Shares of ExlService Holdings surged 9.1% to $33.30 after the data analytics and AI services firm delivered a Q2 that blew past Wall Street expectations and prompted a significant upgrade to its full-year outlook. Revenue hit $594.8 million, up 15.6% year over year , while adjusted earnings per share came in at $0.59, well above the FactSet consensus of $0.55 . Analysts had expected only $573.9 million in revenue — making the top-line beat roughly 3.5%. The stock has now climbed more than 24% from its close of $26.83 just five trading days ago, a remarkable run for a mid-cap services company.
The Guidance Jump Tells a Bigger Story Than the Beat Itself
Management now expects full-year 2026 revenue of $2.39–$2.415 billion, up sharply from prior guidance of $2.30–$2.33 billion, and adjusted EPS of $2.25–$2.29, lifted from $2.18–$2.23 . That new revenue midpoint implies roughly 15% annual growth — a major step-up that signals management isn't just reacting to a good quarter, but seeing durable demand.
AI Revenue Is Doing the Heavy Lifting
Data and AI-led revenues grew 28% year over year in Q1, now representing 60% of total revenue , and Q2's acceleration suggests this mix is still shifting. This matters because AI-tied work carries higher strategic value and stickier client relationships than traditional outsourcing, which is growing below the company average. The pending acquisition of iMerit — an AI model training specialist valued at up to $310 million — is set to close July 31 , adding yet more AI firepower.
Margins Slipped, and Investors Should Notice
Operating margin fell to 14.7%, down from 15.8% a year ago . Rapid hiring, AI investment, and a $125 million accelerated share buyback in Q1 are pressuring near-term profitability even as they bet on future growth. Rising wage and compliance costs in key overseas delivery hubs remain the biggest risk this update doesn't resolve .
The Valuation Question Is Getting Louder
EXLS trades at a P/E of roughly 16.7x , still modest for a company accelerating into double-digit growth. Analysts' average price target sits at $40.50 , implying further upside — but that target predates today's surge. The question now: can AI-powered revenue sustain this rate, or will margin compression catch up first?