EXLS Q4 2025: Data and AI-Led Revenue Climbs 21% as Segment Surpasses 57% of Mix
EXLS’s Q4 revealed a decisive shift, with data and AI-led services now comprising the majority of revenue and growing at three times the pace of legacy digital operations. Momentum is fueled by enterprise urgency to operationalize AI, leading to record new business wins and deepening client relationships across core verticals. With a robust pipeline, high recurring revenue, and a new $500M buyback, EXLS is positioning to sustain double-digit growth and margin discipline into 2026.
Summary
- AI-Led Revenue Share Surpasses Milestone: Data and AI now represent the majority of EXLS revenue, accelerating the business mix shift.
- Operational Leverage Expands: Revenue growth outpaces headcount, supporting margin resilience despite new labor code headwinds.
- Pipeline and Backlog Signal Strong Start to 2026: Record Q4 wins and high renewal rates underpin management’s confidence in sustained growth.
Performance Analysis
EXLS delivered another quarter of double-digit growth, with total revenue up 13% year over year and adjusted EPS up 15%, capping a year where full-year revenue reached $2.1 billion and adjusted EPS grew 18%. The standout driver was data and AI-led revenue, which surged 21% year over year in Q4, now comprising 57% of the company’s total revenue—a meaningful shift from legacy digital operations, which grew 4% and now represent 43% of the mix.
By vertical, healthcare and life sciences led with 26% growth, fueled by expanded payment services and analytics contracts. Insurance, the largest vertical at a third of revenue, grew 7%, while banking, capital markets, and diversified industries posted 11% growth. International growth markets contributed 8% growth, now 17% of the business. Cash flow from operations rose 31% for the year, supporting a net cash position and enabling a new $500 million share repurchase authorization. Adjusted operating margin was stable at 18.8% in Q4, with full-year margin at 19.5% despite a 130 basis point increase in SG&A due to sales and marketing investments.
- Mix Shift to AI-Led Services: Data and AI-led revenue is now the clear growth engine, outpacing all other segments.
- Healthcare and Life Sciences Outperformance: Broad-based demand for analytics and payment integrity solutions drives segment leadership.
- Margin Management Amid Investment: Operating margins held steady as revenue growth exceeded headcount expansion, absorbing higher SG&A and India labor code impacts.
The company’s ability to embed AI in client workflows, coupled with high renewal rates and a strong backlog, supports management’s bullish outlook for 2026.
Executive Commentary
"Our data and AI pivot is well underway, representing 57% of our revenue. Demand for our data and AI-led services and solutions remains robust, and we continue to strengthen our competitive position through investments and capabilities, partnerships, and talent."
Rohit Kapoor, Chairman and Chief Executive Officer
"Our headcount growth for the full year in 25 was less than 10%. It was 9.8. And you see that the revenue growth that we delivered against that was, you know, closer to 14%. So that's where we kind of creating that leverage in terms of revenue per headcount."
Vivek Jaitley, President and Head of Insurance, Healthcare, and Life Sciences
Strategic Positioning
1. AI-Led Business Model Transformation
EXLS has crossed a strategic threshold, with data and AI-led solutions now the majority of revenue. These services include proprietary platforms like EXL Data.ai, agentic AI, and embedded analytics, enabling end-to-end workflow modernization for clients. The company’s ability to operationalize AI at scale is driving both new client wins and deeper wallet share with incumbents.
2. Vertical Diversification and Deepening Domain Expertise
Healthcare and insurance remain foundational, with healthcare outpacing overall growth due to demand for AI-powered payment integrity and analytics. Insurance, a third of revenue, is accelerating AI adoption for customer experience and cost optimization. Banking and capital markets are expanding scope into AI-driven risk and fraud solutions, with EXLS now designing generative AI governance frameworks for global clients.
3. Operational Leverage and Talent Strategy
Revenue growth is decoupling from headcount, reflecting productivity gains from AI integration and a focus on higher-value services. EXLS is aggressively upskilling its workforce, investing in AI certifications, and hiring for data engineering and AI services roles. Innovation is institutionalized, with 10 new patents and over 11,000 employee-submitted ideas in the past year.
4. Ecosystem Partnerships and Platform Expansion
Co-innovation with hyperscalers and tech partners (AWS, Google, Microsoft, Nvidia, Databricks, Genesis) is a force multiplier, enabling rapid solution deployment and marketplace traction. Industry recognition, such as AWS’s AI ML Market Disruptor of the Year, validates EXLS’s positioning as a trusted AI integrator.
5. Capital Allocation and M&A Readiness
A new $500M buyback and a net cash balance give EXLS flexibility for further M&A, with priorities on AI, data engineering, and geographic expansion. Management signals openness to acquisitions as valuations become more attractive, aiming to reinforce data and AI leadership.
Key Considerations
EXLS’s Q4 and full-year results highlight a business in transition from legacy outsourcing to a data and AI-driven service model, with operational leverage, strong cash flow, and an expanding addressable market. The following considerations frame the investment debate for 2026:
Key Considerations:
- AI-Led Recurring Revenue Base: Over 75% of revenue is recurring or annuity-like, providing stability amid rapid innovation cycles.
- Client Urgency and Decision Velocity: Accelerated client decision-making and record Q4 wins point to a structural shift in enterprise AI adoption.
- Margin Discipline Despite Investment: Margin stability is maintained even as EXLS invests in sales, marketing, and talent to capture AI growth.
- Competitive Moat in Regulated Verticals: Deep domain and regulatory expertise act as a barrier to new AI entrants, especially in healthcare and insurance.
- Buyback and M&A Firepower: The $500M repurchase program and strong balance sheet create optionality for shareholder returns and strategic bolt-ons.
Risks
Competitive intensity is rising as hyperscalers, consultancies, and tech vendors target enterprise AI, challenging EXLS’s differentiation. Execution risk exists around scaling AI talent and maintaining margin discipline as SG&A rises. Regulatory changes, such as India’s new labor code, introduce cost unpredictability and could pressure margins if not offset by operational efficiency. Client budgets and macro uncertainty remain watchpoints for deal velocity in the second half of 2026.
Forward Outlook
For Q1 2026, EXLS expects:
- Strong start, building on record Q4 wins and backlog
- Continued outperformance in data and AI-led segments
For full-year 2026, management guided:
- Revenue of $2.275B to $2.315B, representing 9% to 11% organic growth
- Adjusted EPS of $2.14 to $2.19, up 10% to 12%, absorbing a 100bp hit from India labor code
Management emphasized high pipeline visibility, robust renewal rates, and a strong cash position as key supports for guidance. They expect margin stability, continued investment in talent, and incremental M&A activity as opportunities arise.
- Visibility strongest in H1, with second half contingent on pipeline conversion
- Data and AI-led revenue to grow faster than overall business mix
Takeaways
EXLS’s Q4 confirms a durable business model shift to AI-led services, with operational leverage and a robust pipeline supporting 2026 growth targets.
- Data and AI-Led Growth Engine: The 21% surge in AI-led revenue and segment mix dominance signals sustained demand and competitive advantage.
- Margin and Cash Flow Resilience: Stable margins and strong cash generation, despite cost headwinds, highlight disciplined execution and capital allocation flexibility.
- Future Watchpoints: Monitor competitive encroachment, talent scaling, and client budget trends, particularly for the second half of 2026 and beyond.
Conclusion
EXLS enters 2026 as a structurally different company, with AI and data solutions at its core and a proven ability to deliver business outcomes for clients. Operational leverage, strong renewal rates, and a record pipeline set the stage for continued double-digit growth, even as competition and regulatory cost pressures mount.
Industry Read-Through
EXLS’s results reinforce that enterprise AI adoption is moving from experimentation to scaled deployment, especially in regulated industries like healthcare, insurance, and financial services. The company’s success in embedding AI into core workflows and monetizing proprietary IP suggests that outcome-driven, domain-centric service providers are best positioned to capture value as clients prioritize business results over technology hype. For peers and adjacent sectors, the mix shift toward AI-led revenue, operational leverage via automation, and the importance of ecosystem partnerships are critical signals. The competitive landscape will increasingly reward those with deep domain expertise, regulatory fluency, and the ability to deliver measurable business outcomes—not just AI tools.