ExlService Holdings (EXLS) Stock Jumps As AI Growth Lifts Outlook

The market treated ExlService Holdings like a company that just rediscovered its growth story. The stock jumped about 18% to roughly $35.99, a sharp move for a business services and data analytics company that already carried a premium P/E tag versus peers.

The numbers behind that move explain why investors leaned in. Q2 revenue reached about $594.8 million and adjusted earnings per share came in at $0.59. Management lifted full year revenue and earnings guidance and spotlighted data and artificial intelligence led work as the main engine. The full earnings picture comes next.

Impressed by ExlService Holdings leaning into data and AI driven work, but cautious about paying up for a premium P/E stock after an 18% jump? Compare this setup with companies that pair strong fundamentals and solid balance sheets in our list of solid balance sheet and fundamentals stocks (48 results)

Q2 2026 Earnings Summary

• Total Revenue, Q2 2026 vs. Q2 2025: US$594.8 million vs. US$514.5 million (+15.6%)
• Net Income, Q2 2026 vs. Q2 2025: US$64.5 million vs. US$66.1 million (declined 2.3%)
• Basic EPS, Q2 2026 vs. Q2 2025: US$0.42 vs. US$0.41 (+4.3%)
• Adjusted Operating Margin, Q2 2026 vs. prior year Q2: 19.7% compared with a slightly lower level a year ago (modest improvement, exact prior margin not specified)

Prefer clear visuals over scrolling through dense earnings tables and slides? See ExlService Holdings' full financial picture with an easy to read view of its valuation in our company report for ExlService Holdings.

ExlService bullish AI story mostly backed by execution

Bulls argue ExlService is becoming an AI led growth compounder, with data and AI at the center of client spend. Q2 results go a long way toward backing that up. Revenue grew 15.6% to US$594.8 million while adjusted EPS rose 22.3% to US$0.59, and management lifted both revenue and EPS guidance for 2026. Data and AI led revenue grew 30% and now makes up about 61% of the business, which aligns with the claim that pilots are scaling into larger rollouts. Insurance, healthcare and international all posted double digit growth, which supports the idea that regulated industries are leaning on ExlService for AI projects. Total operations revenue, including digital and AI led work, grew 10%, showing the shift toward higher value AI projects is not coming at the expense of the broader operations engine.

Bear case on margins, cannibalization and capacity still alive

The main worry around ExlService is that AI growth might bring talent strain, margin pressure and cannibalization of legacy work. Q2 gives bears some support. SG&A rose 170 basis points to 20.9% as the company spends more on sales and data or AI capabilities. Management explicitly guided to lower adjusted operating margins in the second half of 2026 compared with the first half, even as revenue and EPS guidance move higher. Digital operations revenue fell about 1.5% by design as work migrates into AI led categories, which validates the cannibalization pattern even if total operations still grew 10%. Wage increments diluted gross margin compared with Q1, hinting at labor cost pressure. The planned iMerit acquisition adds capability but also integration risk and near term EPS dilution, which bears can point to as another potential drag if execution slips.

With ExlService Holdings trading on a premium P/E and margins under pressure, the key question is whether cash generation and the balance sheet can comfortably support this AI pivot. Check the full liquidity and debt breakdown in our financial health analysis of ExlService Holdings stock.

Stay Ahead Of Your Next Move

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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