically, like do these contracts typically stem from standalone client relationships or are these The processes you service as part of larger clients. And where do you think the work that's transitioning away will go? Will it go to any of your competitors or clients are taking them in-house?

I would say it is more one-off contracts that we have had. But I'll first step back and just ground you, Puneet, and thanks for asking that. Look, the investments that we've been making for the last couple of years, that has created this incredible opportunity to participate across more parts of clients' end-to-end operations and transformation journeys. And at the center of this flywheel that we are building is applying advanced tech to core that drives this agentic operations long-term. And we are doubling down there and continuing to partner with clients more broadly, more deeply. Having said that, there are certain parts of, you know, where it is more one-off. I'll call it a little bit undifferentiated tale, which is not connected to the transformational work we do. Commercial is only tied to maybe per-hour basis. We're not wanting that. And, you know, and I think that's where, and it's a very small portion of our book, and therefore shaping the business to become far more durable Far Higher Quality, Structurally Higher Margins for Long Term. Got it.

And can you share more details on the timelines of this transition? Like when did you engage with clients to kickstart this process? And when will these two points of advance, like when will that kick in? Like has that already kicked in in 2Q and continuing in 2Q? that can have or will that happen sometime in 3Q or 4Q?

So maybe I'll take the first part, Mike. You can take the timing portion of it. I think one, you should know that we are a pretty active and intense company. So constantly are talking to the clients. And as we build these strategies, they are not built in vacuum. They are built by validating a lot of these questions with the clients too. So it's a constant dialogue that we are having with the clients. And I think just from a timing standpoint, Mike.

Yeah, so the way I would kind of think about it is from a perspective standpoint, right? We'll be transitioning that work over the next four to six quarters. And I think we've quantified the impact from a points perspective of two points for the full year impact for 2026. Okay, thank you.

Our next question comes from David Conning with Baird. Please proceed.

Yeah, hey guys. Great job. One thing that I noticed in the supplemental materials, employees were down maybe a couple percent sequentially, I think a few percent year over year. And it's really impressive. You're growing revenue 7%, employees down 3%. So you're getting, I guess, 10% efficiency growth. We haven't seen anything like that in years. and just wondering, you know, maybe the dynamics of that. I assume that's driving margins, etc. And I saw attrition also ticked up to the highest level in a handful of years in if any that's forced attrition or voluntary. But just maybe that whole dynamic.

Thanks, David. I'll take that. Look, I think we are taking a very disciplined approach to headcount. But I won't say that we are at any inflection point. I'll just say we are getting started. We are making significant investments in advanced tech and will continue to do that. I'm really proud how the team is driving change and reskilling our workforce at scale. And as we said June last year, you know, the longer term, we do expect revenue and headcount growth to decouple. I would say we are still in the early stages of that. becoming a leaner, highly productive talent base that is powered by solution, not some linear hiring. So early signs of leverage, but pleased that we are making that progress.

Yeah, just one other thing to add on to it. So if you heard in BK's prepared marks, I mean, think of our ATS revenue, right? And you talk, think about it, you know, and it's growing, as we just said, this quarter, 24 percent. That revenue cohort is Revenue per headcount is double, right? So as that continues to leverage up, that's going to continue to support that decoupling when we get to whatever that inflection point might look like.

Yeah, that's helpful. And then just as a follow-up, what prohibits or what type of work would never leave CBS? Like, you know, maybe examples or even like what percent of the pie You run about $4 billion or so run rate, but a billion of it could never ever be moved because of a reason. Maybe just talk through that too.

Yeah, I think maybe how I'll respond to that, David, is that whenever we are onboarding, we talked about now we have onboarded a dozen large deals that we will be onboarding as we go along. Clients need Thank you very much. Now we are building solutions where we want to take the clients more quickly to advanced tech, but it also depends upon what is the starting point of a client. And a lot of times the starting point for a client needs some of that foundational work, which is core.

Yeah, so if I can just add on one thing, if you don't mind. So if you think about when, again, if we think about it from a higher level strategic perspective, We're developing, we're becoming an agentic operating company, right? So we're just not sitting still, right? We're developing products, agentified, to continue to transition that work into more meaningful business models for us and for our customers. So that'll continue to evolve in not just quarters and years. And that's really the hypothesis on everything that we're doing here on how we're pivoting this company. And again, early days, but signs are quite positive.

Great. Good job. Thank you, guys.

Thank you. Our next question comes from Nate Svensson with Deutsche Bank. Please proceed.

Hey, thanks for the question. BK, I wanted to talk about the 70 by 70 framework you mentioned in your prepared remarks. So ATS, more than 70% annuitized revenues and more than 70% non-FTE commercial models. I guess I'm interested in maybe kind of the 30-30 portion of that book. So those projects that aren't annuitized or are still using FTE models, could you maybe give some more color on why clients may be anchoring towards those legacy structures? Is it inertia? Are they pushing back on pricing, something else? And then maybe going forward, can you talk about if 70-70 becomes 80-80 or 90-90? I guess why or why not?

Yeah. Directionally, Nate, we are headed to far bigger than 2x2x, far bigger than 70-70. You should know that. And it is already greater than that. Now, sometimes, and we say annualized, sometimes there are projects which are eight months, nine months, four months, right? And they need to advise project on data strategy. So it starts with you know a four-month project and the client is then thinking about hey what it is but so there is a portion of that book also and because that enables further annuity but directionally are we wanting this 2x2x7070 to look much better numerics the answer is yes.

Got it that's helpful and then Mike, in response to a couple of the other questions, you talked about the revenue headwinds associated from this shift lasting four to six quarters. I guess just thinking about that in light of the three-point headwind for 3Q and two points for 2026, is that three-point per quarter headwind kind of the right level to think about for the entirety of that four to six quarters, or are there factors that push that higher or lower in the early stages of this shift? and then the related question just on the offsets from kind of faster AFS growths are there any dynamics we need to consider on ATS bookings and the timing of those you know that may impact the offset I'm thinking about things like ATS durations how long the projects take to ramp maybe they could be shorter longer faster slower just trying to think about the moving pieces on the offsets as we think about overall growth for the company yeah so I'll work my way backwards from that

So ATS, we raised our guide to 25%, you know, for this year, right? And we'll continue to build off of that, right? So we'll continue that. And obviously, the pipeline, the bookings, and all the momentum, particularly on agentic, as that starts earning into revenue, we'll continue to accelerate that growth on a go-forward basis. And then going back to the last question we just got, we also talked about the durability and the quality of that revenue. So that's one thing. With regard to ostensibly how do I think of the four to six quarters, we've given you the numbers by definition for the remainder part of this year. We'll ultimately see how it pans out on a prospective basis in 2027 on how it calendarizes its way out. But what I would continue just to elevate the discussion, really think about our guidance in totality, and to also think about where our views were from when we gave are longer-term views from our investor day back in June of 2025 of at least 7% growth. Thanks, Michael.

Thank you. Our last question comes from Brian Kinn with Citigroup. Please proceed.

Hey, guys. Thanks for fitting me in here. BK, just looking at that chart showing the ATS growth rates, Your expectations going from mid-teens to high-teens, at least 20. Now we're going to 25 or at least 25. What surprised you there that the solution is resonating so much? What's the reason why we're seeing the growth rates accelerate like that versus your original expectations?

I think what is a positive surprise, Brian, I would say, is how It is resonating with both existing, but more importantly, new clients. And how we've been able to capture the new TAM in a number of instances. We picked it up from a few of our peers because we now have this agentic solution, which is more machine-processed than human-validated, wrapped in responsible AI. So I think... The traction that it is taking hold not only with our existing clients, but more importantly with new clients is clearly helping. And then I think how the flywheel is shaping is another, you know, we've been making these investments and I think we'll continue to, but the shape of the flywheel and how the flywheel and investments in Data and AI investments in, you know, last year we did the transaction of exponential that has gone exceptionally well. Investments in partners that I spoke about. So I think combination of all of those things, everything is coming together and that's why we are taking a little bit more bolder step ahead to move in the direction we need to go in it.

Yeah, and then just to follow on to that, is there a way to think about win rates versus peers in the ATS book of business? Like, is it much higher than Genpak historically? And just trying to figure out, you know, are you just taking share from some of the legacy providers for the ATS business?

Look, I think our mode is, you know, which is shaping further is process intelligence with rich context and most of our and that has come from running mission critical operations where we are bringing operations data technology architecture you know people our people our clients people all of that together in a room and that is showing up as a differentiator that is showing up as a big differentiator this is what our clients are telling us and then One of the proof points is six large deals in the first half of last year, 12 large deals first half of this year. And then continued progress on gross margin is telling us the direction we are taking the company to.

Great. Thanks for taking the questions.

Thank you. And this will conclude our Q&A session. I will pass it back to management for final comments.

Thank you all for joining today and I want to extend my sincere gratitude to our employees around the world whose discipline and innovation keeps our flywheel turning and most importantly to our clients who are trusting Genpact as their partner on the journey on this agentic-led transformation and yes to our shareholders for their continued confidence. This is our moment and we have so much more to come. Thank you.

This concludes our conference. Thank you for participating and you may now disconnect.